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March 21, 2017updated 22 Mar 2017 5:01pm

Snapchat IPO gives a glimpse into the power of software

Gemalto's Jamie Longmuir on how companies are still struggling to monetise their software and why they must do this on order to be able to compete.

By James Nunns

As Snap, the parent company of Snapchat, makes its long-awaited IPO, the technology industry is eagerly watching to see if it’s a long-term success – and what can be learnt. And, while the company may have worked out its business model, many developers are still struggling to monetise their software.

With a considerable number of businesses starting to move from hardware to software, this could become a broader issue. The challenges are often more complex, such as making sure products are being used per their licence, understanding which features customers are using and how to protect that software against fraud.

This is when having a software monetisation strategy is essential. It’s about more than just protecting intellectual property (IP) rights. Businesses can guarantee their customers are using their products in the right way, as well as understand how, where and when certain features are being used.

It’s this last bit that offers the most value for businesses. Understanding how customers actually use products can guide how a company develops, packages, controls, manages and tracks its offerings in the future. Most importantly, it can help a business grow.

This could be through providing multiple versions of the same product by adding paid for add-on features that can bring in extra revenue, or optimising investment and resource allocation based on actual end-user behaviours. In the case of Snapchat, the company has the ability to offer advertisers insight into who they should be targeting, through the user data it has collected and analysed. This helps increases the attractiveness of the app to advertisers, which should also drive revenue.

However, businesses must understand the threats that come with developing software solutions as well, including the risk of hacks. It is naive to think that, once an application is protected and distributed, it’s immune to tampering, reverse engineering, theft and licensing infringement. With the growing number of attacks companies face, they can’t afford to lose their IP and revenue – particularly start-ups.

Ultimately introducing software monetization is about staying competitive in an increasingly busy market. Businesses should focus on using the anonymised customer data they have to create bespoke solutions to target the right customers and increase revenue. By optimising this process, companies will find themselves pushing ahead of competitors that don’t and becoming market leaders.

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So how would a company go about implementing a software monetisation strategy in a secure and sustainable way?

software monetisation
Track and identify usage

Businesses need to offer multiple levels of access to their products, allowing customers to consume them in the way they want to. In order to do this, developers need to track behaviours and identify the patterns that will allow them to reconfigure feature sets and business models. Through analysis of usage, businesses are able to adapt quickly to evolving market demands without the need to engineer products from scratch, which can be time consuming and costly.


Segment accordingly

Once businesses know their customers’ different needs, they can segment them into much smaller groups that share similar characteristics and understand their motivations and behaviours. This makes it much easier to target specific groups with tailored offerings and it means businesses are not wasting resources on features that are ultimately not being used by customers.


Test models

In order to reach new market segments, businesses will often experiment with their product packaging by performing A/B testing. By conducting these tests in the same market segment, it creates a greater chance of determining which features or licensing sets are preferred for that audience and which need to be eliminated. Businesses can then monetise this insight by offering these tailored solutions to the right audiences and, in turn, increase revenue.


Measure results

Markets will inevitably change as customer demands evolve, and so must a business’ products. The key is to avoid the high cost associated with each product change. By implementing the earlier steps, businesses should be able to continuously track and optimise the performance of each of their products to determine if they need to be replaced or updated. This means they won’t just be able to extend the products’ lifecycle by refining and improving them over time, but can stay ahead of the competition by quickly identifying R&D, business and engineering needs.


Protect your data

Last but not least, it’s vital to ensure software is protected. It’s all well and good to focus solely on maximising revenues, but leaving the door open for attack can prove very costly. More developers are turning to third-party solutions that can prevent tampering, reverse engineering, theft and licensing infringement. Creating these solutions themselves can be time consuming and costly, and this allows them to focus on creating and improving the solutions. In order to ensure they offer the best solutions for their customers, but retain the control over them, a secure IP-protection solution with a trusted software licensing platform provider is the best form.

As the transition from a hardware to a software world gains momentum, businesses will need to find new ways to grow. Those that can implement a software monetisation strategy correctly will be able to offer the personalised solutions that customers demand, while using this to increase their own revenues.


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