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Mobile Application Payment and Subscription Models

Posted by Dan Vigil on June 27, 2010

So you’ve just created an application to deliver your content on mobile devices. Should you give it away for free and build an audience? Should you charge a subscription? Should you charge a one-time fee?  How about offering access as part of a print subscription? How about a combination of some of these? There are thousands of paid mobile apps that are generating revenue with various payment and subscription models. The following represents a list of the most common payment models for mobile applications along with links to live applications employing each model.

1. Demo or Lite Version:

Allows consumers to try applications with limited functionality and content. Users of the Lite version can upgrade by purchasing a full, unrestricted version of the application at a later date. The idea here is to reach a large audience initially by providing a no risk way for consumers to try the application. Application users are encouraged to “try before they buy” with “Lite” versions of the application. Once they are comfortable with the value of the app, they can download the full version for a fixed fee or subscription.

Example of Demo/Lite Version Content Apps:

News India Lite-Free/News India Plus $1.99

News Canada Lite/News Canada Plus $1.99

2. Pay-Per-Download:

This is perhaps the most popular method of charging for mobile apps. A fixed price is set for the application and once the user downloads the app, they have full access to all the content and features. The paid application may or may not include advertising. This model has been most successful when coupled with a “Lite” limited access version of the application that users can download and use for free.  One of the best examples of the deployment of this model in the content business is the CNN iPhone Application which can be purchased for a one-time $1.99 fee from the Apple App Store. Users pay a one time fee for unlimited access to news content on their phones.

Example Of Pay-Per-Download Apps:

CNN App For iPhone $1.99 one-time fee.

3. Pay-Per-Issue/Edition Download:

Pay-Per-Edition models simulate a subscription by providing an expiration on pay-per-download apps. Consumers are asked to download and pay for another edition of the app towards the end of its expiration. For example users could pay $12.99 for the 2010 edition of their local newspaper application. On January 1st, 2011 they will be required to download the 2011 edition if they wish to continue accessing content.  When employing this method, developers will often reduce the price of the app as the expiration date approaches.

Example Of Pay-Per-Edition Apps:

MLB.com At Bat $14.99 for annual access to MLB content.

The Washington Post – $1.99 for annual access to The Washington Post content.

4. In-Application Subscription:

Apple’s in app purchasing capability, launched last year allows publishers to offer applications free to consumers while generating revenue by giving them  the option to purchase content though i-Tunes within the application. This has become a popular option for organizations to charge subscriptions for content delivered to mobile devices. Users download a free version of the app and then can upgrade by choosing various subscription options from within the app using the iTunes payment mechanism.

Example of In-Application Subscription Apps:

Slacker Radio -Free Download with options for 4 mo subscription@ $19.99 and 12 mo subscription@$47.99

5. Out-of-Application  Activation:

Out-of-App activation models allow consumers to purchase an account (username/password) from a WAP site and then return to the app to login. This model allows app developers to by pass Apples iTunes payment system but makes it more cumbersome to purchase, as users must leave the app and return with credentials. Though users are able to download the app for free using this model, they are not able to access any of the content or use any of the apps features without a username and password.

Example of Out-Of App Activation Model:

Wall Street Journal-Mobile Reader -Access to the content in the App requires registration or $1.50/week subscription via WAP site.

6. Out-Of-App Payment:

Similar to in-app subscriptions, this model allows consumers to access limited amounts of information and features within an application and purchase additional levels of access thought payment mechanisms outside of the application platform. This model often requires complex development to authenticate users accessing content behind a pay wall. The model may also sync up with web-based pay wall systems so that paid subscribers can access content on multiple platforms. Several vendors including Paypal have been experimenting with these types of mobile payment models. The goal is to provide users with a seamless purchase method that sends them back to the application. Both Apple and Google maintain development restrictions which could cause applications using this model to be rejected.

Example of Out-Of App Payment Model:

Touchnote -Free to download with Fees to send a post card

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