Coming up with a ground-breaking concept for your app is just the beginning; from a developer’s point of view, you also need to figure out how you’re going to make money from it.
Thankfully, developers have several methods of monetisation to choose from.
Which is best?
Well, it depends; the nature of your app, your industry, and, to a certain extent, luck, all play their part when determining which approach is best – the only way to determine the most profitable is to experiment.
That being said, the overwhelming majority of apps will be monetised using one (or a combination of) the following four methods:
If you want to make life as easy as possible, consider monetising with a paid download approach – after all, this cuts out all the hassle of implementing advertisements or developing features that only unlock after the user has made a purchase.
Each time a user downloads your app, they pay an upfront fee and you get paid – both the App Store and the Google Play Store take a 30% share, meaning you take a 70¢ cut from each dollar revenue you generate.
The more you charge, the more you earn from each download — simple, right? Best of all, you know the exact monetary value of each user, which shouldn’t be underestimated when it comes to setting your promotion budget.
Now, when a user has to open a wallet to download your app, expectations rise, regardless of whether your app costs 50p or £10; glitches are no longer tolerated, and there is an unwritten rule that the user won’t encounter endless advertisements or in-app purchase requests — you can still add extra monetisation methods, but you will meet more resistance.
Of course, the biggest obstacle you face with this method is the competition from thousands of “free” apps – for this reason, many developers create a free version and a premium “upgraded” version of their app; win the user over on the free version, and they’ll purchase the premium version to access extra functions.
To implement: Simply set your price in the pricing field when you submit your app for publishing. Easy!
If you’re concerned the price tag attached to your app will put users off, consider making it free to download and monetising by encouraging users to make purchases as they use your app – known as In-App purchases.
As with paid downloads, you pocket 70% of the revenue you generate, with Google and Apple taking the rest.
Now, in-app purchases can take many forms: an extra workout in a fitness app, a one-time cheat for a mobile game, or a premium feature in a productivity app.
The important thing to remember is that your app should be functional without the additional purchase, with the add-on enhancing the user experience.
A great example of in-app purchases in action is Candy Crush Saga – around 80% of its fanatical following get deep into the game without ever making a purchase; however, those that do, generate almost 1 million dollars in revenue every single day!
Therein lies the nature of the in-app purchases: even if they love your app, some users will never, ever purchase them; in fact, it’s been estimated that no more than 20% of users will ever buy upgrades, and this number can be as low as 1%! When you monetise this way, revenue fluctuates.
Remember though: even if less users pay for your upgrades, this is offset by the fact that your free app offering will attract considerably more users.
To implement: You’ll have to embed the unlockable content into the design of your app, and manage the details through the App Store. For a more thorough explanation of what this entails, this is a good guide.
If you want a tried and tested method of monetisation, why not place advertisements in your app?
This is the method favoured by new developers, who perhaps don’t have the experience to implement in-app purchases but still went to generate revenue from their app.
Admittedly, this approach is somewhat intrusive and can diminish the user experience, but, if you avoid going overboard and look for natural points to display the ads, this can be avoided – a 30 second video ad before each game is far too imposing, but small banner ads are generally inoffensive.
With prices low and CTRs small, only certain types of apps suit the in-app advertising model – generally an app that gets its users returning again and again. Categories like news, games and reference are a good fit.
This is how Flappy Bird became so lucrative for its developer – with each game notoriously short, a competitive element encouraging ongoing play and a banner ad on every game-over screen, their advertisements were displayed tens of millions of times each day. Of course, if you want to make the big bucks, you’re going to need to have a huge audience!
In addition, many game developers have caught on to the power of incentivised advertisements. Chris Chedgey of App Business Podcast gives his thoughts on the topic:
I love virtual currency combined with incentivized video — coins for hints, content, gameplays, power ups etc. It gives the users who don’t want to spend money in games — like me — an alternative.
By making video advertisements optional and offering clear incentives for users who watch them — through extra in-app coins — you’ll bypass the majority of user objections.
Get the value of your reward right and the majority of users will recognise the benefit of watching the video adverts. Your views will sky-rocket and so will your advertising revenues.
To implement: There are many ready-made solutions for those of you looking to add advertising to your apps; head over to RevMob for one of the better options. Revmob promise the highest eCPM in the industry, by promoting the biggest apps with the biggest reputations, and you’ll get paid each time a user clicks one of your ads and downloads the app. Google’s in-house solution, AdMob is another great option, with the added benefit of mediating ads from multiple sources to maximise your revenue.
At Mobiloud, our customers get to use MoPub or Google DFP out of the box, so they have maximum flexibility in placing banner ads and interstitials from their own inventory or ad networks such as AdMob, iAd or Vungle.
Finally we have the new kid on the block: native advertising for your mobile app.
This is going to be big – you’ll no doubt be hearing a lot more about this!
A native advert differs from a traditional advert by naturally integrating into the overall look and feel of your app – they aren’t there to distract users, they’re there to enhance the experience.
This means, as a source of monetisation for your mobile app, they’re far more user-friendly.
Consider a football game, where, after completing a certain level, you unlock a Manchester United shirt. The advertisement is hiding in plain sight, but in no way detracts from the user experience (unless you’re an avid Liverpool fan), and, for many, makes the game better.
In the real world, BuzzFeed were one of the pioneers who trialled native advertising in their mobile app. Alongside their many quirky stories from around the web, their feed included one or two sponsored listings. Users were barely able to tell the difference when clicking, and because the content was of an equally high standard, everyone was happy – users got good content, advertisers got clicks and developers got paid.
With traditional ads all but ignored by users, this new approach to implementing advertising in a natural, functional manner has significantly increased CTRs, earning developers more money.
To implement: Google, Twitter and current leader, Facebook (with their excellent Audience Network) are battling it out in a race to be King of the native ads; whilst they’re getting to grips with the platform, get in touch with InMobi and MoPub.
Mobiloud already integrates MoPub’s native advertising solution. MoPub being a mobile ad server, it gives our customers the option of selling their own inventory or using any native advertising network. MoPub’s native ads product gives you the ability to work with direct advertisers, promote your own features and apps, and drive more revenue from over over ninety-five demand partners on MoPub Marketplace.
While the vast majority of apps will be monetised using one of these four methods, unfortunately there’s no way to know which one will work best for your app.
To figure this out, you’re going to have to do some good, old-fashioned testing; try each solution out for size before you commit to one method, or you might just be leaving money on the table.