5 Mobile App Monetization Strategies

AppFutura
Published on Jan 27, 2015 in Mobile App Marketing
Money

Guest Post by Anneke S. from Digital Brand Group

These days it feels like everyone is talking about mobile apps! Just ask anyone, and you’ll find that most have had an idea for a mobile application at one point or another. Unfortunately, it requires quite a bit of expertise to create most applications, but if you are fortunate enough to assemble the talent to create a successful app, the rewards can be great! Sadly, for every blockbuster app, there are literally thousands of apps that never go anywhere. This is most often due to a poor or non-existent mobile monetization strategy.

Mobile monetization strategies should be planned and architected before kicking off the development process for your mobile app, and are important to ensuring the long-term sustainability of your app business. The combination of a well-planned monetization strategy, top mobile development company, and marketing plan, will put you and your billion-dollar app idea ahead of the competition and on the road to success!

Do Your Research

Mobile analytics firm Localytics shares a few questions you can ask yourself when deciding upon a business model for your application:

  • What problem is your app trying to solve and how?
  • What is unique about your app and would people pay of this?
  • What else do you think your app users would be willing to pay for?
  • What business models do competing apps use and how well have they worked?

The best way to do your research with regard to business models and strategies is to make use of resources. MonetizationLab is a free resource for those looking to easily define a mobile (or Web) monetization strategy. MonetizationLab allows users to select a business model (“Social/Dating” for example), then a niche (“Travel” for example), resulting in a group of suggested monetization strategies for you to consider. There are many different strategies that may be suggested, from sponsored widgets to digital information products, for instance.

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Let’s Take a Look at 5 of The Most Common Monetization Strategies

1) Incentivised Offers

With this strategy, you can monetize your app by incentivizing users to perform actions on offers within your application. PeerFly explains incentivised offers (or “cross promotion”) in the following way:

“It is simply promoting an offer that is not in the vertical you are currently working in to your customer or a product that’s in the same vertical, but slightly different”.

This method is seen as being one of the “purest” forms of app monetization. For example, a pop-up is revealed and the user is asked to rate a product or service and receive incentives accordingly. These ads are suitable for high volume, lower end products in most cases. As a tip, don’t put all your eggs in one basket - make use of a variety of advertisers and see which offers turn out to be more lucrative.

As explained by Venture Beat, Runkeeper has this system in place where the app motivates users to track their running activity with in-app rewards offered by completion. These rewards are then promotions or exclusive discounts from the sponsors or advertisers.

2) Transactional Commerce

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This strategy is a bit trickier to implement, but according to some, a sure way to secure start-up success. Transactional commerce will work even better if you already have an existing audience in place. This strategy is all about facilitating sales between a buyer and a seller on your platform.

The strategy can also be explained as creating a marketplace where revenue is received from listing fees, upgrades, transaction fees and other marketing services beneficial to both parties. Building a marketplace will require you to establish supply and generate demand for your goods. Take AirBnB for example, it’s not about owning the home, but creating a system where monetization takes place almost “inevitably.”

Additionally, you could also create a subscription-based model where a fixed-fee is charged using an In-App Purchase for accessing app products or services. This is rather popular for magazines or resources such as you would find in the iOS Newsstand.

3) Freemium Strategy

The Freeium strategy for applications entails allowing users to download a free version of an application with basic features. Users would be required to pay for access to premium areas of the application – for example, unlocking extra levels in a game app. In this case it’s going to be about developing an application where users won’t second-guess placing In-App purchases within your application.

“In-app purchases are raking in 76 percent of all revenue in the Apple App Store in the US and over 90 percent in the Asian markets” according to a Dimisto report.

This strategy is probably the most popular of monetization plans, especially in the gaming niche. If you want to build a large audience quickly this would be the ideal strategy since the barriers to entry are lowered, not requiring users to pay for the app initially.

4) Premium Model

As mentioned above, a freemium strategy is where the user can download and use a certain version of the application at no charge. In order to charge for your application up-front (aka the “Premium Model”), your app will need to offer something of value to the user.

The popularity of free applications cannot be denied, but once the brand is established, research has shown that users are more likely to purchase a premium version of a pre-existing freemium app. This is the case for applications such as Minecraft, the fitness application Couch-to-5K, and others. Kiip explains the reasons for deciding to pursue a Premium Model for your app monetization strategy:

  • The App is licensed by a prominent brand. An example in this case would be Marvel’s $2.99 X-Men Days of Future Past.
  • The average maintenance cost per user does not outweigh the app’s price. This is highly beneficial since Freemium apps can cost more in the long run without necessarily bringing in the bucks.
  • The type of app is in high demand, with low supply. This also works well for niche services and games where the user engages in a high-quality experience, where the app does not have a big user base.

5) Merchandising

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If you know that your application will have a cult status, merchandising can be a very lucrative monetization strategy. Take Angry Birds for example. It started out as a basic mobile game and today an entire franchise is built around it with soft toys, board games, books, clothes, and more.

During 2013, Rovio released a statement saying that the merchandise connected with the Angry Birds games increased threefold in the last year, accounting for an astonishing 45% of revenue generated in 2012.

Passionate game users will be enticed by merchandise if they are committed to a game. In the world of mobile apps, games start trends and this flows over to popular merchandise. As a small company initially, you are more likely to break even than make millions by selling merchandise - but it’s about more than just the moola. It’s about creating an established brand and ensuring loyalty in the end.

Some Final Thoughts…

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Know Your App: The success of your application will largely depend on the how well you know your app and the industry it will serve. In order to make money from something, you need to understand its value to the market and position it as such. Determine whether there is demand for what you want to develop then make your next move.

Know Your Market: Different strategies will work for different markets. If you have an application focused on meditation, In-App ads will most likely not work. On the other hand, if you are offering a fast-paced game, offering In-App purchases is a great to go. Have a look at what the competition is doing and which company is the most lucrative within your niche to get started.

Know Your Audience: The last thing you would want to do is push your users away. A fitness app offering In-App purchases for buying sweets in bulk or discounts at fast-food chains will probably not fly. However, rewarding users for their commitment to diet and fitness programs by offering discounts on the latest Nike trainers for instance, will work much better.

Understand The Mobile Ecosystem: Mobile adoption is increasing at such a rapid pace and is expected to reach over 4 billion users by 2017. In order to maintain your relevancy, you will need to set your business apart from the competition. Achieve this by learning about localization and globalization issues to increase revenue for your application, and separate you from other competitors.

Find the Right Pricing Strategy: As a mobile application owner, you could have all the right digital strategies in place, but the wrong pricing strategy. Do your research to determine the best pricing strategy for your app. Find the right balance between what it costs for you to produce, how much maintenance is involved, and what users are willing to pay.

With the mobile industry booming, the strategies outlined in this article are just a few drops in the ocean of vast monetization possibilities. Some determining factor should be what you are trying to build, your market reach, and your audience needs. Do your research, know your audience, and make sure you keep up with the industry in order to find your own application business success.

For more help and assistance in developing a top grossing mobile app, you can always just speak directly with a mobile expert. The crew over at Digital Brand Group in California has been developing apps since the App Store launched in 2008. DBG is one of the best mobile development companies around and can steer you in the right direction.

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AppFutura has been around to list IT companies and marketing agencies for some years now. During this period, the team has published hundreds of AppFutura tips but also important information for the companies to know more about a specific topic of interest. Among some of the articles, you will find different posts of AppFutura team members that are not quite recurring contributors, like our CTO or our finance controller, as an example. From AppFutura tips to improve your presence online on our directories or some information regarding our company.

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