There are several ways for developers to monetise mobile apps, including pay-per-download, where the app is paid for inside the first instance; in-app purchases; and mobile advertising models. Each method has legal implications which must be considered in the course of the development process. Listed here, i am hoping to handle these implications and advise app developers the right way to ensure they stay at the right side of the law, whichever monetisation model they’re using.

Pay-per-download
With pay-per-download apps, users make a one-off payment to download the app to their device. There’s little scope for revenue beyond the download fee (often a disincentive to prospective users) such a lot of developers look to other models. For some though, this can be an attractively simple option and, provided the mobile app complies with the content requirements of the relevant app stores, the developer has few legal issues to think about.

The developer should however have terms and stipulations for the app to restrict their liability; inform users what they will and can’t do with the mobile app; and canopy terms mandated by platform providers. The developer must also have a privacy policy, which sets out what the developer will do with users’ personal data and to hide the usage of cookies. If mobile apps are distributed outside the relevant app stores, which include at the developer’s website, the developer also needs to have measures in place to make sure compliance with strict “distance-selling” laws. These require, for instance, a refunds mechanism – a process that might normally be achieved by the relevant app store.

There can be a possible piracy problem with the users of a few mobile platforms illegally sharing mobile apps in a fashion which circumvents the relevant app stores.

In-app purchases
This model involves the sale of game play extras to feature one other revenue stream. Many users are more inclined to download free mobile apps but may then make in-app purchases, or even even purchase a pay-per-download version (the reason behind so-called “lite” mobile app model) in the event that they just like the app.

The use of in-app purchases, particularly in respect of mobile apps which target children (who cannot enter into enforceable contracts), could breach the patron Protection (from Unfair Trading) Regulations 2008. The UK’s Office of Fair Trading (OFT) recently announced that it was investigating web- and app-based games to examine whether or not they are misleading, commercially aggressive or otherwise unfair. The OFT will specialise in those mobile app games that come with unlawful “…direct exhortations to children – a powerful encouragement to make a purchase order, or to do something to be able to necessitate creating a purchase, or to influence their parents or other adults to make a purchase order for them.”

Whether or not the details within the terms and stipulations for mobile apps is enough to protect developers is still seen. Developers should make it clear to users before the purpose of download (in addition to inside the mobile app itself) the level to which in-app purchases are required to take advantage of the app, or consider exploring other monetisation models.

Subscription/pay-wall
The subscription monetisation model may be lucrative. It provides regular income for developers, but does require investment to retain subscribers. App stores are inclined to have strict rules which form portion of their agreements with developers, on the topic of the provision of subscriptions outside mobile apps, as an example, on websites. If a developer for the iOS platform allows users to subscribe outside of the mobile app, an identical (or better) subscription price need to be offered contained in the mobile app. Using links within the mobile apps which enable users to purchase content or subscriptions outside the app is usually often forbidden. The relevant app stores will most certainly remove those mobile apps which contravene these rules.

In addition, if a developer allows users to subscribe outside the mobile app, the practicalities of the stern distance-selling laws (as mentioned above) may be relevant.

Advertising
Another monetisation option is to embed small banner ads and other kinds of advertising into mobile apps. The industry standard is for the developer to be paid on a price-per-click basis, where the advertiser pays for every active response from a user to their ads.

The advantage is that the revenue generated from integrated advertisements allows mobile apps to be distributed without cost which, in turn, can generate more downloads and, therefore, more advertising revenue for the developer. Here is the monetisation model at play within the lite versions of many apps.

The legal issues are resembling those in respect of ad networks used on websites. It is advisable to for mobile app developers to ascertain their agreements with the ad networks to ensure that advertisements appropriate for the mobile app are served within it.

The ad network needs to be under a duty to vet the ads, and the mobile app developer will often seek indemnities in case of third party claims (although this won’t atone for any reputational harm to the developer).

Sponsorship
Developing a mobile app to generate awareness of the sponsor’s brand is another alternative. The mobile app developer will often receive a contribution towards the improvement costs before everything of the project, which ensures a profit. In return, the developer features branding opportunities in the mobile app, often to the sponsor’s specification.

It is crucial to have an agreement in place between the developer and the sponsor, which clarifies who owns the intellectual property inside the mobile app, the level to which every party can market/advertise it, and respective payment obligations.

Conclusion
The best approach is to have an inclusive monetisation model for mobile apps which covers not just users preferring to pay for apps without a or reduced advertising, but additionally, those people who are happy to receive ads in return at no cost content. Additionally it is worth noting that Apple’s App Store still generates substantially more revenue for developers than Google Play, despite Android’s larger user base, so a mix of those two models is probably going to generate the very best revenues. From a legal perspective, developers must consider the terms and prerequisites of the relevant app stores at an early stage. Certain monetisation models are simply not allowed.

Neil Hawley is an associate at law firm, Taylor Wessing