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Mobile App Business Models 102: How to Turn Downloaders Into Customers

As we mentioned in an earlier article, the most powerful distribution business model on mobile platforms is the Freemium model. This model lets users download and install apps for free; however, if they would like to unlock certain premium features, they would have to pay money either it’s a single unlock or it’s a progressive chain of different unlocks as they try to tap into more and more sophisticated features. A lot of this model is rooted in the game app segment of the app software industry. Be that as it may, it has caught on and it is pretty much one of the best and the biggest models out there.

However powerful the Freemium model may be, the biggest hurdle facing app developers is how to convert people who downloaded your free app into paying customers. Sadly, too many app developers tend to focus more on the number of installs. This means that they just focus on getting as many people to install the app as possible and a lot of the monetization is lost in the mix. As a result, there are many apps out there who have tons of installed and active users but they aren’t making any money or in fact, they’re losing money. Why? For each installed app, chances are it’s making calls and making connections to the server that the app developer set up to provide data for the installed apps. This can cost quite a bit of money so it’s really important to figure out how to effectively and efficiently convert downloaders into premium buyers.

There are many different ways to do this. The first way is to offer enough in the free version to get the user to the level where they would need premium features. This is very similar to app games where the user reaches a certain stage and needs certain tools to get past a certain level. Another approach would be to offer sections that are unlocked upon payment. This kind of irritates a lot of people because it appears that you are giving out incomplete software. In other words, the user would have to unlock half the software for it to fully work. As you can probably tell, this generates a lot of heat and negative publicity but it’s still a fairly popular option for many app developers.

It truly depends on the type of app you have. If it’s a game, it’s probably better to go with a leveling system or a tool based system; however, if it is a business application, you probably can get away with a category- based or area-based locking system. Regardless of which way you go, you need to communicate clearly the value of unlocking the features the customers should pay extra for. This is what separates apps that don’t go anywhere and apps that become profitable.

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