The first blog of this series dealt with why jumping onto the mobile application development bandwagon was a good idea. To ensure that an overly rosy picture wasn’t painted, the argument was tempered with several history lessons, to reach the conclusion that monetization was the key to ensure the mobile application in question was a money spinner.

Now let’s move on to the harder bit. Let’s talk hard numbers: how much do you think your application is worth? Remember, price it too high and nobody would buy it. Price it too low and you may not be able to cover your own margins. Essentially, the trick is to price it just right. On this note, experts are usually unanimous in their opinion that the following questions are sacrosanct while trying to determine how to price a mobile-based application: what is the offering all about? What does the application do? What is my competition offering? Why should a customer opt for my application, vis a vis my competition? And, last but certainly not the least-how is my competition pricing their applications?

Once you have the answers to these questions in place, you’re ready to answer the most important one (and the reason this blog has been written, really), what are the best ways to monetize my mobile application? There are, of course, a thousand and one ways to achieve this, a few may work, while others may not. While I am certainly not an expert in this area, permit me to discuss a few interesting ones that may just help you hit the bull’s-eye.

The first point I’d like to make is launching a trial version of the application. This will help whet the customers’ appetite, as well as give them an idea of the quality of the actual application. Beware, though, maintaining two versions of the same application implies a lot more blood, sweat and tears. Also, remember to have a solid up-sell plan in place before you attempt this route.

Also consider the “freemium” or gated features route. Simply put, like the in-application advertising model, a freemium application is also free. However, certain “advanced” or “premium” features are gated and cost money to be unlocked. The customer can access the application’s basic functionality, but will be charged to access all the features. This method is basically aimed at accumulating and engaging customers until they discover the application’s value and are willing to pay to access additional in-application tools.

While we’re on the subject of payments, let’s talk about paid applications. Now, needless to say, a customer will obviously opt for a free application, vis a vis a paid one. So, the key to making money via a paid application depends on a developer’s ability to showcase the perceived value of the same with a killer listing (which includes screenshots, five star reviews, etc.) that differentiates it from similar free applications. In other words, the most profitable paid applications do wonders in selling their application’s unique features, such as design or functionality or brand.

Next, consider using in-application advertisements, but very cautiously. Look, there is little doubt that this is one of the most popular methods to monetize one’s application, but it has to be treated with kid gloves. Why? Well, don’t you find those advertisements that pop-up in the middle of the movie, game, music clip, etc, annoying? The trick is to know how and when to use this method. Industry experts believe that developers need to find an organic way to integrate the product with advertisements or to enhance the application itself with the same. For example, Pandora has shown how to leverage advertisements to its advantage by offering ‘sponsored’ playlists among their music service. In other words, it can be done, just figure out “how” and without annoying your customers.

Now let’s talk about in-application purchases or things one can pay for within an application. This, again, is a tricky one. The developer has to walk a tightrope while examining what the product offers and how its services can be extended for a small financial cost in a way that is beneficial to both him and the customers. Too subtle and you lose the money game. Too brash or too ambitiously priced and no customer will buy it.

The newest route in the market (arguably) is sponsorships or incentivized advertising. This method requires the developer to partner with advertisers who provide customers with rewards when they complete certain actions within the application. In this model, the application sees the big bucks coming in by netting a share of the revenue from redeemed rewards. In addition, it permits the developer to incorporate advertising that actually enhances the application’s ability to engage users. This model can be adapted for almost any vertical, and can be better received by customers because it is relevant and related to an application’s purpose.

To sum up, this is by no means an exhaustive list of how an application makes money. In fact, the game is going to get tougher, with Gartner predicting that until 2018, less than 0.01 per cent of mobile applications will be considered a financial success by their developers. The bottom-line this grim forecast brings to the fore is: in the end, developers who are creative and not averse to taking risks are the ones who win the game. So, dear developers, happy monetizing and may the best application win.

Srinivas Nidugondi

Srinivas Nidugondi

Srinivas, Chief Operating Officer - Mobile Financial Solutions, has over 17 years of experience in various industries including financial services, payments and commerce in a variety of business and product related roles and most...