How do you make money from mobile apps? With all the hype that has surrounded Smart Phone Apps in the last few years it all seems so simple. Design and build a killer app, release it to the various market places and then sit back and watch the money roll in. For some lucky punters this has been the case but the psychology and tactics for successfully making money through apps is nuanced with a few key factors to consider.

Straight Purchase

I won't linger too long on this as it is a pretty simple concept to grasp. Build an app people want, then sell it to them. A word of warning though. Unless your app generates a lot of marketing hype, favourable blog or in-store reviews or charts on the best selling lists for your category then be prepared for fairly barren sales, especially if this app is not an extension to an already established brand. Mobile users do not speculatively part with their cash unless there is some sort of validation that this is the app they are after, normally from ratings from other users. So in order to make money you better be prepared to spend some on advertising and promotion.

Additionally as competition intensifies between app developers a price war has also begun and the Average Sales Price (ASP) of apps has been steadily decreasing over time. Nobody wins in a race to the bottom though so what other options are there?

Make it free?

It does seem counter intuitive to put all of that effort and budget into a mobile app to then just give it away for free, however there are still some benefits to doing this. Apps are frequently bolt ons to existing web services that make it easier for mobile users to access and consume. There is a school of thought that people will start to access the web purely through apps rather than directly through the browser as the quantity of content and noise proliferates users will want some form of filter to it all. There are more than 200 million (of the 600 million total) active users accessing facebook through mobile devices and those that use facebook on their mobile are twice as active as non-mobile users.

So a mobile app is a natural addition to your existing web presence if you want to keep your user base engaged and active. Unsurprisingly free apps also get downloaded a lot more than paid ones, especially on the Android platform so you could also consider this an exercise in brand building as well as facilitating user consumption.

Ad Supported

Including adverts in your app seems like a pretty simple revenue model. There are established Ad platforms such as AdMob (owned by Google), iAd (Apple's own advertising platform) and InMobi which dominates the Asia-Pacific market. However the revenue cuts are not great and in order to really sustain a decent income you need to have a lot of active users for your app. There is no real harm in supporting your free app with Ads aside from a bit of user distraction and the fact they may well click off your App completely if lured in by the marketing (although iAd has the benefit of being completely in app). You could also consider offering a premium service that removes the Ads which your most engaged users will want to take up.

In-app Billing

In-app billing has long been lauded as the answer to the free versus paid debate. Essentially the download of the app is free (which helps maximises the potential user base) and then the app either becomes chargeable for certain features or content. This way users get to try the app out without cost and if they like it can pay for more. It is essential to provide just enough functionality in the demo version to entice the user to try it and then advertise just how much more the user will get when they upgrade to the full version.

Sounds great! But take up of this option has been very slow so far. Bango reported that a mere 5% of the sales it facilitated in 2010 used this method however they also forecast that by the end of 2011 In-app billing will account for 30% of mobile payments as technical limitations that have encumbered developers are gradually resolved.

In-app purchase falls broadly into two camps:

1. Unlocking content and features in the classic upgrade model from a light version.
2. Building in micro transactions to buy things like digital goods in a game. For example a new bird charcater in Angry Birds or a facebook badge.

Subscription (The Holy Grail)

Marketers often cite subscribed users as the most attractive as income is predictable and regular (although naturally there is attrition). Each user that comes on board adds to the bottom line created by the previous. The sales cycle is gradually upward rather than peaking and troughing.

Not all apps can warrant a subscription model but if your app provides an ongoing level of service or is a source of valuable fresh content then it should be on your radar. I have heard anecdotally that users are also more open to it rather than a high one off purchase as they feel they can leave at any time and might not spend as much even though they normally end up spending more.

In February Apple and Google raised the stakes by announcing two different “one-click subscription models”, with the key difference being the amount each party will get for each subscription sold. Apple will get 30% for each subscription sold. By contrast, Google's “One Pass” system is a flat 10% charge (i.e., the publisher keeps 90%).

Previously subscriptions were handled externally to the app through a web interface but the ability to do this easily in-app is potentially huge. However the heavy cut that Apple have demanded has prompted a lot of unrest as the 30% cut eclipses many profit margins and Apple have said that there cannot be any "Apple Tax" (where users subscribing through their platform get charged more than anywhere else). This effectively stifles the competition unless there is a complete withdrawal from the App Store. Additionally the subscribing user's data is not released back to the publisher in the same way it would had they signed up direct. That argument needs more time to full play out.

Despite the negative issues Apple now offers an operating system that controls over 100 million high-value consumer accounts all connected to credit cards. Google and Microsoft are also both investing enormous resources in this area as well and are showing more willingness to be flexible to both publishers and advertisers.

The only downside is that users are only happy to manage around 6 subscriptions at any one time so get in quick before the gold rush!

Either way now might be the time to start thinking of your future app business model.

Hi my name is Matt, and I am an addict. It’s been 34 days since my last tweet, check-in or status update. I am a social media addict who, in a single 24-hour period, is capable of posting upwards of 20 tweets, five check-ins, and three status updates – on a quiet day.

I became acutely aware of my addiction on the eve of my latest holiday, when I dropped my iPhone and shattered the screen. In one absent-minded swoop, I had destroyed my book, my camera, my watch, my calendar, my MP3 player and... my phone. The tiny electronic object, which could never be further than 2m away from me, was useless. This left me isolated, disconnected and clamoring for internet cafés, just to get a fix of what my friends were up to – and that was just the start. Apart from the obvious lack of incoming and outgoing phone calls, I couldn’t perform tasks that would ordinarily slip off my fingers without a second thought.

For starters, I had to print out maps to navigate the most basic city streets; I couldn’t even refer to my phone to orientate myself North. I would walk past store fronts, displaying items I wanted to research further and be at a loss without a search engine and a quick bookmark for later reference. Cute little landmarks that reminded me of my friends were past and forgotten, since I had evolved into a state of clicking and uploading. So to stop and take out a camera was way beyond my limited attention span. I also constantly found myself asking passers-by for the time.

Most tragically, I was unable to ‘check in’ at the North Pole. For a whole month I was plunged into a state of what is now known as ‘nomophobia’.

I am not alone in my addiction; nearly 50% of 16-24 year olds have an internet-enabled phone. This instant access to the internet is set to radically change the purchasing habits of future generations of consumers and it is vital that retailers are prepared to respond.

Before the social media revolution, advertising was often focused on getting the consumer into a store. This mindset is in need of drastic change, for the simple reason that even if a potential customer is in your store, a few simple taps on their phone could easily take them to a competitor’s website, comparing prices. Guy Laurence, the Chief Executive of Vodafone reports that “20% of consumers on Oxford St on a Saturday are online at the same time, checking Facebook and checking rivals prices”.

Mobile social networks like Twitter and Facebook have put all of your consumers' friends into their pocket. And the consumer is happy to have this support – not least in the changing room. Gone is the impulse buy, along with the perennial question, “Does my bum looking big in this?”. Now this question can be answered with a quick photo post. Laurence again reports that this in turn has led to a drastic increase in time spent in a store’s changing rooms, as the potential customer waits for their friends to respond. This is social sharing at its most intimate and empowers the consumer to either purchase the product or, in the face of new information arriving whilst they’re switching between skirts, leave it behind.

Amazon has further empowered the consumer with their latest iPhone application. A shopper can be wandering through a store and upon finding a product they are interested in, whip out their handset and simply scan the barcode. The app then hops online and proceeds to show all the retailers who stock that product, arranged from cheapest to the most expensive. And yes, there is a large ‘buy-now’ button. This gives the consumer unprecedented power over the retailer; never before has direct product comparison been so simple.

In practical terms, this means that bricks & mortar retailers can no longer compete on price alone; logically, this should push the retail industry back into the realm of the service industry.

The internet trade body, IMRG, is estimating that £6.4bn will be spent online this Christmas, and 20% of that through mobile applications. That is £1.28bn changing hands through iPhones, Blackberrys and Android phones.

This bourgeoning market is rapidly being catered for by many high street traders, who are building mobile websites – rather than apps – in order to capture the consumer in the heat of the moment – and specifically whilst in the competitors’ shops, when there isn’t time to download an app.

Marks & Spencer has just launched a fully transactional e-commerce mobile site, to connect with this mobile audience. This is a simple site which works on almost any mobile browser and allows a user to search through their extensive range. But something is missing: nowhere on the site can I find a store locator or contact details. These two features are vital to today’s consumer, who might be checking out the competition while trying on an item of clothing in another retailer’s changing room.

In an effort to get the consumer to spend more time in store, department store Debenhams has initiated a competition with the children’s game of ‘four-square’. Anyone who “checks in” (via the Foursquare app) on a Friday is given a free cup of coffee in their in-store café. This is a fantastic way to get the mobile consumer in the store and keep them inside longer. The only weakness with this is that this free coffee potentially gives them time to sit down, take out their smart phone and check the competitors’ prices of a product.

It’s easy to forget how quickly this change in the consumer's mindset has come about. It was just a year ago that it was only online retailers who were investing in mobile platforms, and the thought of making a payment on your phone was foreign to the mainstream consumer.

But with the advent of the iPhone, which put the internet into everyone’s pocket and Apples App store, which made it easy (and acceptable) to pay for goods through your handset, we now have a new and formidable generation of mobile consumers who are educated about retailers and competitors at the point of purchase.

In the past few years, one of the biggest areas of change for the Web has been the amount of Internet users who are accessing websites via their mobile devices. You are probably aware of the facts: today, 71% of smartphone owners are browsing the Internet (88% of iPhone users do, 92% for Android). And this trend isn't going to stop: 4 billion mobile subscribers worldwide are expected by the end of 2010(1).

However, accessing Web content on a mobile device is still a rather inconsistent experience. Dozens of mobile browsers exist, each with different rendering capabilities. Designing and building mobile sites brings some unique situations and challenges. For web developers, optimising websites for mobile browsers is often a painful and difficult process.

But things are changing: the latest mobile browsers, available on the iDevices (iPhone, iPod, iPad) and Android phones (Nexus One, Motorola Droid) are game changing, offering a much superior browsing experience to their users. Amazing results can be achieved, as web developers are now able to make use of the latest web technologies, even on mobile devices.

It comes as no surprise that the US mobile browser usage is now dominated by the iPhone, with 64%(2), and Android, which comes second at 19%. Both Apple and Google are pushing mobile browsing, and empower their users with tools far ahead of the competition.

But whether or not you decide to focus your mobile strategy on the iDevices and Android specifically, here are a few things to consider when going mobile:

Simplify
The key to a successful mobile site is simplification: simpler navigation, fewer options (especially in web apps), a reduced amount of text, and possibly fewer images. While webpages made for the desktop often get crowded (banners/ads, huge blocks of text, countless buttons and links etc.), mobile websites have to remain simple. What is important on the page has to be kept, but the rest should be cut out. Less is definitely more on mobile. With fewer (carefully selected) options available to the mobile user, the site gains usability and the viewer is likely to continue browsing your site.

Think lightweight
Because of the limited bandwidth on mobile devices, as well as the inherent hardware limitations, an important focus has to be put on optimisation (load speed, image compression). Your visitors using mobile devices do not need high definition pictures, neither do they need ambient sounds or music. Pages have to be leaner, so users are spared excessive bandwidth costs and enjoy a faster browsing experience.

Prioritise content
What is crucial in your mobile strategy is to put "function before form" and present users with a customised experience, relevant to mobility. Your mobile site has to be contextually relevant to your users, and first address how content is consumed. If you are an online reseller, you might want to put the search bar at the top of your page and a quick way to find a local store (which are the most likely actions users will need on mobile); if you're a small business with an online presence, you would probably need quick access to your phone number (e.g. a "Call us" button) and address (e.g. "here's our address, view it on a map"). The logic is that your viewers who are accessing the website are on the go and probably have something very specific in mind!

Do not neglect the Mobile Web
Having a mobile website doesn't mean removing images from your website. It deserves it's own strategy and requires dedicated development. As the number of users browsing the Web from mobile devices continues to rise, you cannot miss the opportunity to shine!

References

1. Mobile Subscribers to Reach 2.6B This Year
   
2. Net Applications, February 2010

It is with interest which we have been watching Google’s Android Application competition. This is the $10m competition to develop applications for Google’s Android mobile platform. The 50 semi-finalists were announced today, and although a lot of the applications are shrouded in secrecy, a strong theme seems to be developing. The majority of applications seem to be based around Social Location tools, or Security applications.

For more about the semi finalists information have a look at this site.

Most of the industry are predicting a breakout year for the mobile web in 2008.

For a long time, the mobile web has been unpredictable, costly and low on user take-up. The majority of campaigns I have previously worked on with any serious mobile element have just scraped the surface, tapping into popular SMS and MMS services.

So what is encouraging us to use our mobiles online?

Apple's iPhone, released in late 2007, has made mobiles very sexy again.

If you haven't heard of it (welcome back to Earth, the wall is down and the cold war is over) the iPhone is a revolutionary device that unites your calls, contacts, email, music, camera, web browser etc in a dynamic, touch-screen, curvy-edged box.... and regular people are using it in droves!

For many reasons it would be wrong to confuse the iPhone with most mobile devices, especially if you are considering building a mobile site, but it has finally united the idea of phone and web working together properly.

It's not just the technology that has pushed us. Major websites, search engines and social networks such as YouTube, Flickr and Facebook have placed mobile services at their core, tempting unsuspecting users into an ever-connected virtual world.

Location Based Services

We have been using Google Maps and Sat-Navs for a while. It makes perfect sense to be applying all this thinking to your mobile. Needless to say the iPhone already does a lot but what about the rest?

In 2007 Nokia acquired a mobile advertising firm and a leading navigation system company. It isn't hard to see where they see things going. The benefit to marketers is easily delivered, relevant, geographically contextual content to end users.

Open Platforms for Applications

It's not all about browsing! 2007 really brought home the possibility of the web app, widget, mashup etc. Vista followed the Mac's lead and introduced desktop feeds for your local weather, football scores, status updates (the list goes on forever) and we all became RSS junkies. Adobe launched AIR and iGoogle followed suit so even your default homepage can tell you everything about anything you want.

But what about the mobile phone? Geeks have been hacking the operating systems on their phones for years but there have been no open standards available for developers to really use the core features of a physical handset. Until now!

The Open Handset Alliance Project launched Android, an open, free mobile platform which is being supported by some heavy companies such as Google, Motorola, LG, Samsung and T-Mobile to name a few. Expect that to be supported as standard in most future handsets.

Apple decided to open up the iPhone Developer SDK last week so we can look to develop intelligent bespoke apps that can fully interact with the handset soon!

Mobile Web Standards

There has been a degree of convergence in web standards for mobile. XHTML-MP has become the default industry-supported language for the mobile web. Page load and the multitude of various screen sizes still need to be taken into account when designing but at least the code is behaving itself!

Codegent Mobile

So we thought after all that talking we should show you something. We have built a simple version of our own site for your viewing pleasure.
www.codegent.com/mobile/

Or you can navigate to it using your mobile barcode scanner on the funky looking graphic below. You will see these dotted around everywhere soon. The Japanese have been using them on outdoor advertising, business cards, print ads etc. for years. But don't feel too left behind, they also have robotic dogs that clean their flats whilst they micro-sleep :)

Geek out.