How to make money on your software – experts answer

General development trends of the Russian software market

In the total volume of the Russian IT market, the segment of software development for solving commercial problems in companies and institutions traditionally occupies a considerable share.

Analyzing this area, it can be noted that the peak of sales (in the private and national sectors) occurred in 2013, when total revenue amounted to a record five billion dollars. Since 2014, due to a sharp drop in oil prices and an aggravation of relations between Russia and the West, a sharp drop in profits has been observed (according to analysts, in total, the commercial software sales market dipped by 40% in dollar terms).

And only in 2017 there has been a tendency to a gradual restoration of positions – the income of Russian manufacturers of licensed software grow by 11% annually (taking into account the conclusion of contracts with Western partners). The latest data for 2018 show: today the sales market is approaching two billion dollars a year, excluding the shadow sphere of counterfeit goods.

These figures demonstrate: the Russian market of high-quality, “white” software, after several years of failure, is not only stabilizing, but is also in the stage of steady growth. And, most likely, in the coming years it will overtake the existing volumes by capitalization before the crisis.

Similar optimism in the forecasts is observed when assessing the domestic software segment in the analysis of experts of the international consulting and research company IDC.

Who brings new software to the market and how to make money on it

As practice shows, the most relevant ways to create software include:

1. Development of a system software environment and market launch as a separate, unique product within a startup.
2. Creation of specialized software in the form of an individual corporate product with a further expansion of functionality for entering a wide market.

The first method, with all its progressiveness, is in fact not suitable for everyone. Since the successful launch of a startup depends on many completely different, sometimes even non-market factors, it is impossible to derive any universal formula for such a launch.

The life cycle of software development consists of several stages: project planning, implementation, testing, prescribing technical documentation and implementation (including with high-quality, warranty technical support).

All this takes, as a rule, from three to five years, during which a startup has to literally survive in a highly competitive environment without an outside sponsor.

The internal corporate development and launch of a new product on the market is more relevant in our realities, if only because the operating company has a well-developed team of IT specialists, proven marketing methods, and brand-loyal customers / partners.

From the foregoing, it becomes obvious that in any case, the survival and profitability of a particular software product largely depends on how it is monetized. This is a higher priority for IT startups, but corporate projects are always looking for additional opportunities for making money.

Actual monetization methods for software

Before talking about ways to make money on a software product, it should be noted that developers are guided by three main platforms:

As a rule, large, leading players today are developing their products in accordance with the hybrid model – with an eye on both the web and mobile applications. The advantage of this approach is that it allows you to reach the widest possible target audience of software.

Monetization options for the web and mobile also differ.

So, for web-products the following types of monetization are characteristic:

1. Subscription with the possibility of monthly payment of the selected tariff. This can include all types of package offers ranging from a stripped-down demo to activating a professional account that has been pumped up in every sense.
2. One-time purchase of services. Less profitable way to monetize compared to recurring payments. Some companies nevertheless practice this model, compensating for lost profits with super-loyalty of regular, status clients and using partnership with them in their marketing strategy.
3. Selling virtual goods. Various variants of such a web allow good monetization of any software related to the use of virtual “goods” and services.
4. Getting sales commission. Another relatively profitable monetization option, which is most effective in the case of a branded, already hyped product.
5. Display and contextual advertising. Various options for advertising software promotion are successful when an advertising campaign is carried out within the framework of finely tuned, full-format tools. This includes, for example, native advertising, generally useful blog posts in large specialized media, etc.
6. Partnership programs. This is an option for indirect, strategically beneficial monetization, which also increases brand awareness in the market.

The following monetization models are typical for mobile:

1. Paid download. It is a simple, well-established tool.
2. In-app purchases. Effective for software, the functionality of which allows you to earn on auxiliary services, add-ons, significant mods, etc.
3. Paid subscription. This is also a well-known and easy-to-understand variant of monetization, which is nevertheless desirable to back up with offers that are really beneficial to the consumer.
4. Advertising in the app. The well-known, well-known monetization model may in fact turn out to be not very effective, because users have long been accustomed to such advertising and often simply do not “notice” it (the effect of the so-called “banner blindness”).

Analyzing all the possibilities of monetization for software, it is safe to say that you can make money even with a fresh, just entering the market. In this case, the product itself must be of high quality, in demand, solving real customer needs. Good, unique software in itself allows you to choose options that will be in harmony with the functionality of the program itself, with its marketing capabilities and the expectations of the target audience. Indeed, in the final analysis, it’s not advertising that determines success, but a product that is bad and raw will certainly not be in demand.