Main business models in mobile apps

With the increase in mobile devices, many developers have been encouraged to create applications and find new business models in a market where there are many ways to make money but it's not always easy to get it right.

There is a sector that has grown dramatically in the past two years. We are talking about mobile apps and their explosion is not trivial: it has been in line with the rapid penetration of smartphones on the market. There's an app for everything, and a developer behind looking for a business model.

Accordingly, we create our app, it runs smoothly but it's time to raise a very important question: How are we going to make money with it? Today we explain the main models so you can find out what they are and see which one best suits your application.

Free or paid for?

The first question that crops up is always this. Sometimes we can be very clear and opt for one model or another. Both have their advantages but we have to know well what each offers and how we can take advantage of it.

Free is always very attractive to potential users. They don't lose anything by trying it so they know that there is zero risk. If they like it, they will keep it on their smartphone or tablet, if not, they will uninstall it and will have only invested a few minutes tinkering with it.

However, sometimes in the world of free apps it is associated with poor design. There are many examples that belie this hypothesis but having to pay can also appeal to the consumer, especially on platforms like iOS where paying for apps is more established –– if you have to pay for it, it has to be good. This isn't always true, but it's a good rule of thumb.

From this point, we separate paths. If we choose the free model, we can introduce advertising. To date, no mobile advertising platform has managed to become established. It's no coincidence: it's often poorly integrated, at least the part we design ourselves, and the return is pretty low. We could use it to pay for some coffee but little else.

We can also choose to add payments within the app, but we will talk more about this model later. Another option is to leave it free: with the aim of becoming known as a developer, so people see that your work is good and are encouraged to pay for the next apps you release. It is a good incentive for novices in the field.

In the other route we have the option to pay first. Accordingly, we have decided to price our application, but How much do we think users are willing to pay for it? Sometimes it's difficult to measure and so it's always good to be aware of the competition, who the most popular are and how much they are charging for it.

The figure is sometimes very sensitive and depending on our target audience, a small difference can make a difference. Here the famous 0.79 euros is the limit for many users who do not feel the need to pay more for our creation.

Therefore, it is key to know who we are targeting. If it's an application for the business world, you may not find many obstacles for charging. On the other hand, if it is a game aimed at a younger audience, maybe you should consider other models.

There is no right answer to this dilemma. Know your audience, industry and based on these two variables, choose what your strategy will be. But a word of warning: don't expect to make a killing with your first app. Rovio, the creators of Angry Birds, had to make 50 games before finding its (angry) hen that lays golden eggs.

Purchases within the application

Once we have (or haven't) answered this first question, it's time to consider the inclusion of a model that is not suited to every application, but is in other cases and can be a major revenue source.

We are talking about charging within the application. That is, our user has already downloaded it previously, paying before or not, and within it we offer a number of additional services that are not needed for normal use but offer us a bonus that we will have to compensate with what we are going to charge for it.

This model works really well with free apps. Assuming that the download is free, users will be encouraged to try it and tinker. Sometimes the price of an app can eliminate that desire to want to try it, but we also have the much loved free demo model for that.

Once they have tried it, we can offer different payment options within it. There are many such examples, and the games are excellent representatives here: charging for having more characters, virtual money (redeemed for real money) to progress faster. From meteoric success, such as the case of the company Zynga, to projects that seem to have started to become established such as the Simpsons game by Electronic Arts.

Is this an exclusive territory for video games? Not at all, we can also use it for all kinds of services and tools. Imagine, for example, a sound recorder. An application with a simple development.

We launch it for free. However, if users want higher quality recording, to be able to encode in mp3 instead of wav or for it to be synched with our favorite cloud storage, we pay a small fee.

This model can also be used to remove advertising. Thus, if our application is free, we can have income through two routes: advertising, or the cost we charge to remove it. In both cases, we're making money.

Subscription and premium services

Another very interesting model is the premium subscription.  This is another services and tools territory, not so much of games or other categories. A concept that is nothing new but has been adapted very well to mobile devices.

A very interesting example is Spotify. Its premium service enables access to the app on the smartphone and tablet, in addition to removing advertising. Evernote provides us with more storage capacity and other unique features in its paid version.

Again, it need not always be a barrier for the user. We can let them use the application with the basics and some other limitation, depending on the nature of our project. We can also completely restrict it, but we are human, we like to try, tinker and experiment, giving a little bit to taste, to familiarize themselves with it, is always a good choice.

In conclusion, there is no method that is the panacea for all applications. However, the correct choice of a method to make profits will be the key. What applies to one app does not have to be true for the rest.

It's difficult to replicate success stories, so it's important to know our audience, who will end up using it and whether they are likely to pay for that service, either through embedded advertising, a lump sum or subscriptions or purchases within the app. You now have the information, and it's your decision to know what's best.