Software monetization has become a stumbling block to many software developers: the market is saturated with competition, there are many high quality programs available for free, and consumers are less and less inclined to pay for products they have never tried.
To keep up with the ever-changing landscape of online marketing, app developers and software publishers are turning to other monetization models that enable them to both compete and generate revenue. While most of these models operate using advertising or affiliate sales as their essential form of income generation, software monetization models take several forms.
Charging for the End Product
Charging end users for the final piece of software is one of the oldest software monetization models. It has worked since computers became mainstream, and it still works today. In this model, app developers and software publishers simply set a price for their product, and require users to pay for the product before using it.
This approach works well with developers and publishers who have a successful line of products or a recognizable brand. Charging for products can generate a great deal of income for the right product or publisher, but this method also has some drawbacks.
For unknown publishers, or publishers without a great deal of marketing resources, this approach can be quite difficult. As mentioned above, the software market is saturated with software that is free and cheap. Why pay for an app when you can find a similar one for free?
To succeed with this software monetization model, app developers often must have marketing resources, brand recognition, and/or unique product features that set them apart from the competition.
Free Trial with Advertisements
This model can work in conjunction with priced products. By offering users a free trial, publishers can give users either a partial or complete product that can still generate revenue through advertising. One common approach involves reserving certain features for the paid version of the product; another approach involves offering paid versions that come without advertisements.
In either case, this model offers both marketing and monetization benefits. By offering a product for free, users don’t experience the same hesitation over whether or not they should purchase a product. This can increase downloads and market share, while simultaneously putting a revenue-generating piece of software directly in the hands of the target audience.
On the downside, however, a free trial or ad-supported version may not end up generating as much income as a paid app or program. Users have become so desensitized to advertisements that, when done incorrectly, ads can go unnoticed. And users who are satisfied with the features offered by a trial version may never end up paying for the final version.
This model works better with certain types of applications. Games, for example, often work well by hooking the player for free and then requiring payment if people wish to continue playing.
Pay-per-install (PPI) software monetization models are an excellent way for developers or publishers to generate revenue, reach larger audiences, and partner with other industry leaders. It works by promoting advertisers’ products during the installation process.
Instead of advertising inside an application or offering a partial product such as a free trial, app developers can use this model if they wish to distribute complete products. This can improve the user experience while still generating revenue for the developer. Free software programs can also increase the total number of downloads, which can increase the market share.
Bundling refers to packaging multiple programs, tools, or applications together into one suite. Add-ons, application extensions, and plugins are good examples of products that may benefit from bundling. Developers who have developed complete programs or products can also enhance their offer by bundling their products together with those belonging to a third party.
This software monetization model helps increase market exposure by pooling multiple audiences. And if the publishers charge for the final product, the developers and publishers can share the revenue.
Software bundling is an excellent method for developers who have designed tools that work well with other applications. Bundles often offer a higher value to the end user, so end users may be more likely to pay for the final product.
Advertising In Apps
In-app advertising has become one of the most common software monetization models. Developers competing in an oversaturated app space will often choose to offer products for free, but include advertising inside the app to generate revenue.
This can be beneficial from a marketing perspective, since users are more likely to download free apps than paid apps. And in-app advertising does offer a sustainable method of monetizing programs.
Some advertisements, such as tacky display ads, often go ignored, due to “banner blindness.” Done correctly, though, in-app ads can be contextualized and integrated as a seamless part of the app experience.
There are quite a few software monetization models, ranging from a priced end product to advertising-powered approaches. Regardless of which method developers and publishers choose, offering value to the end user will always be the most sustainable long-term monetization model. A successful software monetization strategy is one that offers value and integrates well with the user experience.