A lot of the companies I coach in the mobile/wireless world aren’t clear of a path to revenue but as the mobile business models take shape the thing that I find completely amazing is the sheer number of ways to generate revenue from building applications. Traditional software had a few business models – license sales and subscriptions are the most popular – but, by embracing mobile, you have at your disposal an almost endless number and combinations of business models.
You might need a map to really understand how all these models overlap and relate but here are just a few of the more popular ways companies are generating revenue from mobile applications. It is by no means a complete list but it’s a start.
No 1: Selling Your Application
This is the most obvious and the one that is most widely leveraged today: Build an app that everyone will want and sell millions of licenses and reap the rewards.
No 2: Freemium
Freemium isn’t one single model for mobile, it really encompasses a number of opportunities to generate revenue. The goal of freemium is to get your app in as many hands as possible and once you do, try to generate revenue from one of the following ways:
- 2(a): Sell an enhanced version of your app
This is THE most widely used model. You are essentially giving away a limited version of the product in hopes that you can attract enough people to download it and then convert a percentage of those into paying customers.
2(b) Sell in-app advertising
The second most popular approach to freemium is selling advertising in your app. Using services like AddMob or Apple’s iAd is simple to implement but requires a successful product with hundreds of thousands or millions of downloads to make a decent amount of revenue.
2(c) Up-selling content packs
Once you’ve got your application installed on millions of devices you can now start offering content packs (additional levels for example), additional functionality or even have people pay to remove the in-app advertisements.
No 3: Extend an existing business into the mobile world
There are many options for extending an existing business into the mobile world but I’m going to summarize into two main business goals:
- 3(a) Enhancing an existing line of business
This is about finding the one key area of an existing business you are currently involved in and extending it to the mobile world. There are a ton of great examples here but take a look at Kayak‘s iPad application for inspiration. It takes a conventional service that they already offer (flight times/schedules) and puts a different spin on it on the iPad (finds the nearest airport and shows all flights that are leaving from that airport based on what you want to spend on a ticket).
3(b) Extending your reach to new customers
One of the greatest potentials of mobile is to extend the reach of your product – say from TV, the web or bricks and mortal – to new customers that wouldn’t normally consume what you are selling in its current form. A perfect example is the opportunity for someone like Gary Vaynerchuk to extend his Winelibrary.TV web show into a wine-review app with a barcode scanner and ecommerce engine to connect to his video reviews, written reviews and to order it right from his warehouse. Now you don’t need to watch the show every time you want to make an informed decision.
No 4: Build an application as a service
You could take this in many different directions but for a great example of how this model can succeed, check out Ubercab. This iPhone/SMS service allows you to quickly book and pay for a car service with one button. This is great example of the future of productive mobile business models – filling a need that is best-suited for our mobile lives.
No 5: Build an App as a subscription
One word: Wired. When Wired launched their iPad app version of the magazine it surpassed sales of its print version in the first month it went live – that’s disruptive. Other similar examples would be Sirius/XM satellite radio for mobiles, the New York Times Crossword puzzle game and PumpOne’s FitnessBuilder application.
No 6: Mobilize an existing technology
Most companies are looking for mobile versions of enterprise software they have already implemented internally — things like CRM applications, HR application or business operations applications. For some, mobile is the natural extension for these services and there is opportunity to fill a very specific niche here. Take a look at Aeroprise, a company that built a business mobilizing BMC software. Instant market if the demand is there
No 7: Build an app that extends a web business
The most amazing thing to emerge since the dot com bust has been the open API. Any company currently offering a legitimate web service has adopted the open API in hopes that their service will find developers who will create the next layer of service on top of theirs. Enter mobile. This is area is ripe for entrepreneurs to bring a service (or a bunch of services) into the mobile world as a new level of value.
A perfect example of this is TopGuest.com using all those location based stamping services to reward hotel guests with loyalty points.
No 8: Sell affiliate products through your app
This one requires a VERY popular application in order to generate substantial revenue from the referral fees but it could compliment another stream from one of the other business models mentioned here.
A great example of this model is a news service application from Blancspot. Part of the application emphasizes music and photographs – both of which are available for purchase through the app itself.
No 9: If all else fails, build an app for someone else
The old service model is still alive and kicking and one of the fastest growth segments in the mobile world is actually helping companies who don’t have the expertise to build mobile applications for them. Service for hire. One caveat here is that the price and complexity of building applications for a living is being impacted by the better development tools coming into the market that are democratization or commoditizing this business.
There you go. Limiting your business model scope to just making money from selling your application is quickly becoming an outdated approach. How are you building your business in mobile?