Nov 022012

One of the most frequent questions we get asked at HANDI is "How do I fund my app?"

Developing that first working prototype of an app can be a quick and therefore fairly cheap process which many individuals or small companies can easily afford, but turning this first version into a product that is sustainable and supportable and able to reach a wide audience can soon become much more expensive process and either spending you own money on this of seeking support from investors requires that app developers have a clear idea of their business model.

Government also needs to understand this. Presently there is great hope that the app community will deliver for free what the NPfIT failed to deliver for £12bn and that all the NHS has to do is encourage a few healthcare professionals to code, offer some prizes and an opportunity for glory. Sadly, much as I believe in the power of the app community and the app paradigm to transform the way we deliver health and care it's not quite this easy and the centre will have to invest in support and infrastructure if it wants the app community to thrive, but most of all it needs to understand the possible business models that exist and ensure that it doesn't unintentionally or inappropriately inhibit those that could support a vibrant app ecosystem.

So what are the business models available to app developers? Well from my discussions it would seem they are these.

Just for the hell of it – Many apps are produced by developers just because they can with no expectation of a direct or indirect commercial return.

This is the realm of the hobbyist and lots of great ideas and innovation will emerge on this basis, but this approach is rarely sustainable as the pressures of family life and the day job close in. If an apps open source someone else may pick it up but normally such apps die or switch to a more sustainable business model.

User pays – Users pay a one-off charge, takes out a subscription, pays per use or even makes a voluntary donation.

There are very few examples of commercially successful patient facing apps for which users pays. Most chargeable apps sell for well under £5, but even this small charge seems to put people off and unless an app has mass appeal the volumes achievable at this sort of price rarely generate enough revenue to be sustainable.

User pays for service including app - Here what attracts the user to pay is the service of which the app is a just a part. For the app developer the opportunity is to be paid by the service provider to create the app that supports their service or to take on the broader role of service provider. There are a number of app enabled health and care service for which there seem reasonable prospects of commercial success based on the user paying for the service.

NHS/care provider pays An NHS organisation or care provider pays for apps that are made available free to appropriate  service users. Here the payer sees value to itself in making an app available and meets the cost of doing so.

There are a number of potential variations on this model. The payer may fund a developer to create an app which they then own (or open source) or they may buy licences, subscriptions or pay-per-use to enable an app to be provided free to users  with the developer bearing the commercial risk and opportunity.

This approach can create sustainable business models where the value of app to the payer is sufficient. Given the potential of many apps to substantially reduce payers costs and improve quality of service this approach should work in many cases.

However, the app developer faces two challenges. Making the business case to the potential payer and finding a route through the procurement jungle, both of which can be challenge for a typical small and innovative  app developer and an area where Government could help.

Non-commercial sponsorship. Many self-help and charitable organisation have paid for the provision of apps and services that are made available free of charge to the community that they serve – Organisations concerned with specific patients groups or conditions may well fund the development of apps or buy licences or subscriptions to provide apps free to those in their communities.

Commercial sponsorship – A commercial organisation sponsors an app in the hope of a direct or indirect commercial return. There is significant interest from pharmaceutical and other healthcare companies in sponsoring apps which relate to a clinical area in which they have an interest or draw users into services they offer.  There are a number of potential variations on this model which include funding development of an app they then own, paying for licences or subscriptions for an app to be available free to a target audience they define or pay-per-use (possibly linked to "click-throughs" to a service they offer. Commercial sponsorship is likely to be an attractive business model for many app developers.

Advertising – Apps are made available free to user but carry advertising. This approach is used by a number of health web sites and apps. Typical this approach uses services like Google Adsense or PlacePlay which provide advertisements relevant to the apps target users and shares revenue with the app developer. This is low effort for the developer but means they have little control of the advertisements that appear.  Targeted advertising has been one of the most successful business model for many web sites and the same is likely to be true for popular health apps, particular those that can attract user valuable to advertisers.

There is some understandable concern about some of the more commercial business models which could results in apps with a commercial bias towards particular products and services and  in apps not being so easily available to those in the groups that might benefit most from them as either they won't be able to afford the app or associated service or because they are not attractive to commercial sponsor and advertisers. However, Government need to decide if it wants to support commercial models for the delivery of health and care apps or fund them from the public purse.

However, beyond all this lies the challenge for the app community to demonstrate that apps bring value in terms of reduced cost and improved quality in the healthcare system. I'm firmly convinced that with the right support and infrastructure that apps can do exactly this and it then  becomes simply a matter of designing business models which enable those who get value from apps to pay for them, which in the context of a publicly funded health and care system is predominantly the tax-payer.