August 22, 2012
The Dilemma of Making Money within the Mobile App Space
By Amanda Ciccatelli TMCnet Web Editor
“How can developers make money?” is a crucial question in the mobile app space these days, and the answer has recently been changing.
Forrester Research (News - Alert) forecasted that mobile-app revenue would hit $38 billion by 2015, with tablet app sales comprising $8.1 billion of that total, up from $300 million from 2011.
Over the past few years, there has grown increasing recognition that one-time payment for apps is not necessarily the right solution for developers who want to be compensated for their work. Except for a few at the very top of the list, it’s a challenge for paid apps to become well-known. Therefore, developers are finding other ways to make a profit such as in-app purchase and carrier billing.
Programmable Web recently published a blog post by David Schoenbach, consultant for Exadel, discussing the dilemma of in-app purchase and carrier billing. Many successes are being seen in some of the apps that offer in-app purchase; however, an inhibitor to user acceptance is the inconvenience of payment methods.
PayPal (News - Alert) works well in the US and is also available in other parts of the world. This is similar with credit card billing, however, people tend to not want their credit card information given out to another small vendor due to possible risk, said Schoenbach. Amazon has made is easier because millions of its users already have an account, and they have been successful at making on-device purchase convenient.
The easiest payment method for the most people around the world is carrier billing because the majority of smartphones are associated with a monthly payment plan for voice and data. The billing relationship between the carrier and the end-user can then be extended to support other payments.
“For the developer, this seems ideal: Build a freemium app, include in-app purchase/upgrade opportunities, offer carrier billing, and voilà, revenues! Two problems, however, intrude on this ideal scenario: (1) Carriers have traditionally charged a lot for such transactions and (2) you don’t know which of the hundreds of carriers your customers are on, and which carrier APIs you as a developer must support,” explained Schoenbach.
However, these problems are being addressed. There’s been progress on fees as wireless operators are tending toward a 70 percent share to developers. Additionally, there has been movement of solutions for handling billing APIs from multiple carriers. Although individual carriers such as Verizon, AT&T, Deutsche Telekom (News - Alert) have offered carrier billing API solutions to developers for a while, this has had limited acceptance.
Now, there are aggregation solutions emerging for cross-carrier billing APIs, enabling the creation of in-app billing solutions supporting multiple carriers.
“The Wholesale Applications Community (WAC) was a pioneer in this. Although they recently reorganized, they sent its in-app purchase API over to Apigee where it has a good home,” he said.
Another example is Aepona, a service delivery platform (SDP) provider for carriers that aggregates billing solutions from among their 25 carrier partners into one convenient API.
WAC and Aepona have worked with GSMA, the global trade association of wireless carriers and it’s GSMA’s OneAPI (News - Alert) project. With 800 wireless operator members and a history of work in this area, GSMA’s effort was a recently-completed pilot in Canada. This brought together Canada’s three big carriers (Rogers, Bell, and Telus) to provide the first region blanketed by a carrier billing aggregation solution.
Schoenbach said, “There’s a need for something like the OneAPI project, but the large number of carriers and regions presents an obstacle. Whatever entity overcomes this challenge, will be providing a significant service to the mobile developer community, advancing mobile app creation.”
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Edited by Brooke Neuman
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