Sunday, July 18, 2010

App Store business model observations and learnings

I have been experimenting with Mobile Advertising business models for a while. From WAP based sites at VCEL to iPhone video apps to iPhone and Android Map Based Navigation apps.
Below is a general observation and summary of the reality of developing a mobile advertising based revenue stream from the perspective of a small iPhone app developer [ the majority of iPhone and Android developers fall into this category].
The Problem:
Simply put the problem is that as a small iPhone and Android developer it is too hard to grow your User base to be large enough where you can build a significant revenue from Admob or Google Mobile Ad sense, quattro , etc . The reason is because unlike the web user acquisition is constrained to a single place the App Store, which has huge Discoverability issues.Both are very crowded and only getting more crowded.

What i am starting to realize that from an App studio's perspective the way to build out a mobile advertising business is not through selling CPM or CPC based ads inside your app. iPhone apps and Android apps are not the web.

The Solution:
You need to change the way you perceive "mobile advertising". The Whole APP IS THE ADVERTISMENT. Not the impressions of tiny banners inside the app. I believe that a business model of "App as a monthly service" makes the most sense for small App Studios.

Example based on TMD's iPlacemarks apps:
For instance take iPlacemarks for example. Instead of launching a flagship iPhone app or making 26 Android apps that appeal to users and depending on them floating high up enough in the app store rankings to get a lot of downloads and then impressions , What if we went out to restaurants and had each one pay $29 per month for us to launch and operate their app ?

The Existing "App as a Service" market Niche:
Turns out this is a rapidly growing market niche. There are 5 companies doing this already. 3 of them focussed on restaurant apps. Their pricing models vary quiet significantly but can be summed up at an average of $29 per month.

3. Restaurant specific:
3. General Custom Apps:
4. Entertainment focused Custom Apps:

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