Discovering the Revenue Generation Code

Given India's dismal record in infrastructure development, the telecom revolution has been a face-saver that drove higher growth rates. Even as internet and mobile penetration rates improve month after month, cutthroat competition has kept service rates at some of the lowest price levels worldwide. In this ultra-competitive scenario, telecom players have been left wondering how to boost revenues.

This is where mobiles apps and m-commerce could spell the big difference between profitability and losses. As India's mobile market matures, customers are gradually becoming comfortable with using their mobiles to make small payments for music, photos, and applications of all kinds. With increase in m-commerce, e-commerce levels are also being boosted due to the benefits of convenience, ease of use, and instantaneous response.

Alongside these trends, customers are increasingly getting hooked to various apps. With more than 65 mn active internet users and almost 900 mn mobile handsets, India's mobile app market is poised to reap rich dividends. Considering the slew of mobile devices being launched every other day and tablet PCs slowly making their presence felt, mobile applications are gaining popularity, not only for gaming, lifestyle, e-books, shopping, social networking, education, and entertainment purposes but for business and other productive applications too.

Viable Revenue Models

But while apps proliferate like flies, successful business models are missing for app developers to monetize their ideas and ensure sustainable revenue streams. Unless apps are relevant, engaging and irresistible to users, cashing in on the app craze might remain a mirage. The most apparent means to monetize apps is by charging customers per download. Unfortunately, this is the easiest way to ensure the app fails, since download charges are a major barrier. Even if overcome, pay-per-download only represents single-strike revenue generation. Without sustainability, no model is viable.

The other option is in-app advertising. Again, this alternative is only viable with volumes. Subscriptions are another option. Here, no actual content is downloaded with the app, but using a user-management tool that comes with in-app purchase, content can be unlocked to subscribers. Worldwide, magazines use this strategy successfully, especially by giving one free issue, with subsequent issues only available on purchase via subscriptions or singly. Sadly, this model works best with magazines, not apps.

Advertising is one model that's popular and scalable. It may even be possible to make more money than paid downloads through this model. An advertising model however needs a large installed base that can generate high volumes of ad impressions to ensure actual income is generated. The app content also needs to be in sync with the advertising content vertical or else the advertising inventory will not bring in attractive remuneration. Advertising is best for apps with a captive audience and repeat usage. But profitable ads allow the developer to keep the app free and thereby cater to a larger audience.

Yet another option is to distribute the app free but charge for upgrades. This is possible if the original app is so 'unputdownable' that it lures users into buying upgrades. It could work well with games or other interactive apps where users reach their limit and then are tempted into upgrading to continue enjoying the app.

Cloud and Other Options

As more businesses move onto the cloud, there's palpable hope this could become a sustainable revenue driver. Since cloud services are demand based, highly scalable, up to date, and flexible, app developers could become cloud based application providers and garner revenues by delivering hosted software-as-a-service. Tie-ups with cloud application providers could take different forms, including private labeling, co-branding, and reselling.

Subscribers could enjoy the service if the quality of experience, ease of use, and other features provide apparent enhancements. With cloud based applications, a revenue-sharing arrangement with content providers could be possible by ensuring high quality of user experience. Revenue generation may also be possible through the app provider's own independent hosted services.

Mobile advertising and m-commerce could act as additional revenue streams. With telecom penetration rising every month, more consumers are moving to mobile devices to enjoy various applications and services. In fact, Cisco predicts there will be 7.1 bn mobile devices in 2015-equal to the world's population at that point of time. Paradoxically, the ever-rising number of mobile devices and operating systems also creates challenges that make it imperative to champion cross-platform development to overcome this barrier.

Nevertheless, the opportunities seem limitless with m-commerce. Unlike earlier years, users now access the internet via mobile devices even when at home. M-commerce is also rising because the younger generation is extremely gadget savvy. Changing mindsets mean the youth wish to be connected with peers, friends, and gadgets at all times of the day or night. And just like big retailers with large shelves of well-stocked, colorful products that trigger high impulse buying, m-commerce also holds the opportunity to ensure impulse purchases. For instance, retailers target users throughout the day with irresistible offers and discount pricing to prompt impulse buying through 'just for today' offers. Such impulse behaviors are precisely what app providers could capitalize upon, given the 24x7 nature of mobile platforms.

Meanwhile, developers busy building their new apps should make sure these work across platforms enable sharing and engage the audience through frequent updates and promotions-these could be the first steps to monetization.

Praveen Rajpal
The author is CEO, Handygo Technologies
vadmail@cybermedia.co.in