In brief
The three main app business models are paid downloads, free downloads supported by advertising, and free downloads with in-app item sales. Apps offer sustained revenue potential and mobile marketing advantages, but success requires product quality, a strong marketing plan, development investment and a good user experience.
The widespread adoption of smartphones has driven the rapid growth of apps. Today, apps immediately bring to mind smartphones, tablets and wearable devices. When apps first emerged, it was a golden age of innovation, and even inexpensive apps often made substantial profits. The environment today is very different, but opportunities for growth remain.
By 2017, the app industry was expected to generate US$77 billion in revenue.
Although the app industry has changed significantly, the main app business models have remained unchanged. They fall into three main categories:
1. Paid downloads
2. Free downloads, with revenue generated through advertising placements within the app
3. Free downloads, with revenue generated by selling in-app items (mostly referring to mobile gaming apps in which players can only win by paying)
App business models: advantages
An individual app can be highly profitable if it finds the right market at the right time. Some apps generate millions of US dollars in revenue. Apps have considerable potential: many can continue generating revenue for months or years, requiring updates only when the iPhone or Android operating system is updated, with little work needed at other times.
Another advantage is that apps run on mobile devices, where people now spend most of their time. This creates many marketing advantages. For example, many apps use advertising placements in the Facebook app to reach their target audiences. After clicking an advertisement, users immediately download the advertised app onto their phones.
Disadvantages of app business models
Since apps first appeared, competition in the market has become increasingly intense. In January 2016 alone, 19,130 gaming apps were added to the iTunes Store. The competition could be described as brutal. This means that, to profit from an app, you need to ensure product quality and have a flawless marketing plan to get it off the ground.
Developing an app is relatively expensive. To succeed, you need to spend substantial sums hiring excellent developers. Generally, apps built by low-cost developers encounter many problems after launch, and resolving those problems can be expensive. Even if you hire excellent developers who can build a great app from scratch, you will still need to hire additional programmers to improve the user experience.
Some users rarely open an app after downloading it, making actual use a crucial step. Improving the user experience is essential to increasing user engagement. If your user interface is very poor, users are also likely to leave your app unopened.
If you have sufficient funding, these initial investments are a drop in the ocean compared with an app's profit potential. Nevertheless, you still need to consider your start-up's costs before choosing an app business model.
http://www.cnsoftnews.com/news/201607/50761.html