Wednesday, November 24, 2010

Monetizing Mobile Apps- A Value-based approach

Apart from deciding whether to charge on a one-off or a subscription basis, mobile app developers need also to consider whether their application has mass market appeal as well as perceived value. This can help determine which strategy to follow when deciding how to price the application (free or not). It can also help to determine whether to include advertising or not.

In my book, Building Location Aware Apps (2010 Manning Publications, R Ferraro and M Aktihanoglu-AVAILABLE FOR PRE-ORDER ON AMAZON.COM) I present a model of how the perceived value of the app and target market can be combined to decide on the charging strategy for the app itself:

'Freebie' applications are shown in the lower left-hand quadrant of the matrix. When it comes to monetizing an application, there is clearly no interest in giving it away for free, especially if it is not supported by ads. However, in the case of low value/low market potential applications this is often the only choice available.

'Long Tail Kings' are those applications that address a small, but definable niche within the market with a high-value proposition. They can charge for their application a premium price, and don’t need to include advertising as a result.Long Tail Kings can try over time to extend their appeal to other market segments.

'Killer Apps' rule over the mobile landscape. By offering great value to the consumer within a mass market, they can use their dominant position to not only charge for their application but also generate regular advertising revenue. Other applications continually aspire to become killer apps, though most never make it.

'Boot Campers' are those applications that hold great promise, because they have a large market potential, but that do not hold a great deal of perceived value in the eyes of the consumer. Boot Campers have to work extremely hard (hence the name) to work their way out of their quadrant by convincing consumers of the value they can offer.    

There is a lot more on this and other approaches to determine how best to monetize your mobile app (including a full range of mobile advertising options) in my book. I also explore the freemium model in more detail, as it remains one of the key ways of successfully commercialising digital products.

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