If you’re an Appreneur and have an app idea, you may be getting excited at the prospect of soon joining the app millionaires club... which is great providing you have an appropriate revenue stream in place to bring in those millions.
Even the greatest million dollar app ideas will crumble without a proper monetisation model in place. So to get you thinking and dreaming big, here are 8 of the most common ways app developers generate their revenue:
1. Paid Apps
The most basic app model is charging an upfront purchase fee to use the app. Although losing its momentum to ‘freemium’ apps (explained below), it still certainly has the potential to make money. It does require a recognised brand or product with a dedicated user group, or promoting the app to a large number of interested parties. Sponsoring another popular app, making your ad and app show exclusively to its users, is another plausible method.
Through the use of ad networks, app publishers can generate money solely from ad revenue while offering their app for free. Advertisers usually pay a ‘Cost Per...’ fee, dependent on their buying method: fixed price, Cost Per Mille (CPM), CPC (Cost Per Click), CPA (Cost Per Action), CPL (Cost Per Lead) or Cost Per Order (CPO). CPM is common and is the cost for every 1000th impression of their ad on your app’s ‘ad space’.
Your effective-CPM (eCPM) is the CPM calculated post-campaign regardless of buying method, which differs due to over or under delivery by the ad network or publisher. It is calculated by dividing your total ad revenue by your number of impressions, multiplied by 1000.
There are two options for ad networks, either a singular mobile app network such as MoPub, or the use of a mediation platform that organises multiple different ad networks to avoid campaign overlap. ‘AdMob Mediation’ is Google AdMob’s feature for this if you have an AdMob account. These offer improved return rates on click-throughs from higher fill rates and more effective target advertising. Another mediation platform AdtoApp uses a self-learning algorithm that accurately adjusts to 280 countries and near any target demographic. It cleverly uses only four lines of code, so can be implemented seamlessly into any existing app.
Look for a platform that offers a ‘weighted mediation platform’ as opposed to a ‘waterfall system’ as developers report an average 40% increase in overall ad revenue from the former.
3. Partnering with a Sponsor
This means showing only the ads of one particular company on your app, unlike traditional advertising which can show a range of ads from different companies.
4. Promotional Services
Without being seen, nobody is going to download your app, and you aren’t going to make any money. Promotional services (Appshout) can get your app seen by many app reviewers and consumers, and will help push your app through newsletters and press releases, to journalist and the general public. Websites and social media can help it grow somewhat but in the rare case, go viral. Think Flappy Bird. Thanks to social media it gained enormous momentum and as a result, enormous revenue figures.
Everyone loves free… so it’s easy to see why the most popular of all is to offer your app for free, but then restrict certain functions or features in the app, which require a one-off payment to allow full access. Being ‘free’ encourages the user to download the app and allows them to test if they like it, then if they find themselves using it often and do like it, are more likely to pay for full access and enable the premium features of the app. Spotify and AVG antivirus software are prime examples of this working well.
6. Freemium with multiple purchases
Similar to the basic freemium model above, it offers the app for free, but also encourages the user to pump more money into it to unlock or allow different features, usually offering a more immersive experience. Seen heavily in mobile gaming to advance in-game ranking and offer new items, Candy Crush’s numbers will convince you of its profit generating power.
7. Advertising options on freemium apps
A money-maker on both ends. App publishers can offer their app for free, but only if they tolerate the ads, generating the publisher ad revenue, or the alternative being a paid premium version which removes the ads for the user, often highly desired through their intrusive nature. Be careful not to go overboard on the amount of ads shown in the free version, as many developers drive users away before transferring to the premium option.
8. Video Advertising
Some developers are partnering with ad networks that allow companies to show video ads on their app, instead of basic banners ads. The ads can be overwhelming, but if done properly they can certainly engage users in a way not possible via traditional banner ads. Video ads already convert better than banner ads, with mobile video ads converting best of all.
There’s certainly no best practice to monetising your app, each app works differently to another, so it’s all about finding the best method for each individual app. However if your app is one of giving the user an exciting and immersive experience, such as a gaming app, in-app purchases have shown to work extremely well.
If your app is more of a utility or editing tool like a video editor, the ‘freemium’ method has proved its worthiness by getting the user engaged and stuck in, committing their time to learn their way around the app, and then offering extra features behind a paywall.
If going for an ad revenue monetisation strategy, go for mediation platforms due to their higher fill rates, targeted advertising and ultimately higher revenue.
If you're looking for a digital agency to help you develop your digital marketing then please contact Shaun on 01242 511912.