Without the introduction of the smartphone, and the various app stores, there would be no Candy Crush (King), Angry Birds (Rovio), WhatsApp, or Snapchat. These are just some of the many "unicorn startups" - businesses now valued at more than a billion dollars - that have taken advantage of the relatively new marketplace. 

But what if your business isn't a tech start-up, isn't in a period of high growth, and isn't offering a revolutionary product. Is it really realistic for an established business to build an app and expect a substantial ROI? Our answer to that question is yes. 

The award-winning app that we built for GAME is the perfect example of a business that has moved into the App space and generated a substantial return on investment. If you think this only works for large digital companies, think again. We also built an app for an individual called Robert Banks, author of the legal sentencing guide “Banks on Sentence”. Making the publication available as an app has lowered production and shipping costs, increased the rate of innovation (especially in terms of updates), and boosted value for customers (through offering additional in-app tools). The app is available on the Apple iPad and Windows 8 devices, and sells for £99.00 per download, generating a fantastic ROI for the business.

The real question to ask yourself is, “Will an app work for my business?”. That question is a lot harder to answer without knowing more about how your business operates, but I’d be so bold as to say yes to that too, and hopefully one of the monetisation models listed below will help you to generate ideas of how that might be achieved. 
Whether you already know what kind of app you’d like built, or you’re trying to figure out which kind of app would provide the most value for your organisation, it’s worth exploring the different monetisation models available. Taking the time to consider each of the following models as a feasible option might help to trigger ideas.

Monetisation models

Many different business models have appeared over the years and, whilst they have fluctuated quite dramatically in revenue share, they’re here to stay for the foreseeable future. Before we dive into model types, it’s worth considering what other businesses are doing. 

Source: http://distimo.com (Now part of App Annie)

As you can see, the vast majority of Apps, in Apple's App Store, have settled with the option of providing the App for free with in-app purchases (IAP). The second and third most popular models, “Paid Apps without IAP” and “Paid Apps with IAP” have decreased in popularity, but still hold a substantial share of the market. 

Fortunately, this isn't a definitive list of options; there are many more that aren't mentioned within the graph, so let’s take a look at each one individually. 

Freemium / In-app purchases (IAP)

In this model, the app is given away for free. The free version of the app usually allows access to most of the app’s core functionality for free whilst promoting additional paid features as upgrades once the user is hooked. 

This model is often very used in games like Clash of Clans or Candy Crush Saga: the user can play the game for free but by paying extra, they unlock new powers which help them to progress at a faster rate.

Paid / Premium

This is one of the most simplistic of revenue models: The App is paid for before downloading, and the store splits the revenue with the developer/ business. At the time of writing, apple takes 30% of the revenue generated from these sales and your business takes the remaining 70%.  This transaction fee is also the same for the Google and Microsoft app stores. A good example of this model is the Banks on Sentence app we mentioned earlier in this post.   

Advertising

This model was inherited from the web world and is widely used across the app store. Apps are given away for free and the developer relies upon showing adverts for revenue. 

There are a number of problems with this model for use as a business app: 
1. The app is generally only profitable when it has a large user base due to low industry-wide CPC/CPM rates. 
2. Adverts can draw customers away from engaging with your business
3. If you use an ad network you have limited control over which ads are displayed within your ad space, increasing the risk of unwittingly promoting competing products.
4. Ads get in the way and harm the user experience.

Despite having pointed out these negatives (and trust me…that’s not a definitive list), there are many social/information based companies that use this model well, including Facebook and Twitter, although they are in control of their own ad networks so ads typically appear less spammy.

There are many different types of ads; some more intrusive than others. If you think this is a viable model for your business, there is plenty of information on the different ad types you might consider. Here’s an article from Google that explains ad types well.   

Subscription-based

It’s a perfectly viable option to charge customers on a subscription basis for your app. This is commonly used in the news and entertainment sector, where apps such as Netflix and The Times can charge customers on a reoccurring basis due to the copious amount of valuable fresh content they supply. 

These Apps are usually available for free download, but in order to use any of the functionality you’ll need to agree to pay the subscription fee. The good news is that the subscription fee is managed by the company’s website, so the app stores can’t get their greedy hands on the 30% they’d usually take on any purchases made.

E-commerce

This is another type of app that is offered completely free. It has no advertising nor in-app purchases, and still manages to make a lot of money.

Good examples include the Amazon app, Zara app or any other retailer of physical goods. Once again, payments are managed by the company website, avoiding the 30% app store fees.  

If you sell physical goods this is probably the best option for you. This business model also works well for companies offering low-cost services such as those offered by Uber and Hailo – two popular taxi apps.  

New Channel App

Interestingly this model is overlooked by many, yet it can be utilised by most companies. A New Channel app is usually offered for free, and they don’t tend to include adverts or in-app purchase offers either. Instead, the app exists purely to act as another channel of communication with prospects and existing clients. In essence, you make money the same way that you always have, but the app plays a part in the buyer journey. 

In most cases, New Channel Apps replicate the pre-existing company website. Information feeds can be automated to the point where the app does not need any monitoring, and all changes made to the website are reflected in the App instantaneously. But these Apps don’t have to be direct copies of the website. They can also make use of the phone’s on-board technologies such as maps, calendars, and push notifications etc., and thus provide more value to the end user than a website could. 

Apps that offer additional functionality that help to facilitate the sales function can be even more beneficial to an organisation. Take the DFS Sofa and Room Planner app for example: The customer is able to digitally install sofas into their living room to see what they look like before they purchase – that’s bound to seal the deal!

Another big reason for the existence of New Channel Apps is their ability to offer fast access to the information a company produce - Web browsers take a long time to load and navigating to each page on a slow connection can lead to a painful user experience, a contributing factor to high bounce rates.

Mixed models

Finally, we have the option to mix and match these models in a way which maximises app revenue. It’s not uncommon to see paid apps offering in-app purchases, or apps with adverts offer an upgrade service to remove the ads. However, be aware that few other combinations work well together – users won’t like paying for an app that has adverts for example.

Now that you have a better understanding of these models you can plan to integrate the appropriate monetisation model into your app development process.

If you’d like to discuss your plans for a business app, please get in touch.