40 Android Business Models, Part One

moneyOne challenge with any new platform is figuring out how to make money from it. While some people are working with Android “for the love of the game”, others would like to build a business or augment an existing business.

One of the complaints about Android vis a vis iPhone is the apparent lack of developers making money. Some of that can be attributed to relative market sizes. But, more importantly, those complaining are focusing exclusively on just one business model: build the app, sell the app to individuals.

There are many other ways to go about the problem. In fact, selling apps to individuals is pretty close to dead last in the models I would choose (and have chosen).

So, with that in mind, here are the first six entries of a brainstormed list of 40 different business models for making money off of the Android platform:

Model #1: Build the App, Sell the App to Individuals

This is the quintessential mobile revenue model, since the dawn of handheld computing. By listing your app in the Android Market with a price tag, you are counting on X% of the users visiting the catalog, Y% of those finding your app, and Z% of those buying your app (and not requesting a refund within 24 hours). Given a big enough number of devices in use, you can sell some copies, despite the fact that neither X% nor Y% nor Z% are anywhere near 100%. You can also take your own steps to improve your percentages (e.g., marketing, to increase Y% and Z%) and sell through altermative markets (each small, but with their own X%, Y%, and Z% that may be more favorable).

Model #2: Make the App, Sell the App to Enterprises

Consumers are not the only market for software, though.

Enterprises purchase a ton of software, some even for mobile devices. Making apps that would appeal to enterprises — who tend to buy large numbers of licenses — gives you an entirely different sales process and revenue model. Now, you are making thousands of dollars per sale, not pennies, and you are using marketing to get sales calls, not individuals making purchases.

Not every app is something the enterprise will want, you still need the sales expertise, and there is no sign that Android is a major player in mobile devices (the way Blackberry is, for example). But, it is an alternative to trying to convince some percentage of millions of people to part with $1 apiece.

Model #3: Make the App, Sell the App to Schools or Universities

Enterprises are not the only ones who buy in bulk quantities. Educational institutions, notably colleges and universities, tend to buy a lot as well. Some device manufacturers are going to pitch their devices through schools — creating software of interest to students (or perhaps school administrators) and partnering with those device manufacturers gives you another way to get your wares in front of interested people. You can still sell through the Android Market, of course, but by finding or creating other channels, you gain access to markets with perhaps fewer directly obvious competitors.

Model #4: Make the App, Sell the App to OEMs

Of course, the dream of many app developers is to skip selling one copy apiece to a million people and instead sell a million copies once to a device manufacturer or OEM. With this model, selling to individuals is not an end, but a means of demonstrating consumer interest. Couple that with a well-designed app strategy, one where OEMs can gain a competitive advantage by putting your app in their firmware, and you have a chance at a “big score”.

Of course, only a handful of third-party applications make it onto devices, and these tend to be ones with crazy-good user value (e.g., Microsoft Office file viewers/editors). It also helps if you have connections with device manufacturers, either directly or through advisers or similar indirect means.

Model #5: Make the App, Sell the App to Content Providers

Not everybody who wants to get on mobile devices is in position to create their own apps. If you can find a repeatable pattern (say, WordPress sites), you could create a “template” app that covers much of the functionality, then tailor it on a one-off basis for specific content providers. You then license the customized app to the content provider, that they can distribute through their site, or the Android Market, or wherever. The content provider gets visibility on Android devices for less time and money than it would take for them to create the app themselves. You get to leverage your investment in the template across multiple sales, each far more lucrative than selling to individuals.

The challenge is in finding a repeatable market segment, which you are familiar with, for which you can create such a template app. And, of course, sales and marketing cannot be ignored, either.

Model #6: Make the App, Sell the App to Service Providers

Some apps are tailor-made for the same strategy as Model #5, but targeting service providers rather than content providers. A great example would be a SIP client. SIP is generally interoperable, but it frequently requires lots of finicky settings that are provider-specific. Rather than (or in addition to) creating a SIP client to sell to end users, make it brandable for a SIP provider, plus have the means of “baking in” various provider-specific settings at the same time. You license the tailored app to the SIP provider, who in turn distributes it to their customers (probably for free, banking on more SIP minutes sold). Once again, you can leverage a single app into multiple significant sales, rather than having to only deal with end users.

Tomorrow, we will begin looking at models where you give the app away for free to individuals, and make money from some of them in other ways — the so-called “freemium” approach.

Mark Murphy is the founder of CommonsWare and is the author of The Busy Coder’s Guide to Android Development, The Busy Coder’s Guide to Advanced Android Development, and Android Programming Tutorials.

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