3 tips for actually making money making mobile apps

Let's face it: Your prospects of becoming an overnight billionaire by inventing the next Instagram probably aren't good.

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But that doesn't mean you can't make a decent living in the mobile app market. Although competition for mobile users' attention is fierce, there are ways to steadily build your user base and monetize your app's content. During the Sloan Hi-Tech Conference at MIT this week, five veterans from the mobile app industry dished out tips for up-and-coming mobile companies for building lasting business models and ensuring that their apps don't end up as the mobile equivalent of Pets.com. In no particular order, here are some of the nuggets of wisdom.

Don't assume you're going to be Instagram. Sure, you'd love to have Facebook CEO Mark Zuckerberg ring you up and offer $1 billion for your yet-to-be-monetized application, but the chances of that happening are slim. This is why it's best to take a long-term view of what has to be done to gradually make your app successful, which invariably means establishing a business plan to monetize your app and thus show venture firms that you will be able to create a steady revenue stream.

"When you look at OMGPOP, Facebook and Instagram, those are the one-percent of the top one percent of startups out there," said George Bell, CEO of Jumptap. "If you're a normal startup, you're going to have to go through rounds of funding and you're going to have to prove that you have a sustainable model."

When it comes to revenue models for apps, the panelists said there were generally two major systems in vogue: Apps that are free to download and are supported by advertising, and "freemium" apps that are free to download but that charge money for additional premium content that users will presumably want to enhance their experience. The general consensus was that the "freemium" model is the one gaining traction since it typically provides a more consistent stream of revenues. Aaron Woodman, the director of Microsoft's mobile communications business, said that app developers have to insist on charging something for their content despite the fact that mobile app stores are overflowing with apps that promise users everything for free.

"At Microsoft we've struggled with how we create floors for values to defend your ability to sell your product," he said. "I don't think there are a lot of models other than 'freemium' where you can sell content within games."

Not everyone shared the enthusiasm for the model, however. Ray Sharma, the founder and CEO of XMG Studio, said he "strongly disliked" the freemium system and instead pushed something he referred to as the "paymium" plan where users would pay a small amount for their app while also being charged extra for optional goodies.

"We believe the ultimate model is to charge $0.99 for a game and then charging for additional content," he said.

Stay off the HTML5 bandwagon for now. While HTML5 is likely the future of mobile app code, the standard is still in its early days and has a long way to go before it can provide the sort of customized coding that app developers have with their own native APIs.

"From a game developer perspective, if you want to achieve higher performance for your users, you need a lot of APIs that HTML5 doesn't support," said Sharma. "For instance, take GPS. Many apps take it for granted but within the HTML5 world the APIs for it don't exist yet."

Eli Schleifer, founder of Directr and panel moderator, chimed in and said HTML5 would be best used by companies that are developing relatively simple apps that don't require location-based services or other complicated development tools.

"If you're writing a grocery store app then HTML5 is great," he said. "For people on the cutting edge, though, I don't see it coming together now."

File for patents, early and often. In case you haven't noticed, the mobile world has been consumed by a series of lawsuits and countersuits over intellectual property. That's why if you think you've got a brilliant idea that could be the next big thing, you really need to patent it to prevent imitators from knocking off your app.

While this sounds daunting, panelists noted that making an initial filing is fairly inexpensive and businesses will be glad they invested in protecting their intellectual property once their business got off the ground.

"We encourage people to not be afraid of the process," said Sean Kelly, the vice president of product development at Zynga. "We think it's ultimately great for small developers to be a part of the process."

Sharma also said that getting involved in defending your IP would be a bonus when going to venture capitalists for startup cash.

"People will take you more seriously as a startup for having gone through the process," he said. "It may sound like a pain in the butt to do the patent thing, but I think the coming years we will see stronger assertion of IP in the app market in a big way."

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