MOTODEV Blog

[#1]

You just spent the past several months writing what should be the best mobile application ever and now you are ready to start watching the money flow in. While it’s a great start, there is still more work to do. Many developers tend to postpone planning for the marketing and pricing of their applications until the very end but given the myriad of potential pricing and billing models available, it is highly advisable to spend a good chunk to time on this very important part of your overall plan early in the development process and to re-visit that strategy often once the application is ready for sale. Below are some of the many application pricing models that are available to you today:

1. Pay-per-download Model

• The most widely used pricing model for mobile apps today and is employed by most online application stores.
• In this instance, the developer sets a fixed price for his or her application and the user downloads and has full, unlimited access to the application.
• With this model, it is essential that the developer research what other, similar applications are being sold for to make sure they are not charging too much or too little for theirs.
• Developers will also need to constantly monitor the sales of their application and be prepared to change the price as needed, which often may be required several times over the life of the product.
• NOTE: Developers should note that the average sales price (ASP) for applications has been steadily decreasing over time due to fierce competition and the increasing number of “freemium” applications in the marketplace. Applications that might have sold for $14.99 or $19.99 a few years ago may now only sell for $4.99 or in some cases, even $0.99.

2. Subscription Model

• With subscriptions, the developer typically provides access to one or more of their applications for a set period of time but the end user doesn’t actually own the application.
• The subscription cost for access to 3-4 applications per month may be comparable to the pay per download cost of a single application.
• Developers have the opportunity to distribute a larger number of applications and generate an ongoing revenue stream.

3. Demo or lite version Apps

• Allows consumers to try an application with limited functionality or for a limited period of time, with the option to upgrade to a full version of the application at a later date.
• There is little risk to the consumer because the application does not cost them anything to try and developers get to have their application trialed by a larger audience.
• There are several success stories with this pricing model where developers first posted only a pay per download version of their application, did not get much traction and then later added a demo version and subsequently saw their sales skyrocket.
• It is essential that the developer provide just enough functionality in the demo version to entice the consumer to give it a try and then advertise just how much more the user will get when they upgrade to the full version.

4. Ad-funded or subsidized apps

• Generally allow consumers to enjoy the full benefits of the application at no cost.
• Consumers are instead shown banner ads in and around the application as well as when the application is starting up or transitioning between screens.
• The application developer in turn makes money based on the number of times each ad is viewed and/or when a consumer clicks on one of the ads within the application.
  In the mobile games industry, companies like Greystripe have had a great deal of success with this model.

5. In-application micropayments

• A way for developers to offer their applications for free to consumers while generating income by giving consumers the option to purchase virtual content within the application..
• Micropayments are widely used within free applications on social networks like Facebook and MySpace today and are just now starting to appear in the mobile space.
• Companies like Zynga, one of the top game publishers for Facebook, is rumored to be making $100M per year using this format within their games.
  In games such as Mafia Wars and Street Racing, consumers can purchase reward points that can be used to accelerate or otherwise improve their standing within the games.
• Consumers can buy these reward points using a credit card, PayPal, one of the popular virtual currency providers out there like Spare Change or Social Gold, or in exchange for accepting a promotional offer from one of several marketing partnerships that are featured within the game.
• While not widely used today, carrier billing via premium SMS is likely to start gaining traction in the near future and will provide an enormous impact to the industry as vast numbers of consumers are given the ability to purchase in-application virtual content.

6. Combo of 2 or more models

• Developers can for example offer an application that is free to consumers and then utilize both advertising and micropayments to monetize their creations.
• This combo approach can provide developers with a diverse array of revenue streams from their application, which may also help fill the gap left by declining ASP’s as discussed earlier in this article.

Whatever pricing model you end up choosing for your next mobile application, I hope this has helped you become more familiar with the various pricing and business models available and how proper planning and competitive assessments early in the planning process followed by frequent monitoring of your sales will help your application be as successful as it can be.

If there are any other pricing models or app pricing topics that you would like us to cover, comment on this blog post.

Message Edited by cswambar on 05-19-2009 11:58 PM

[#2]

I my opinion, I think #3 Demo or Lite-version apps always works best as it allows consumers to get a "taste-test" of the app, and if it's good, they'll buy it. Quality will always sell itself.

I think #5 In-app micropayments will be hot too, especially for the impulse buyer. I saw a great example of this done with Apple's 3.0 version of iPhone software. The demo'd a 1st-person shooter game where the guy brought a rocket launcher while in game play. This works best when your CC is tied to an account like iTunes. I'm interested in seeing if Google can pull this off with Google Checkout???

[#3]

How can I to pay for this services.

Thanks

[#4]

Great article. Thanks.

[#5]

Good survey of the key pricing models.  I would love to see a discussion of how a developer would go about getting advertising integrated into their app--not on the technical level, but from the business end.  How do you source advertising, how to negotiate through the maze of integrators and other intermediaries, what to expect in terms of rates, how to maximize appeal, etc.

[#6]

Great article! Very pertinent, by the way!

[#7]

Good article.  I do have a question regarding POI (Points of Interest).  Can POI's be sold as a download for EZ Navigator.  I have developed a very targeted list of locations that is essential to NJ State employees and would like to sell it throught EZ Navigator which runs on Motorola cell phones with Verizon as the carrier.

Any adivse?

Patrick McCarthy

Message Edited by DJ_Ksar on 08-24-2009 07:33 AM