With more than 65,000 apps available in Apple’s iPhone app store, developers are experimenting with a variety of ways to earn money — from interstitial ads to relying on initial payments of $1 – $2 for downloads. The problem with that approach is that it’s difficult to be a breakout hit, and a developer needs real scale unless they are a highly specialized medical or financial application, said Mark Donovan, a senior vice president of Mobile at Comscore at an afternoon MobileBeat panel today.
Rich Wong, a venture capitalist at Accel Partners, said he saw four other business models developers can pursue:
1. Paid subscription over time: This would be an app that has a monthly subscription fee of a few dollars or more. Wong said an ideal investment for him would be a personal productivity app that charges several dollars a month. Loopt founder Sam Altman said the advantage of this approach is that consumers seem more comfortable with variance in monthly fees than with initial download charges, which are usually around 99 cents.
2. Ad-supported: Wong, who started in marketing at Procter & Gamble, said brands like Tide and Charmin want to lock in consumers at the earliest possible age to establish a lifelong relationship. So even though the mobile advertising space may be relatively small now, big brands will follow the eyeballs as they move toward mobile applications.
3. Traffic share or bundling: This would involve taking a cut of any incremental data charges that an app drives through a service or to a site.
4. Virtual goods: Virtual goods is by far the most successful business model in Japan, Wong said. Virtual goods can involve sending a “gift” icon to a friend on Facebook or buying virtual armor or gear in a mobile game. Altman gave the example of a person who spent $150 a month buying virtual flowers to woo girls.