Mobile Application Monetisation: A Revenue Model

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The mobile application monetization framework is a generic revenue model that can be used to systematically assess the possible revenue streams for a mobile application or content service.

Mobile Application Monetisation: A Revenue Model

  1. 1. Mobile Application MonetisationA Revenue Stream FrameworkBy Keegan Ziady and Steve Vosloo19 July 2011
  2. 2. THE REVENUE STREAMMONETISATIONFRAMEWORK 2
  3. 3. Caveats Revenue streams not limited to smart- or feature-phone apps. Includes all mobile apps and content services. Revenue streams are analysed from the developers or entrepreneurs perspective. 3
  4. 4. THE FRAMEWORK 4
  5. 5. ADVERTISING | PPM 5
  6. 6. ADVERTISING | PPMHow It Works The application (app) or content service is freely available. Advertising is displayed in the app or content service to generate revenue. Advertising can be self-sourced by the developer, or it can be done through an ad provider. In this revenue stream the developer is paid per impression (PPM) or ad that is displayed in the app or content service. Ad providers generally have a PPM rate for every thousand views of the ad. 6
  7. 7. ADVERTISING | PPMAdvantages Disadvantages It is easier to tally up  If an ad provider is used views than clicks-through‟s they take a share of the (Pay-Per-Click). advertising revenue. If an ad provider is used it  The app or content service is easier to fill the ad needs to reach a large space than it is by self- base of users to generate sourcing. significant revenue. Ads are easy to set up and  Users may be discouraged can be used on a number by ads. of apps or content services. 7
  8. 8. ADVERTISING | PPMExamples Tag-line adverts in bulk SMS and “Please Call Me” messages. Splash screen ads when opening smartphone applications. Ad banners in .mobi websites. South • ZestADZ African • Google AdMob • InMobi mobile ad • BuzzCity providers • NAVTEQ 8
  9. 9. ADVERTISING | PPC 9
  10. 10. ADVERTISING | PPCHow It Works In this revenue stream the app or content service is freely available and advertising is displayed in the app or content service. The developer is paid per click-through (PPC) that each ad receives. Advertising can be self-sourced by the developer, or it can be done through an ad provider. Studies have shown that click-through rates are higher on entertainment orientated apps such as games. 10
  11. 11. ADVERTISING | PPCAdvantages Disadvantages Ad space easily filled with an ad  If users do click-through their provider. attention is diverted from your app to what is advertised. Ads are easy to set up and can be used on multiple apps and content  The risk of occupying ad space with services. an ad that generates no clicks and subsequently no revenue. More revenue is generated per click than per view.  No guarantee that traffic or usage will result in click-trough‟s. It may be possible to specify a minimum amount to be paid for  If an ad provider is used they take a each impression (ad) irrespective of share of the advertising revenue. the number of clicks.  Users may be discouraged by ads. 11
  12. 12. ADVERTISING | PPCExamples Ads on .mobi sites that redirect the user to a different site. Ads embedded in smart- or feature-phone apps that when clicked take the user to a .mobi site in their mobile phone browser. Ads in SMS or USSD taglines that include a link to a .mobi site, which will be opened in the user‟s mobile phone browser. 12
  13. 13. SALES | PREMIUM 13
  14. 14. SALES | PREMIUMHow It Works Revenue is generated by selling the app or content service. This includes apps for smartphones and feature phones that operate on Android, Windows 7, Symbian and iOS operating systems. Apps can be sold through their respective app stores. The app store keeps approximately 30% of the purchase price. 14
  15. 15. SALES | PREMIUMAdvantages Disadvantages 24/7 access to global markets.  Hundreds of thousands of apps are available making competition incredibly stiff. Large potential sales volumes.  Attracting awareness to an app is An app store acts as a marketing, difficult. distribution, and payment agent.  Encouraging first time use amidst user fears of wasting money in purchasing a dissatisfying application is difficult.  Many free apps exist in app stores, limiting saleability.  Apps need to be approved before they can be put into an app store which can take time. 15
  16. 16. SALES | PREMIUMExamples iPhone‟s Skee-Ball game that sells for $0.99. Android‟s Quask app that allows one to type and ask (using speech) general questions and get answers that sells for $3.99. 16
  17. 17. SALES | FREEMIUM 17
  18. 18. SALES | FREEMIUMHow It Works Two approaches to generating revenue with Freemium apps. (1) Create an app with simplified features and market it as a „Lite‟ version. Another application which is like the first but has more advanced features is then purchasable. (2) Allow users to freely download and trial the app for a limited period of time, after which they need to purchase it to continue use. Developing an app that has limited features, with a purchasable upgrade option to enable all of the features, is not recommended as it is not accepted by the Apple app store. 18
  19. 19. SALES | FREEMIUMAdvantages Disadvantages Users get to try the „Lite‟ version  Very attractive features need to be for free, eliminating the fear of offered to encourage users to wasting money when purchasing the purchase the full version. full version that proves to be dissatisfactory.  Hundreds of thousands of apps are available making competition Users will more readily download incredibly stiff. free apps increasing user awareness of the app.  Apps need to be approved before they can be put into an app store 24/7 access to global markets. which can impose time delays. Large potential sales volumes. An app store can act as a marketing, distribution, and payment agent. Freemium apps are becoming increasingly popular. 19
  20. 20. SALES | FREEMIUMExamples An iPhone app called Twitterrific that encourages people to upgrade to Twitterrific Premium for $2.99. Mahala mobile banking which is aiming to offer free peer-to-peer money transfer, money deposits or withdrawals and retail payments, and expects to generate revenue by selling additional services to users. 20
  21. 21. SALES | SUBSCRIPTIONS 21
  22. 22. SALES | SUBSCRIPTIONSHow It Works Users download the app for free and are charged a small monthly or yearly subscription fee in order to use the app, which generates revenue. Alternatively, users can subscribe to a content service and are charged for receiving information (e.g. when an SMS/MMS is sent to them). 22
  23. 23. SALES | SUBSCRIPTIONSAdvantages Disadvantages A small monthly subscription fee  App stores take a percentage can be more attractive than a (approximately 30%) of the revenue larger initial payment for the app or generated from subscriptions. content service.  Users in South Africa have been 24/7 access to global markets. notably put-off by SMS subscriptions that have been unexpectedly costly. An app store can act as a marketing, distribution, and  Apps need to be approved before payment agent. they can be put into an app store which can impose time delays. Mobile operators or content aggregators have existing payment  Negotiating required with mobile mechanisms in place. operators and content aggregators.  Users may perceive that they are being locked into a long term expense. 23
  24. 24. SALES | SUBSCRIPTIONSExamples Mobile TV applications which users subscribes to and pay for monthly. Mogasm (a subscription-based mobile dating website). Ringtones.co.za (a subscription service that offers media content such as ringtones, wallpapers etc…). DStv‟s mobile USB TV decoder, Drifta. 24
  25. 25. SALES | DIRECT GOODS/SERVICES 25
  26. 26. SALES | DIRECT GOODS/SERVICESHow It Works With this approach the app or content service is available for free and revenue is generated from the direct (in-app) sale of goods and/or services. Here users use the app or content service to purchase either virtual or real goods and services. These include items such as movie and concert tickets, virtual gifts, virtual currency (mobile money), m- banking and airtime top-ups. 26
  27. 27. SALES | DIRECT GOODS/SERVICESAdvantages Disadvantages Users are not discouraged  Revenue may not be or irritated by ads. generated from the app itself but rather from the sale of goods and services Users are able to download via the app. and use the app or content service for free.  Attractive goods and services must be available Enterprises gain access to to encourage users to a global 24/7 virtual store- make purchases. front. An app store can act as a marketing, distribution, and payment agent. 27
  28. 28. SALES | DIRECT GOODS/SERVICESExamples Happy Theme Park iPhone game that facilitates the purchase of virtual currency (as well as earnable in-game currency) in quantities ranging from $0.99 to $99.99. Vodacom‟s USSD airtime top-up service. MXit Lifestyle‟s introduction of MXit moola (virtual currency) which allows users to purchase MXit wallpapers and skins, download music, etc… Safaricom‟s M-PESA mobile money service where revenue is generated by levying service fees on transactions. 28
  29. 29. SALES | INDIRECT GOODS/SERVICES 29
  30. 30. SALES | INDIRECT GOODS/SERVICESHow It Works The app or content service is free to download and use. Revenue is generated indirectly by complementing existing purchasable goods and services. The respective good or service can be real or virtual. An app or content service of this sort can predominantly work in two ways: ◦ (1) as an advertising tool to generate awareness for the complementary product or service, or ◦ (2) as a tool that makes it easier for people to use the complementary product or service. 30
  31. 31. SALES | INDIRECT GOODS/SERVICESAdvantages Disadvantages Users are not discouraged or  Revenue is not generated from the irritated by ads. app itself but rather from the sale of a complementary good or service. Users are able to download and use the app or content service for free.  The app needs to be particularly useful and improve customer An app store can act as a convenience in order to be marketing, distribution, and successful. payment agent. Awareness of the good or service can be generated if the app is downloaded or the content service is used. Sales, and ultimately revenue, can be boosted by the app or content service. 31
  32. 32. SALES | INDIRECT GOODS/SERVICESExamples Dunkin‟ Run (an app from Dunkin‟ Donuts) allows you to easily jot down your friends‟ coffee orders so you don‟t forget them when you get to the drive-through A print store that develops an application that allows users to create a digital photo-album on their mobile phone which can then be printed at the print store An application that allows clients to monitor their investment performance with a particular firm in real- time 32
  33. 33. SPONSORSHIP 33
  34. 34. SPONSORSHIPHow It Works Sponsorship is where a specific enterprise agrees to sponsor (fund) an app or content service that has some degree of affiliation and direct (or indirect) benefit to the enterprise. The app or content service is freely available and the developer is paid by the sponsor for development of the app or content service. 34
  35. 35. SPONSORSHIPAdvantages Disadvantages Developers get access to  Application features, revenue that might not design, and have been otherwise development may be available. limited by the sponsors requirements, agenda, and budget. A sponsorship contract can guarantee revenue for a specified period.  Sponsorship is usually a once-off agreement, and may not generate Sponsors may be willing on-going revenue. to fund additional application R&D, enhancements and improvements. 35
  36. 36. SPONSORSHIPExamples Coca-Cola sponsoring an iPhone or Android (smart-phone) game that promotes the brand. A government health department sponsoring an m-Health application that allows clinics in rural locations to quickly access patient medical history. The Deutsche Bahn (German national railway company) procuring and sponsoring the development of the DB Navigator app which calculates the optimal trips for users by train, bus, tram, subway and ship. It also includes a .mobi site that allows users to pay for and book transport tickets. 36
  37. 37. But!A monetisationmodel alone is notsufficient to makethose millions! A Revenue Stream Monetisation Framework Copyright © 2011 37
  38. 38. You need to at least understandand evaluateThe Mobile Demographics of the Technological Possibilities &m-Ecosystem Appropriateness Who is your target market?  What type of handsets does How old is your target your target market possess? market?  What are the lowest common Are they mostly male/female? denominator technical features and functions? How many handsets are there in the market?  What technology is appropriate for this handset? What are the handsets mostly used for?  What technology is appropriate for your What cost are users able to service/innovation? incur for your application?  Are users familiar with the Is the application adding technology? value?  Etc… Etc… A Revenue Stream Monetisation Framework Copyright © 2011 38
  39. 39. ThankYou!GoodLuck! www.mlab.co.za steve@mlab.co.za twitter.com/mlabsa 39

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