LAS VEGAS – GetJar CEO Ilja Laurs today guided a developer audience at Mobile Connections through the perils of picking an appropriate model to monetize their apps, attempting to dispel the notion that paid downloads and mobile ads were the only way of making a dollar on development.
He focused a lot of attention on the emerging virtual goods and subscription business models, which allow a developer to distribute an app widely by offering it for free or at low price at the outset and building up revenues by creating sticky subscription services or offering add-ons and upgrades that will keep the customer paying. In such a way, developers can turn what would normally be a $1 download into a $50-to-$100 staggered revenue opportunity, he said.
But at the end of his keynote presentation, Laurs acknowledged that even those boosted revenues are just chump change compared to the larger ecosystem of the mobile app once the developer looks beyond transactional monetization. Laurs estimated that 80% of the value produced by mobile apps lie outside the limited pool of revenues circulating in the mobile transaction space. And that’s just a conservative estimate, he added. If you factor in cost savings and revenues derived from mobile apps linking customers to a bigger business model, through branding, marketing and customer relationship management, the revenues derived from downloads, advertising and subscriptions could just be a tiny fraction of the overall market, Laurs said. “If you’re looking to solve a higher-order experience problem, then the sky’s the limit,” Laurs said.
Of course, developers themselves won’t be able to access all of that value. Much of it comes in intangibles that can’t be measured, he said. For instance, an airline app that helps customers rebook canceled flights, allows them to check in remotely and alerts them to gate and departure time changes, could save an airline enormous customer service costs. Such an app could increase loyalty linking the customer more closely to the airline’s frequent flyer program. Measuring those cost savings would be impossible, but they could be very large, Laurs said. An airline would pay a lot of money to a developer who could build such an app, but the transactional value of that app would be zero, as it would be distributed free of charge to all comers, he concluded.
Other examples would be Groupon, which delivers a daily-deal coupon to customers who sign up for its distribution list. It also offers a smartphone app that pushes that daily deal to a customer’s home screen, thus increasing take-up rates. The app generates no revenue and is distributed for free but is becoming a key part of Groupon’s promotional strategy.
The market for apps contained solely within the smartphone is by no means disappearing, but it’s ultimately only a small part of their overall market, Laurs said—and it’s not an easy market in which to achieve success. He pointed to the hottest game in the market today, Rovio’s Angry Birds, which generates tons of revenues through a multiple sources: paid downloads on the iPhone, ads on Android and virtual goods. But Laurs pointed out that before Angry Birds Rovio had been around for 10 ten years and produced 51 apps, none of which that were all that successful. “There’s no correlation between effort and success,” Laurs said.
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