,,In the words of the philosopher Scepturn, the founder of my profession: am I going to get paid for this?” - Terry Pratchett
So how exactly did the mobile app world reached to be a market of over $30bn+ in 2012? The figure includes all money made from pay-per-downloads, in-app purchases, subscriptions and in-app advertisements.
Monetization strategies for mobile apps have changed over the years due to market / tech flux, user perception, more competitive offers, mobile penetration and availability. Even so, four methods have stabilized. That is, until new technologies appear and pave the way for other opportunities.
Until then, these are the four ways of making money out of apps. (and we’ll add something sweet at the end)
It’s quite self-explanatory. Once your app is ready, you publish it in an app store such as Apple’s App store. Google’s Play Store, Windows Store, or other smaller app niche stores around
There are 2 catches to this approach.
A) Each app store has its own policy, target base and app approval process. You play by their rules. For example Apple charges a 30% commission for all pay-per-download apps, in-app purchases or in-app ads (if you use their Ad-server, Iad) in regards to revenue generated from them. The benefit for using known app stores when publishing an app is that customers and users are provided with reliability when it comes to downloading and using the app.
B) _To go freemium or not? _This is a very big question. Is your app worth $1,99? Is it even worth $0,01? Put yourself in your user’s shoes. Will they buy something they have never tried even if it costs a penny? Do you want to sell it 2000 times and only get $4000? Monetizing apps isn’t the same as selling a pancake. A pancake is a one time product, you buy it and eat it, smile and them go on about your day. Apps have more sophisticated marketing models.
Here’s a tip, freemium models beats premium models 7 times out of ten. Freemium apps generate 69 percent of the worldwide iOS app revenue and 75 percent of global Android app revenues. The reasons for this aren’t complicated. People use apps to save money, so why should apps cost anything in the first place? Not all apps are made for a price tag in the first place.
Premium apps are usually one-shot apps or limited time span apps. A good example were the London Olympics 2012 mobile apps. Some of them were worth $0,99 and the Olympics set the momentum for their 5 minutes of fame.
Freemium models generate good revenue when you couple it with in-app purchases and in-app ads. People who pay for an app are more likely to discard it if they see ads or annoying banners and notifications.
Most money from apps is made from in-app purchases, subscriptions, in-app ads and not from selling the app itself.
# 2 In-app purchases and gamification(Note: In app-purchases cannot be used as a conduct for selling physical products outside of the app such as books or clothes.)
In-app purchase revenues have skyrocketed from 7% in June 2010 to 68% in June 2012. The reason for this massive trend? In-app purchases as a monetization model are symbiotically linked to the freemium model.
Another way to define in-app purchases would be in-app gaming content. In-app GC can mean anything from virtual gems, in-game money, better items for adventure games, accessories, pets, titles, etc.
The benefit of in-app GC, is that you offer an app to your users, then engage them with content. This leads to higher conversions than pay-per-download apps and it increases user loyalty.
In-app purchases don’t refer only to games. They can also be used by publishing companies to offer more engaging content, either by way of subscriptions, loyalty bonuses, promotions and discounts for different content acquisitions.
However, this monetization model is all the rage with games especially considering that games offer the longest user retention and app usage, next to social networking and entertainment media. Here‘s an eloquent example of what in-app GC means for games: Over 90% of mobile game revenues generated by in-app purchases.
# Third’s the charm: mobile adsMobile ads are a touchy subject and although many marketers hope for gargantuan revenues, they walk a fine line between engaging the customer or pushing him away. Despite the risks and blunders, revenues from mobile ads reached $9.6 billion in 2012, according to Gartner, Inc.
So why not go for mobile ads?
Not all apps are tailored for ads. In fact, not all mobile devices are tailored to mobile ads. Especially smartphones. Why? Scott Forshay, a mobile and emerging technology strategist for emarketing company Acquity Group said : ,,This year, mobile ad spending in the U.S. is expected to reach $2.6 billion. Of that $2.6 billion spent, $2.5 [billion] of that was probably wasted. Mobile marketers do not need to increase their budgets, but rather should get smarter about their mobile strategies. Marketing on mobile devices will need to be timely, personal and contextually relevant (people expect their phone to be customized to who they are), in order to work.”
Mobile ads, much like everything in the mobile landscape, is dependent on 2 main factors : mobile device and the app.
Freemium models go well with mobile ads, but premium rarely, if ever. When considering mobile ads as a monetization path, take into account things such as CPC (cost per click) correlated with the ,,fat-finger” syndrome (when we accidentally tap on a ad banner). And it doesn’t stop here. Smart portable devices are now a natural part of people’s lives, even more than desktops. As such, mobile ads seem more intrusive and abusive on users’ devices.
The crucial question you should ask before integrating ads will be : Will it cut into the user experience and actually make the user uninstall the app?
If you choose ads as a monetization model, they shouldn’t obstruct the user experience, but rather blend with the app itself so it won’t jump in front of someone’s eye with a flashy-starry banner with : ,,You can save 95% off shoe polish today”.
Otherwise known as push alerts, they are a more sophisticated form of engaging the user with content and products.
For example, good PN strategies can be used in the hospitality industry, restaurants, retail shops, app updates, product offers and so on. The golden virtue of PN’s is that they are targeted to a specific app-user base and take into account location, time, usage and if integrated with a good analytics platform, can deliver the best relevant content in a timely and useful fashion.
The downside is that PN’s aren’t made for heavy use. Too many push alerts can quickly transform into spammy and annoying messages. When choosing a push alert strategy, the basics are simple : rare, contextual, relevant, location.
For more info on how to choose a good PN strategy, check out ,,How a Push Strategy Can Drive Revenue Through Your Mobile App.”
These are the main avenues to make money out of mobile apps. But they aren’t the only ones. You can sell the app entirely if you have other plans in mind.
Another course of action would be the sponsorship monetization model in which a company or a business underwrites your app in exchange for recognition benefits (such as a logo within the app). But this is double edged because it mainly works with event focused apps such as the World Olympics. It’s not scalable but it’s a good way to kickstart your app.
No matter how you slice it or dice it, the mobile app market is going only up, from $30bn to what many predict to be a $46bn market by the end of 2013. Before entering this gigantic dance of competition and opportunities, judge your app for what is best suited for it.
The app question of the day is : Can an app support all monetization models and be enjoyable and useful at the same time? How would you do it?
Related article : A Detailed Guide On How To Monetize Your Mobile Apps
,,4 questions you should ask yourself before going freemium”
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