This is a guest post by mobile marketeer Peter Evers based in London who frequently blogs about mobile on peterevers.net.
After working in mobile marketing for quite some time, recently a friend challenged me to think of a business plan for his mobile startup MaptheGap. His plan was either to sell his company or making money by selling pro accounts.
I think choosing the sell out strategy is one of the most common mistakes startups make. They hope to make their service so appealing that a big player has no choice but to acquire them. What if that’s not happening? Well, then you run out of money sooner or later, go bankrupt, and your startup has stayed a startup forever. In these times of economic slowdown it seems a pretty risky strategy.
Another failing strategy is to start with a pro account right away. So you’re launching a new service, but you prevent your very first users from using the full functionalities of your service? Since the first phase is mostly about convincing people to actually use your service, this will lead more to frustrated users than to money in the bank. Besides, a lot has been written and said about everything becoming free anyway.
So, what would be viable business plans to make your mobile service profitable? I have summed up three business strategies, which do not exclude each other, to earn money with a mobile service.
- Advertising – Very obvious, but still a lot of startups think of it as the a-word. They are too afraid to upset their userbase. But aren’t we all still watching tv and reading newspapers? Advertising doesn’t bother people as long as it doesn’t interfere with the usability of your service. Besides, the techniques to target ads on specific characteristics of your users and their location are pretty advanced, so your users might even think of the ads as helpful.
- White labeling – A white label product or service is a product or service produced by one company and rebranded by another company to make it appear as if it’s theirs. In terms of a mobile service, it means that you license the technique of your service to another company for a fixed fee, so they can rebrand your service as their own at an event (fair, release party etc.), offer it to their customers or on a bunch of other occasions.
- Licensing – By far the best way to grow a big audience, which obviously boosts your advertising sales, is to get your service preloaded on people’s phones. So your service is on their phone before they have even thought about buying it. This is hard, you’ll need to speak to phone manufacturers and they’ll need approval of the operators who sell their phones, but will certainly mean a big breakthrough for your service. Since the rise of the mobile Internet most manufacturers also have a ‘Downloads’ application preloaded, but the downloadable content within this application isn’t preloaded but can be changed at any moment. If you manage to get your service in there, every user of a phone of that particular manufacturer, looks at your service as soon as they want to download something. One of the most successful examples of this is the App Store on all the iPhones. The other side is that the operator or manufacturer will demand a share of your advertising revenue, but it’ll be worth every penny.
Although according to Michael Arrington revenue models aren’t really web2.0, I’d advise you to be ahead of the pack and think of a way to monetize your service instead of waiting for demanding investors (like Mike himself, what a coincidence) to come along buying shares you could have sold ten times higher.