By Chris Lee

Analyst group Canalys predicts that direct revenue from the sale of apps, in-app purchases and subscriptions across smartphones and tablets could rise from $7.3bn in 2011 to $36.7 billion by 2015. Yet despite the millions of app downloads being distributed from app stores daily, one of the biggest problems facing mobile app developers is how to generate revenue.

Jens Lauritzson is CEO of Flexion, a company which develops “wrapper” technology. Wrapper technology creates a small amount of code that is wrapped around the original content application, enabling a range of additional services, such as in-app billing, content discovery, viral distribution and digital rights management (DRM).

According to Lauritzson, in the early days of the app economy, the focus was on how many titles were available in each store and how many downloads per day these stores generated. However this has now changed to a focus on monetisation. App monetisation providers enable developers to promote and monetise their mobile content, increase conversion rates and protect against piracy. So what are Lauritzson’s top tips for monetising apps?

Increase penetration

First up, Lauritzson advised improving penetration by moving monetising from the app store to the app itself.

“The storefront should just be a distribution channel and monetisation should be done within the app,” he told NMK. “All content should be free to download. The pay-per-download model has been limiting the use of mobile content for years and the sooner it is gone the better.”

Drive conversion

App developers should let users decide whether your application is good or not and how they want to pay for it, Lauritzson argues.

“You get best conversion by offering the user the opportunity to sample your full product for free,” he said. “This is particularly important for less well-known brands. Once the free period is over, let the user decide how they want to pay. Operator billing has by far the best conversion rate globally because of its reach but also because it offers ‘one-click’ purchasing.”

Not all customers are the same and different licensing models may improve conversion and revenues, Lauritzson warned. For example, short-term rentals alongside the full purchase option would be a good model.

“Non-premium models such as incentivised downloads and pure advertising should also be considered as monetisation options and ideally if they can be offered as a complement to premium,” he added.

Promote and distribute

Content distribution is key to monetising apps, Lauritzson said.

“The competition for shelf-space is very tough and once you have got customers to buy your product, make it easier for them to buy more from you without having to go back to the store again,” he advised. “Choose a solution that lets you promote your other titles via a dynamic display within your apps. Relevant advertising before start or after exit of an app has very high conversion rates.”

New customers are much more likely to buy if they get introduced to you by a friend, Flexion has found. “Try to implement viral features such as Facebook in your app. Once a customer has logged into your app via Facebook a new world of information will open up to you,” Lauritzson concluded.

Connect2Media is a publisher of digital entertainment and provides a range of licensed entertainment content across multiple mobile platforms. The company has developed 70 Java-based apps wrapped in Flexion technology for distribution on the Nokia Store. Since adding the Flexion “Try & Buy” wrapper, the company says it has seen an increase in revenue by more than 400 per cent and an upturn in downloads each month.