By Logan Merrick updated on 04/22/2013
Warning: This article could provoke deep insight and ‘aha’ moments.
Developing a mobile app is a piece of cake if you have a good idea and a killer team of developers. But designing a foolproof monetization strategy that works — not just for you, but also for your users — is another challenge altogether.
Even though each monetization model can work incredibly well, the way you apply each strategy will make a noticeable difference to your bottom line. And let’s face it, if you can make another 20-30 percent revenue, then it’s worthwhile to read the rest of this article, right?
Below are three key monetization strategies for mobile apps:
Pay-per-download strategies are best deployed with apps like games, utilities, education, fitness, etc. However, if you’re using this strategy, it’s important to offer something that people really want and can’t get anywhere else to prompt the download. People rarely spend money on something they aren’t sure that they need or want.
Once you’ve built a brand of recognizable apps, people will become more inclined to download your apps on a pay-per-download basis.
When it comes to social media applications, charging users upfront is bad business. Just take a look at the top 10 social media apps (bar Zoosk and other dating apps), none of which use the PPD strategy.
Besides, Facebook already tried this and nearly lost a quarter of its users at the time.
You can make your social media app profitable by establishing a loyal user base and adding an online website (PC) to your system to run ads to generate revenue. This is a long-term strategy so I wouldn’t hold my breath to see that return on investment. You can add other monetization strategies later with future updates.
2. Free with Ads (Cost-Per-Click & Cost-Per-Mille Advertisements)
In a nut-shell, the CPC/CPM ads are the annoying little banner ads you accidentally click from time to time, opening your browser to a webpage almost completely unrelated to what you were just doing.
As annoying as them might be, they work. And this is how:
Every ad a user clicks (or taps by accident) earns the app owner x-amount of money and every thousand impressions (times an ad has been displayed on the screen) also earns the owner money.
The amount earned per click or thousand impressions varies depending on the ad. The way to use this strategy to make a lot of money is almost completely volume based. That means you need to optimize your banner and full-page ads to pop up as often as possible, but not in a way that is going to turn your users off.
It's not uncommon to see people using this strategy in conjunction with the PPD strategy, by pushing users into paying for a version of the app that has no ads. It's pretty basic, but it works.
3. Freemium (In-App Purchases)
- An In-App-Purchase strategy where users subscribe to use premium services hidden within the system, and;
- An advanced cost-per-click and cost-per-mille system allowing any business to sign up as a user and advertise its services to its specific target market.
I also would like to share a basic strategy with you that I learned from big app developers like Rovio, @angrybirds. How do they monetize their apps? Check this out…
Step 1: Launch your app and charge your nominated fee (average fee on app store: $0.99);
Step 2: Deploy a free version of the app, which uses an ads strategy that pushes people into downloading the paid version of the app;
Step 3: The app allows users to make purchases (extras, unlock levels, hints, etc.) that improves the users’ experience.
There are truckloads of ways each of these strategies can be used and combined, and it really comes down to how creative you're willing to get. If you feel that a particular strategy isn’t working for you then rethink your approach and try something different.
- Be careful how you monetize your mobile app. Not every monetization strategy works for every type of app;
- Monetization rule of thumb: grow a large user base first, and then find a way to monetize it;
- Pay-per-download apps get less downloads than free apps.
Next in Logan's App Development Series: Why Mobile Apps Fail