Over past few years, world has witnessed an unprecedented number of people rushing to develop mobile apps for various platforms like iOS, Android, etc. A key factor for developing apps is earning revenues either by selling apps, ad space or end user data to other companies. A closer look at growth of mobile app revenue from 2011 – 2015 and further forecast through 2017 gives a rosy picture.
• Maximum year-on-year growth was recorded in 2012. Most of revenue growth was because of iOS based apps
o This can be explained by the fact that Apple launched iPhone 5 this year.
o Android also saw significant jump this year because more mobile phone manufacturers adopted Android as base OS.
• Between 2011 and 2015, revenue grew 445%
• In 2016 and 2017, its expected to grow another 69% over 2015 revenue
If above encourages to dive into app business, be cautious about data that supports the flip side of app development business.
According to "The Developer Economics Q3 2014 Report"
• Majority of app businesses failed or are at risk of failure
• 50% of iOS developers and 64% of Android developers are running below $500 per app per month.
• At least 69% of developers struggle to sustain full-time development from app revenues only.
• Its 80-20 rule with App businesses. Here, 20% of app businesses control 80% of overall revenues.
• Just 1.6% of the apps earn more than $500K per month
• Only 12 % of developers earn more than 11% of all app store revenues.
In order to make your app business run, you need to think about "Planning the Work". Which means, you need to plan you app development from various dimensions. Key first questions to answer are:
Usability: What problem will be solved by app and how
Uniqueness: What is Unique Selling Proposition of the app. Why would people pay for it
Competition: Business models that competing apps use and their value to the apps
App's Worth: What additional features app users would be willing to pay for.
Once these questions are answered, next key step is to think about your app's business model. Here, we look at 6 famous business models that you should explore from benefits and shortcomings perspectives.
Free with Built-in Apps:
You remove price tags from your application for download but send targeted ads to app users. In this model, goal is to have a large user base and collect specific data that is useful for other companies to send targeted ads to app users.
Income Source: By selling data-driven advertising space in your app.
App download is free with basic features but most features cost money for app users to unlock. This is beneficial when users want to preview an app and have a consumer experience before buying it.
Income Source: App price for fully unlocked version. While the app is locked, it can be used to earn money by having targeted ads sent to users.
It costs money to download this app. Helps make money with brand new users. It takes a lot to sell your apps in this model. Your app need to be a killer app solving some key and complex problem. Uniqueness plays an important role in this model. Apart from an out of the world app, your marketing team’s ability to convince users to buy your app instead of free substitutes plays an extremely important role.
Income Source: This model works on “pay then play” strategy.
It’s a profit sharing model where users can use your app to purchase consumer goods or anything that has commodity value.
Income Source: This model turns your app into a key sales channel & a mobile storefront. You retain some share of profits for every good sold through your app.
This is primarily used by content based apps. In this model, a preview of content is available to app users for free. They need to subscribe and pay to view full content.
Income Source: Earns money by getting subscriptions.
This model gives incentives to users if they perform some action in the app. App business partners with advertisers and other business houses. Advertisers gain inclusion in your app by funding rewards for your users, who earn these rewards by engaging more with your app.
Income Source: Your app earns money by taking a share of the revenue from redeemed rewards.
App businesses can be innovative by adopting an hybrid approach to their app development. A hybrid approach uses 2 or more of the above models to monetize an app.
Influences from merging trends in computing:
According to Gartner, the total number of connected industrial, business and consumer ‘things’ is likely to reach 26bn units by 2020.
- ABI Research expects that the number of IP-connected devices and sensors in the world will exceed 30 billion by 2020.
- With application in areas such as as home automation, industrial monitoring, connected & autonomous vehicles among others. IoT may is really new era in computing technology.
- In IoT, machines communicate and interact with other machines through millions of sensors and generate data that is processed into useful actions that control and command things to make our lives much safer and easier.
- Future growth app revenue will depend on how fast IoT will evolve and its adoption rate. IoT will be a logical next step for software’s technological growth for mankind. Mobile apps will help fuel exponential growth of connected machines by having understandable insights driven from data generated by sensors.
- With over 25% of developers earn over $5,000 per month on the iOS platform and Android sees 18% of theirs faring good as well, mobile app development is still a growth business if done right. Apart from growth in IoT as described above, other technological factors like growth of Smart Watches, Smart TVs and other advances in technology area will help expand the app environment.