Where is the money in Mobile Apps?

By Sunil Gupta   |   Friday, 13 Dec 2013, 13:12 IST

The Google Play store crossed 25 billion downloads, some months ago. Apple, with only seven percent of the smart phone market boasts impressive figures as well. Everyone, who is anyone, is buying a smart phone. And everyone with a smart phone is downloading apps.

It may not be an exaggeration to say that people buy a specific mobile operating system based on the apps available for that phone. Companies like Microsoft are reportedly paying app developers to develop and list apps on their app stores. Money is to be made by platform companies (read Android, Windows, IOS...) and Internet Service Providers. Mobile companies will do what it takes to make their platform 'sticky'. In the platform wars it was not the superiority of the platform that won – it was what could be done with one. The winner did a better job of the 'whole stack', not just the core technology.

Organisations are facing pressures to have apps because mobile is the 'space to be in'. Every developer wants to get onto the bandwagon and develop on the mobile. Mobile development tutorials, books & tools remind me of the dot-com era, before the great bust. I wonder if the app world is building itself a bubble.

India as the fastest growing app market

Like the dot-com era when page-views, unique visitors and bounce rates created bloated valuations because no one stopped to ask "how much money did the visitors pay?" in the mobile app world the number thrown around is "downloads", not "revenue".

Scour the Internet and there are tons of numbers – one of which is paid-vs-free downloads. One is the ratio of 'paid to free' and this number depends on who is talking. Distimo, an app analytics company, has an interesting graph that has the number for each county and India stands at 1:200.

So while we are the fastest growing market, the paid app space is quite small in India.

The Financial Model

Money is made in one of three ways – paid apps, free apps with ad-supported revenues and in-app purchases (the app is free and users have to pay a $ to unlock a level or a feature). Yet the top seven Indian app developers have not made any money!

Is the app developer targeting the right audience – and can money be made?

A Matter of Mindsets

As a 'consumer' we 'buy', follow trends, pursue fun things and seek instant gratification. Look for the top-of-the-charts apps and you will find that these are all games, news or social apps. One shudders to think that a personal expense tracking app will make it to the top ten – this is NOT anyone's idea of fun.

Phone numbers, mail IDs and other 'identities' are changed at the drop of a hat – no wonder email services are still free after decades. Imagine the mass exodus if Gmail or Hotmail were to charge even 1$ a month!

Enter the B-to-B Space

There are, at a fundamental level, two buying behaviors. We are either 'consumers' or 'professionals/businessman' at any one time. And both operate extremely differently.

As a professional/businessman' we are 'sold to' follow advice of peers in our industry and seek long-term advantages. One would think of stability, security, support and continuity as parameters in the decision process – and impulses are under check.

There is money to be made here, if only app developers take off their own consumer mindsets. Why do I think this is the gold-mine for app developers?

The Business of Money

While email started off as free and targeted the consumer space, the enterprise mail space continues to be big money. One of Microsoft’s critical success stories is Exchange – and even today is a core component in its stranglehold of its business users. Microsoft continues to replicate the successes in the consumer space into viable B-to-B models.

I believe that developers must look at the only space that has millions of paying customers – the enterprise user.

Unfortunately, this space is tougher to crack, and there are several challenges. These are largely infrastructural in nature, and it is impossible for an app developer to overcome them on their own. They will be resolved over time.

The Test of Theory

When we launched TallyShop, as we call the Tally app store, we had listed ten free apps. Within a year we had several thousand downloads of these apps. One day I made these paid and priced them at Rs. 240. Sales of these have not crossed a hundred in total over several months!

Awareness had to be ruled out - else why did we have thousands of downloads earlier? Payment methods had to be ruled out - we accept most forms of electronic payment. Were these business apps not worth even such a low price? What was the issue – was it really that Indians accept only free apps? What was going wrong? Was it the payment process that was causing the resistance?

The Initial Hump

In the case of our apps and with mobile apps, the biggest hump is to get the buyer to enter his credit card details and make the first purchase. It is at this time that he overcomes his internal resistance of sharing important details.

Once that is done and the user sees the benefits of an ad-free & complete app, they are far more likely to pay for more apps. Consider the offer from Airtel to help adoption of its Airtel Money platform – users get five percent off just to load money and use that to pay an Airtel bill.

A Solution?

In the same way, I suggest that instead of offering free apps and pushing people away from the paid mindset, app developers must incentivize customers to pay – even if it means that the entire money is refunded on the credit card if uninstalled within 14 days. Or you could look at a pay-refund-trial-pay model instead of a free-'pay-to-unlock/remove-ads'model.

To succeed the initial payment hump must be crossed. Can you look at 100 percent refund as the way to go free – you can still market your apps as 'free' and can make some money from ads. You will do yourself and the app community a favor while contributing to profitable growth of this industry.


About Author

Sunil Gupta

AVP-Head: Technology Partnership Business -Tally Solutions Pvt Ltd

Headquartered in Bangalore, Tally Solutions Pvt Ltd. is a software company known for its software for vouchers, financial statements, and taxation in many industries.