But that doesn't mean you can't make a decent living in the mobile app market. Although competition for mobile users' attention is fierce, there are ways to steadily build your user base and monetize your app's content. During the Sloan Hi-Tech Conference at MIT this week, five veterans from the mobile app industry dished out tips for up-and-coming mobile companies for building lasting business models and ensuring that their apps don't end up as the mobile equivalent of Pets.com. In no particular order, here are some of the nuggets of wisdom.
Don't assume you're going to be Instagram. Sure, you'd love to have Facebook CEO Mark Zuckerberg ring you up and offer $1 billion for your yet-to-be-monetized application, but the chances of that happening are slim. This is why it's best to take a long-term view of what has to be done to gradually make your app successful, which invariably means establishing a business plan to monetize your app and thus show venture firms that you will be able to create a steady revenue stream.
"When you look at OMGPOP, Facebook and Instagram, those are the one-percent of the top one percent of startups out there," said George Bell, CEO of Jumptap. "If you're a normal startup, you're going to have to go through rounds of funding and you're going to have to prove that you have a sustainable model."
When it comes to revenue models for apps, the panelists said there were generally two major systems in vogue: Apps that are free to download and are supported by advertising, and "freemium" apps that are free to download but that charge money for additional premium content that users will presumably want to enhance their experience. The general consensus was that the "freemium" model is the one gaining traction since it typically provides a more consistent stream of revenues. Aaron Woodman, the director of Microsoft's mobile communications business, said that app developers have to insist on charging something for their content despite the fact that mobile app stores are overflowing with apps that promise users everything for free.
"At Microsoft we've struggled with how we create floors for values to defend your ability to sell your product," he said. "I don't think there are a lot of models other than 'freemium' where you can sell content within games."
Not everyone shared the enthusiasm for the model, however. Ray Sharma, the founder and CEO of XMG Studio, said he "strongly disliked" the freemium system and instead pushed something he referred to as the "paymium" plan where users would pay a small amount for their app while also being charged extra for optional goodies.
"We believe the ultimate model is to charge $0.99 for a game and then charging for additional content," he said.
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