Mobile Landscape 101 – Part Five: Revenue Streams

In this mobile landscape article, we explore the phenomenon that is mobile technology; what it means for your business and how you can take advantage of it. In our previous article, we discussed Applications and highlighted when it is a good idea for a business to go to the effort of developing an Application.

In this article we look at the types of revenue streams used by those currently making money from mobile applications.

Can you see any potential in these options for your business?

Virtual Goods

Originally, virtual goods were used primarily within the gaming industry. Virtual goods are things bought by consumers that are not actually real. While it may seem impossible that people would pay for goods that don’t actually exist, what the consumers are really paying for is the experience within the virtual environment. Typically, in these business models, the environment itself is free but to progress in the environment a user needs to buy things. For example, the free game ‘Dark Orbit’ sold 2,000 of its members an upgrade to a character. They each paid $1,300.

In the Virtual environment Second Life, many people pay for virtual shoes and houses for their virtual characters. The trend is so common that some people have begun to make a living by acting as a real estate agents or shoe shop owners in Second Life. Bitcoin took it one step further by creating a virtual currency, used around the world for online purchases. Virtual goods require a lot of investment in the original environment to be successful, and are typically only recommended for game-like environments.

Advertising Revenue

An old model translated into a new platform, advertising revenue is exactly what it sounds like. Mobile applications or websites that have high traffic, including sites like Facebook and newspapers, turn revenue by placing advertising on the screen the consumer is looking at. Typically revenue gained from these advertisements is generated by a consumer clicking on the advertisement. It is becoming more and more common to use advertising applications, such as Google AdWords, to simplify the process of connecting platforms with advertisers. Websites like TripAdvisor, who are very good at garnering a lot of visits but don’t have a direct revenue stream, use this model. If you have a lot of visitors on your site, consider placing advertisements on it to generate extra revenue.

Subscription Revenue

Some Applications that provide value to their clients on an ongoing basis have chosen a subscription model to generate revenue. The subscription model requires the user to pay a small subscription – usually monthly or yearly – to continue to use the Application. Shazam, an application allowing users to discover the name and artist of any song they are currently listening to, transitioned to a premium subscription model a number of years ago. Users can identify 5 songs for free every month, after which, they need to pay a yearly subscription.

Provided the price point is right, consumers are adjusted to the concept of subscriptions. If you are providing a service of value, a subscription model will generate regular income for you.

Download Revenue

Another way of charging for Applications is to ask for a simple, one-time download fee. This is where a customer pays to download the application up front or pays to upgrade to a premium version of the application. Typically the price point is higher than on a subscription model. This option is preferred when the usefulness of your application is not ongoing. For instance, games are best on download revenue models because their usefulness to the user expires once he or she has finished the game.

It is also possible for these revenue streams to be combined. For instance, a consumer may download a light version of a computer game for free, pay to upgrade to a premium version, buy virtual goods and also be subjected to advertising.

There are many different ways to monetise an application. Which will work for your business?