How to Protect & Monetize Android Apps Using SafeNet’s Field-Proven Sentinel Software Monetization Technology WHITEPAPER

Table of Contents Introduction...... 2 Global Trends...... 2 Growth & Evolving Markets...... 2 Freemium Boasts Greatest Revenue Share...... 2 Android Apps Gaining Market Share...... 2 Gaming Tops the App Charts...... 2 Mobility in Business Means More Business Apps...... 3 Choosing a Business Model...... 3 Free Apps...... 3 Free Apps with In-App Purchases...... 3 Paid Apps with In-App Purchases...... 3 Paid Apps...... 3 The Importance of Securing Your Apps...... 4 Piracy Harms You and Your Customers...... 4 Reverse-Engineering and Theft of Erodes Your Competitive Edge... 4 Using Sentinel License Management and Intellectual Property Protection to Derive Maximum Revenue from Android Apps...... 5 Android Envelope...... 5 JNI Layer for Android Java Applications...... 5 Multi-threading...... 6 Android Licensing API...... 6 Feature-based Licensing Enables Multiple Configurations of Your Apps...... 7 Conclusion...... 7 SafeNet Software Monetization Solutions...... 7 Try Sentinel for Free...... 7

How to Protect & Monetize Android Apps 1 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper Beyond choosing a business Introduction model and deciding how to The advent of mobile computing via smartphone, tablets, and wearable computing technology monetize your app, how will has given way to masses of mobile applications or “apps,” as they’re commonly referred to. you actually execute those These apps entertain, help improve your productivity, and can even extend the functionality of your mobile devices. Every day, new apps are released and the number of active publishers in business models? And then the app stores is continuously growing. how will you protect your revenue and your intellectual With nearly 2 million apps available today, the vast majority of download volumes are being property (IP) investment from attributed to free apps. How then, are app developers to make money? What are the different business models and which models make the most sense? cheaters, hackers, and copycats? Beyond choosing a business model and deciding how to monetize your app, how will you actually execute those business models? And then how will you protect your revenue and your intellectual property (IP) investment from cheaters, hackers, and copycats?

This paper presents global trends, the different business model options and introduces the SafeNet solution for protecting and monetizing mobile apps.

Global Trends Recent research tells us there are clear trends for global app markets. Though the US remains the frontrunner, Asian app markets are experiencing explosive growth. And over the past year Android app revenue growth is outpacing iOS. Read on for more detail on each of these and other trends.

Growth & Evolving Markets The US remains the most lucrative apps market in the world but if we look at growth year over year, Asia shows the most growth with triple digit gains in South Korea, China and Japan. And western developers are increasingly gaining ground in Asian markets by using cross-cultural strategies, such as localization.

Freemium Boasts Greatest Revenue Share When evaluating the money makers, recent research indicates that, at the beginning of 2013, the percentage of app store revenues from “freemium” apps – those downloaded for free and featuring in-app purchases – was 77% in the Apple App Store and 89% on Play. By November, that had increased to 92% and 98% respectively. The freemium option continues to be a successful business model and has gained the most revenue share of all business models in the last years. This trend is expected to continue.

Android Apps Gaining Market Share Since the dawn of mobile computing, Apple has been the frontrunner in the app market. Though the iOS App Store is still leading in terms of revenue, Google Play’s revenue share is increasing rapidly.

For example, on a typical day in November 2013, Distimo estimated the global revenues for the top 200 grossing apps in the Apple App Store at over $18M. The estimate for Google Play was about $12M. When comparing to the same period a year earlier, their estimates were at $15M for the Apple App Store and only at $3.5M for Google Play. As this example illustrates, Google Play is grabbing revenue share at a rapid pace with an impressive 243% increase year over year.

Gaming Tops the App Charts Though there are apps in many categories such as productivity, music, navigation, etc., the vast majority of mobile app revenue is generated from the Games category. Gamers are dropping their Nintendo and PlayStation handheld gaming devices in favor of playing Game apps on their Android and iOS smartphones and tablets.

How to Protect & Monetize Android Apps 2 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper When you look at both free Mobility in Business Means More Business Apps and paid business models in Mobility means more devices, more locations, and more business apps. According to Forrester combination with the option of in- Research, the number of anytime, anywhere information workers — those who use three or more devices, work from multiple locations, and use many apps — rose from 23% of the global app purchases, you see that they workforce in 2011 to 29% in 2012. With tablets tripling to 905 million in use for work and home represent the business models globally by 2017, the anytime, anywhere work trend is definitely here. with the highest revenue volume for software developers today. Given these trends, app developers would be wise to evaluate their current software licensing and business models to ensure they’re not leaving revenue on the table. Just as important, developers need to secure their revenues by protecting their valuable intellectual property investments.

Choosing a Business Model The most commonly offered business models by both iOS and Android app developers today generally fall into one or two overarching categories. Developers are either offering free downloads of their apps, or they are charging for them. Some developers allow in-app purchases and some do not. The four most common business model variations used today by both iOS and Android developers are shown below.

Free Apps Free apps are those similar to InstaGram where users can Common Mobile App Business Models download and use the app for free. Users like this business model because there is no cost. In an effort to monetize their development investment, app developers using the free app FREE APPLICATIONS business model commonly generate revenue through third-party advertising within the app.

FREE APPLICATIONS Free Apps with In-App Purchases with in-app purchases Also known as “Freemium,” the free app with in-app purchases is a popular business model for app developers and to date, has also proven to be the most lucrative model. With this business model, PAID APPLICATIONS developers offer free downloads of their apps and then proactively with in-app purchases entice users with added features and functionality through in-app purchases.

PAID APPLICATIONS For example, the maker of Candy Crush, a popular game app, uses the freemium business model to offer free downloads and play of its game, and then generates revenue by selling virtual items that can enhance game play or help players advance to new levels.

Paid Apps with In-App Purchases The paid app with in-app purchases business model is very similar to the freemium model except users must pay a fee before they can download and use the app. Then users can choose to add features or functionality at any time by using the in-app purchase options.

Paid Apps The paid app business model requires that your customers pay for your app before they can download it. The most common examples of the paid business model are business, finance, and productivity apps. This is probably the simplest business model but it may not be the most effective option unless potential customers already trust your app. If you’re still building trust, you might consider offering a free trial version of your app in addition to the paid app so users can try before they buy the paid version.

In the end, choosing a business model can be a quite complex decision with many variables to consider. For example, when you look at both free and paid business models in combination with the option of in-app purchases, you see that they represent the business models with the highest revenue volume for software developers today.

How to Protect & Monetize Android Apps 3 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper However, research shows that this varies by app category. For example, in the Apple App Store specifically, 90% of games revenues come from freemium apps, but that falls to 88% for social networking, 68% for entertainment, 65% for music and 77% for books. The other categories are mainly paid apps. Seventy percent of productivity app revenues and 55% of navigation app revenues can be attributed to paid apps.

Add to this that diverse markets and the related user behavior can also have an influence on the average revenue per download—even when looking at the same app—and you begin to understand the complexities of choosing a business model.

Despite lower download volumes, paid business models generate higher average revenue per download (ARPD) and can still be a viable monetization option. Even though the ARPD is lower for the freemium business model, this is the dominant business model and has proved to be the most profitable with the largest revenue shares.

Combining general market statistics with the more precise ARPD metric can be valuable for developers when deciding how to market and monetize their apps. Including additional industry metrics can also help to evaluate the best matching markets, depending on the individual strategy for releasing a new app.

It makes sense then for developers creating new apps to investigate ARPD metrics of similar apps in terms of business model, geography, and device. Gaining these insights can help to determine the best strategy for any individual app in order to choose a business model with the most revenue potential.

Once you get beyond choosing a business model, it’s time to figure out how to manage licensing to fully monetize your apps and then to protect these apps from reverse engineering, theft and illegal distribution.

The Importance of Securing Your Apps Strong intellectual property With the availability of downloadable software apps, comes risk. Through download, a hacker protection for mobile apps can more quickly and easily access your software and potentially take it and expose your is an important part of any product on the Internet for a much lower price, or even free of charge. competitive strategy and has Piracy Harms You and Your Customers numerous benefits. Developing a software app involves a major investment of time, money and effort. Software piracy denies you the revenue you deserve and harms your customers, who ultimately bear the cost of illegal use of your products. Piracy limits your ability to be competitive, leading to higher-priced, less advanced products for your customers. Investing in strong anti-piracy protection for your free or paid apps (and Trialware) will help secure your revenue.

Reverse-Engineering and Theft of Intellectual Property Erodes Your Competitive Edge If yours is like most software companies, your Intellectual Property (IP) represents a significant portion of your company’s total market value. Therefore, it is imperative that you protect your development investment. It is critical then that the protection and licensing solution you choose for your software apps, not only enforces your licensing terms and protects against piracy but also provides comprehensive protection against reverse engineering and theft of your IP–including the proprietary algorithms and other trade secrets you embed in your object code. Strong intellectual property protection for mobile apps is an important part of any competitive strategy and has numerous benefits.

It is important to protect your investment while giving your users the ability to run your apps according to what they’ve purchased and are entitled. If properly secured, licensed software apps can definitely help grow your business and your revenues. Increased revenues offer you the added flexibility to: invest more in improving your apps, offer competitive prices, and make them more accessible to a wider customer base.

How to Protect & Monetize Android Apps 4 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper Sentinel RMS Android provides Using Sentinel License Management and Intellectual Property Protection to the mechanism to control and Derive Maximum Revenue from Android Apps deliver various app features and SafeNet Sentinel RMS Android provides the mechanism to control and deliver various app configurations, and then to track features and configurations, and then to track their usage once in the market. The Sentinel RMS license management functions embedded in the app, check for a valid license code their usage once in the market. before the app is run. If a valid license code exists, the app will run; if Sentinel RMS cannot find a valid license code, the app will not run.

Using Sentinel RMS Android to Maximize Android App Revenue

Sentinel RMS licensing library and functions ISV Application Your Application

Sentinel RMS + = library and licensing management functions

######## ########

License License Customer Generator Code

Sentinel RMS Android contains several components to help you protect and license your mobile apps for the Android OS.

Android Envelope Android Envelope has been designed to protect Android’s Java applications. It takes Android Application Package (apk) files as input and returns a modified apk file. Modified apk contains encrypted code (original app code) and some additional code inserted by envelope. The Android Envelope is licensing API agnostic, in that it does not insert any licensing calls into the protected application. For licensing needs the ISV can use RMS SDK for Android.

JNI Layer for Android Java Applications The Sentinel RMS SDK is primarily a C language based SDK – a JNI programming framework provides that interface with the Sentinel RMS SDK for licensing Java applications on Android platforms. This interface acts as an intermediary for passing data back and forth so that a Java compiler can be used to communicate to the standard C-based library. The easy-to-use Sentinel RMS APIs need to be integrated into your Java applications.

How to Protect & Monetize Android Apps 5 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper The diagram below depicts how the JNI interface allows usage of C functions/library in Java applications:

Android based Java Application

RMS JNI Layer (rmsjniinterfacelib.jar)

Sentinel RMS JNI Layer (libSentinelnonetJniLib.so)

Sentinel RMS C stand-alone Library (libnonet.a)

Multi-threading Sentinel RMS for Android provides support for a process-wide locking mechanism to meet the following objectives:

• Execution of Sentinel RMS APIs in multi-threaded environment. Sentinel RMS will support the execution of two threads at a time.

• Controlled access (read-only) of license storage file from simultaneously running threads.

Android Licensing API The typical calling sequence of the Sentinel RMS Android APIs for licensing are pictured in the diagram below.

Calling sequence of the Sentinel RMS Android Licensing APIs

VLSsetFileName For obtaining Locking Code

VLSinitialize VLSsetCustomExFunc*

VLSaddFeatureToFile VLSinitMachineID

LSRequest VLSgetMachineID

LSUpdate VLSmachineIDToLockCodeEx

VLSaddFeature * VLSdeleteFeature Scenario 1 - VLSsetCustomExFunc should be called before VLSinitialize if customEx locked Optional APIs VLSdeleteLicenseFromFile licenses are being loaded from the license storage. VLSgetFeatureInfo

VLSgetLicenseInfo Scenario 2 - VLSsetCustomExFunc should VLSgetLibInfo be called before VLSaddFeatureToFile if licenses locked to CustomEx criteria are being added. Only one call is sufficient. LSRelease

VLSCleanup

How to Protect & Monetize Android Apps 6 Using SafeNet’s Field-Proven Sentinel Software Monetization Technology Whitepaper By allowing app developers to Feature-based Licensing Enables Multiple Configurations of Your Apps encrypt and license the app Sentinel RMS enables you to implement feature-based licensing in order to gain control over file, the Android Envelope and your intellectual property. Using Sentinel RMS, you can tailor multiple licenses for one app— hence effectuating multiple product configurations with differentiating packaging and pricing Sentinel RMS Android API options. This benefits your customers as they can purchase features and new functionality provide a multitude of security & easily and automatically. Additional features, license renewals, and updates can be obtained licensing feature configurations electronically without a complex upgrade process. based around individual needs. Conclusion For the first time ever, internet access via mobile apps has eclipsed internet access from a computer in the US – a clear sign that mobile apps are here to stay. In order to fully monetize these apps, an app publisher’s protection implementation must be thorough, complete, and to a certain extent creative. Only when both the security infrastructure and its implementation are maximized is the software app truly protected. This may sound like an enormous task to accomplish, and while it is by no means trivial, it is definitely achievable. Implementing effective licensing and protection can not only increase your app’s longevity, but it can also significantly increase your company’s revenue, making it well worth the effort.

By allowing app developers to encrypt and license the app file, the Android Envelope and Sentinel RMS Android API provide a multitude of security & licensing feature configurations based around individual needs.

SafeNet Software Monetization Solutions Easy to integrate and use, innovative, and feature-focused, the SafeNet family of Sentinel® Software Monetization Solutions are designed to meet the unique license enablement, enforcement, and management requirements of any organization, regardless of size, technical Resources: requirements, or organizational structure.

World Tablet Adoption Forecast, 2012 to Software Licensing Products & Services: An award-winning suite of hardware, software, and 2017 (Global), January 16, 2013, Forrester cloud-based licensing solutions for protecting software applications from piracy, overuse, Research, http://www.forrester.com/ go?objectid=RES90621 or code manipulation in order to maximize profitability and protect competitive intellectual property (IP). 2013 Year in Review, December 2013, Christel Schoger, Analyst, Distimo, www. Entitlement Management Products & Services: A feature-rich entitlement management distimo.com system offered hosted, as a service, or for on-premise installation, for enabling software 2013 Retrospective Report, App Annie publishers to streamline and easily manage all operational tasks associated with software Index, www.appannie.com licensing. What to Expect from Mobile Apps in 2014, www.trademob.com/expect- SaaS Licensing & Management Services: A CODiE award-winning software licensing and mobile-apps-2014/ entitlement management service architected from the ground up to support the unique catalog definition, provisioning, control, and usage tracking challenges of SaaS and other cloud service delivery.

Software Monetization Professional Services: A full suite of consulting and implementation services to help you define, align, and deliver a licensing strategy that meets the business objectives and operational processes unique to your organization, regardless of where you are in the lifecycle of your licensing project.

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