As mobile application stores see a boom, phone manufacturers are using these to vie for more consumers and sales.
In 2008, Apple had introduced the applications store for the iPhone, and this paved the way for popularity of original equipment manufacturer application stores.
The demand for mobile applications soared and major mobile phone manufacturers followed Apple's footsteps. Nokia launched the Ovi, Android launched the Market Place and BlackBerry opened the App World.
Application stores like iStore and Ovi see up to 10 million downloads a day. According to market analyst firm IDC, by 2015, mobile application downloads are estimated to touch 183 billion. The huge opportunity offered by this new trend has led to a good deal of interest among youngsters to enter the application development business.
The revenue-sharing model for any paid application in most of these stores is split between the developer and the application store in the ratio of 70:30. However, experts say most applications in these stores are free, developers are looking at various options to make money.
“Most applications downloaded in the stores are free. We need to find means other than paid applications to make revenues. We cannot charge for all applications. If you are not able to make money from the business, you need to follow application development outsourcing, in which the margins would be less,” said Virat Singh Khutal, chief executive of twist Mobile, which provides application for Nokia Ovi.
Monetisation strategies adopted by providers of free applications include in-app advertising, which means partnering the advertisement content provider, and in-app purchasing. IDC says developers would increasingly focus on in-app purchasing and advertising to fund their business models.
twist Mobile claims seven of its applications have crossed a user base of one million, while three have crossed two million. The company makes around $30,000 a month from Nokia Ovi. “We use both in-app advertising and in-app purchasing as part of our revenue strategy,” said Khutal.
App advertising is all about placing ads on applications and charging the advertisers, based on cost per click and cost per impression. In-app purchasing is paying money to buy virtual goods or unlocking certain features in applications used by users.
Free apps target a greater audience and make money through advertisement. Earlier, before application stores were introduced, developers sold their apps through service providers, as value-added service or WAP services. Through this model, service providers paid developers money and most applications were not promoted.
“When apps were delivered through service provider, there was lack of transparency. Many small application developers were not able to sell their apps through service providers, as these needed more effort. The evolution of applications stores has changed the trend. As the ratio of free to paid apps is in the range of 5,000:1, it is increasingly important for the industry to look at various options to monetise applications,” said Dippak Khurana, managing director and chief executive, Vserve Digital Services, a provider of in-app advertising.
Vserve provides an application for developers, and this can be downloaded from the site and incorporated on applications. App advertisement providers like inMobi and Vserve follow a revenue sharing model of 60:40 between the developer and the ad provider.
“Unlike the traditional service provider route, application stores provide a developer the opportunity to reach a global audience and promote applications,” said Lalit Yadav, head (media operations), Aims Migital, a company which develops applications for leading platforms.
Experts believe such platforms are not important for developing applications, and that the primary step in the development of applications is to know the the interest of the audience. Another important step is to try and bring in more users to an application, since this would successively bring more downloads and more ad revenue.