Most of the mobile applications are falling among several type of customers:
- for the general consumer (B2C business-to-consumer)- apps used by social media companies to reach high volume of people, music streaming, games, productivity apps (trading, office use apps)
- for business purpose – (B2B business-to-business) – helping companies to be more efficient, market more efficiently or streamline some of their operations
In general, B2C apps are getting their money by mining data from users and allowing them to buy different features as needed. The users are testing first the “free” version before committing for upgrades. The main revenue formula for B2C apps is:
Revenue = purchasing users x price for upgrades + users X revenue from ads
where the important factor is the volume of people buying the extra-features.
For B2B, the mobile app has a fixed cost but is recouped from the efficiency of the new business processes involved. The revenue is manifested in reduced costs to run the business.
– Cost = mobile users x (reduced cost / user / period of time ) x period
One of the features of the marketing strategies is to start with an application, test it, listen to your audience and (in order to increase revenues) move it to another category (B2B) and earn money from a different market or so called an horizontal expansion. Some companies are releasing the free version and enhance it for B2C and when the glitches are fixed they move the app to B2B by presenting the goals of the app in a totally different view.
One company that illustrates the concept quite clear is Yelp, which started as an app which collects comments and ratings about any business, serving mostly the consumers. Then it expanded and asked businesses if they want to be marketed differently on Yelp’s website. The main revenue is based on businesses paying for the service of being present on Yelp’s website. Yelp has even a controversial approach on asking businesses to being promoted with a famous case of a restaurant which had the lowest rating but a thriving business.
On the same approach, Groupon has a similar strategy: gather together people interested in being notified about deals on different categories (for free) and collecting money from businesses marketing their business through promotion sales.