Deciding on the Revenue Model for your Mobile App

When deciding between a ‘free’ ad-supported business model and a 'paid' app business model consider these things:

1) Compare the revenue for both the models by doing the following anaylysis

• Crunch the number to estimate the revenue you think you can get per user on a free vs. paid model - estimate the number of impressions you’ll get per day (or week) per user for your ad model v/s how much you plan to sell your app for
  
• Consider the number of users you think you can realistically get with each.
• Ensure you estimate the reasonable growth rate. It will be a while before you can get a million users

2) If you’re leaning towards a free, ad-supported model, make sure it’s scalable for you to support marketing and business development

3) If you want to have a free, ad-supported model but the numbers in 2 above make it unaffordable, consider whether a 'freemium' model would work for you

4) If you feel your app is far better than other apps out there, don't be afraid to charge for it. However, be prepared to invest in marketing and add some major viral elements.

Comparing Mobile Analytics Solutions

In my previous post I explained the important of using Mobile Analytics in mobile apps. This post compares some of the popular solutions available in this category along with my suggestion for.

Google Analytics
Google Analytics enables you to track performance by downloading the SDK and use it to get traffic insight on iPhone, iPod Touch and Android application platforms.

Google Analytics SDK allows you to rule which view or what part of your application view will trigger a page view. Google suggests that you trigger at least one pageview, and do it at the point the app loads, if you want Google Analytics to track Unique Visitors.

Admob
Admob has made a simple to implement mobile analytics solution. You can track visitors, site usage, traffic source and mobile goals that you create in AdMob administration section. You can track the effectiveness of advertising campaigns from advertising partners that you work with, get detailed information regarding the referring sites and keywords which your visitor came from, analyze Pageview, bounce rate, downloads, etc.
Further, Admob ads can be integrated.

Flurry
Flurry provides real-time app usage statistics for developers who need a single mobile app analytics platform, that will allow them to get app usage insight, how the app performs on different handsets and allows them to watch advanced reports to increase retention and grow their user base for the app shelf-life

If you have a multi-platform mobile app, you can use Flurry on many types of devices, whether you deploy your app for Apple iPhone, Android device, Blackberry or JavaME and others coming soon. The offering is free.

AppCircle can be integrated for ads.

Webtrends mobile Analytcis
This is a robust and flexible product, which allows mobile website owners and apps developers to get in-depth data analytics of their app/website usage. It gives you the advantage to monitor, track and analyze real-time usage data and measure every metric that can possibly be measured for both apps and mobile websites.

There are also some other companies like Bango which provide advanced analytics however they are not free to use.

If you are on considering analytics for Mobile apps, I highly recommend Flurry. It is very user friendly and provides a sea of analytics which are more than what you need to made those crucial decisions. Besides this, it is absolutely Free!

The other main benefits of Flurry are:

• Mobile app usage insight
• Analyze app performance on different handsets
• Who uses the application?
• What are the most useful feature in your app?
• Check users’ loyalty
• Users by country , time and customer segment
  
• Average session usage session length

The Need for Mobile Analytics

The important of Metrics for feedback cannot be over-emphasized. Its like the basic feedback loop in circuits, appraisals for employees, Balanced scorecard in companies and more recently web and mobile analytic in the digital era.

The Growing Mobile App Market

Gartner estimates the mobile app downloads to touch 17.7 bn in 2011. As the mobile apps market grows tracking what users are doing on these 17.7 bn downloaded apps becomes of prime importance to advertisers, marketeers and big brands. The sale of Smart Phones and Tablets is also estimated to surpass the Desktop and Notebook PC sales in 2011 by Morgan Stanley. Hence there was no better time to start monitoring the mobile app usage in additional to analyzing behavior on the web.

Mobile Analytics

While various tools are available for mobile analytics. I have found Flurry to be highly useful. The platform lets you track the number of new users across time, geography and customer segments along with active users, session lengths and number, frequency of use and retention. Moreover they compare your data with genre averages to help you get a better sense of where you stand in the segment.

These metrics can be combined to derive more important results like analyze customer segments across demographics to help devise and improve both your product and marketing strategy.


This also helps the relevant placement of advertisements and putting the high yield ads in the more frequented mobile app screens.

Challenges

• Mobile app analytics has some basic challenges compared to the web analytics, due to the nature of the mobile platform. A considerable amount of mobile application usage happens when no network is available. As a result, analytics data has to be stored locally on the device and reported later.
• Apps are downloaded onto the phone as opposed to a website where the content is all dynamic. This requires the analytics to be finalized before app release, because you can't change the tracking points once it's downloaded, unlike the web where its all dynamic
• Data overload can also become an issue. You need to know what you want to track and how you want to use the data for interferences so that you do not get overwhelmed.
• One frequent argument against all the data collection is that it discloses sensitive user data. Hence you should always ensure that you take the user's permission before capturing such data.
  

Mobile Gaming - The Freemium Way

A recent study by Flurry indicates that on an average iOS and Android Freemium Games generate $14 revenue using their Freemium model.

The rise of the Freemium mobile games has given some tough competition to Nindento DS and Sony PSP. an avid Freemium game player becomes so engaged in the game, that the usual $0.99 iPhone app threashold no longer bars him from a $9.99 purchase or in some cases even a $50 purchase (which is how much many of the game CDs for the PSP and DS sell for).

The Freemium model which has earlier been used by many big Web companies, as highlighted in my earlier post, is here to stay and rule the mobile gaming industry. It should come as no surpise that game drive 75% of revenue generated among the top 100 grossing iOS apps, of wihch 65% were generated from freemium games. Again, the crux of this model remains udnerstanding the customer segment and their needs to correctly decide the offerings in in-app purchase and price them right to induce purchase.

The 'Freemium' model

The "Freemium" business model for apps - in which apps offer some services for free, incentivizing users to try an app before paying for additional features is becoming more and more common in the top grossing apps on the various mobile app stores. The primary source of income for many freemium apps is in-app downloads.

A recent study by Flurry found that mobile phone games which are free to download, are actually making more money than those that charge.

Many companies let you download apps for free, rather than asking $0.99 to download a game you have never tried. when you become an passionate player, they you into paying quite a bit more than $0.99 for in-game virtual goodies like farm crops or power boosters. In June 2011, among the top 100 games in the iTunes store, free games generated almost twice as much revenue as games that charged to download.

The Freemium Business Model

The word “freemium” may be less than four years old, but the business model it describes – offering basic service access for free and then charging for advanced features – has been around for decades and is utilized by some of the Web’s most successful companies.

The working: Everyone gets your product or service for free, forever. But those customers who really like it, and find most value in it, will have a strong temptation to upgrade to a “premium” service which has lots of additional goodies and come at a price. It is a strategy for pricing by customer segmentation. It also requires a lot of insight into your customers and how they use your product to know what you want to giv for free to entice your user yet ensure you have some core features available for the paid versions.

Examples

Pandora - Since its launch in 2005, the company known for giving away “free” music to users has expanded to 20 million unique visitors. In 2009, it brought in $50 million in revenue – all the while as a freemium business

Skype- The popular internet calling service is free for those millions of customers who use it just to call or videochat between two computers anywhere in the world. Skype only charges if you want to use it to call a landline phone.

Some more examples include Flickr, Dropbox, Evernote, Spotify and recently announced Apple's iCloud music service.

With a high conversion rate and its ability to create an incredibly loyal audience, freemium has become a cornerstone of many successful startups and is definitely worth considering before you decide you pricing and go-to market strategy. But beware, not all Freemium products actually break even.