Over 80% of app downloads are free. How can app developers make money?

With the total number of mobile applications on the market exceeding 180,000 and 80% of app downloads being free, effective distribution and monetization continues to be a major challenge for developers. In addition customers browsing for mobile apps find it difficult to locate the apps they want and often get lost when they get to the payment stage. So how can app developers make money from their mobile apps?

An increasing number of smartphone users and rising demand for mobile apps are some of the key factors driving the mobile apps market. This is good news for developers, but for them to succeed in this overcrowded market; they need to get a better understanding of how to capitalize on this opportunity. Here we look at the key factors impacting success in more detail:

Multiple platforms and fragmentation

Having to support multiple platforms is one of the challenges that continues to be a major headache for developers. Unfortunately, it is not as simple as developing for a small set of platforms. Each platform has a number of versions. Apple will soon launch iPhone OS 4.0 and there have been many minor versions to go with the 3 previous major revisions. Current Android phones are using version 2.1 (Éclair) and version 2.2 (FroYo) is due imminently. All of these versions add new functionality and fixes a number of earlier issues, but unfortunately it also introduces platform fragmentation making things more complex for app developers. But as web browser capabilities continue to improve, developing a website to replace the need for an app is increasingly becoming more appealing for developers.

Show me the money – Revenue models for apps

Ad-funded, app store sales and selling from within a free app are some of the revenue generating models available for developers.

The Ad-funded model relies on the ad-networks, they promise a lot but can they actually deliver on their promise? Developers will only earn money if their app gets run and the ad is clear and compelling, so with any ad-funded driven business model the crucial factor is, measurement. Using an independent mobile analytics tool is key, this enables developers to independently measure who is visiting their app and what they are doing. Only this way they will get an understanding of the true value of their app.

App stores sales are one of the most popular revenue models for developers, but unfortunately they are not always the most efficient place to collect money. Developers need to be aware that the payment experience that many of them offer, can be confusing for customers. Many of the app stores offer multiple steps until the customer can make the purchase – i.e registration for Google Checkout or PayPal accounts, which can deter customers from purchasing the app.

Selling from within the app, an increasing number of successful apps are available for free but then sell upgrades, add-ons or virtual goods. If using a reliable in-app billing solution, this works very well for developers. Developers can distribute a free app with limited functionality then use in-app billing to charge users to get the pro version. This is an effective way to get users familiar with the app so when they are ready they can pay to get more. Unlike with the app store model, it focuses the payment on the place and time the customer is most likely to upgrade, avoiding loss of sales that are sure to occur when passing customers back to an app store to download the premium version.

Promotion is key

Promoting your apps via mobile advertising networks with banner and text ads or through search marketing providers are just a couple of ways you can get your app out there.

Your campaigns can point back to the app store for download or to your own website if delivering to open platforms (i.e. not Apple iPhones). Take as much control of promotions as possible, don’t rely on the overloaded app stores.

Measure, measure and measure

As mentioned above using an independent mobile analytic tool is key for the success when developing an app. Whether developers want to measure how visitors are interacting with their app or to measure their app’s marketing campaigns, developers need to make sure they use a reliable mobile analytics solution that gives them a complete, independent and real-time picture of both their marketing and apps. This way they are able to quickly adjust their marketing spend and it shows them clearly what networks and messages are working best.

There are many factors that developers need to consider if they want their app to be successful and more importantly if they want to make money and maximize their app revenue.

To help application developers get a better understanding and effectively make money from their mobile apps, Bango has published a new white paper titled “Make money from you mobile apps”. This free white paper can be downloaded here – Mobile apps white paper.

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