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December 10, 2014 by Deepak Thakral

New App Monetization Approaches

More than 2 million apps have generated 100 billion installs across the various app stores. Consumers spend 80 percent of their mobile time on apps, and mobile advertising grew 78 percent to reach $19 billion in 2014. Yet, over half of all the app developers remain below the “app poverty line” of $500/month in earnings. Why is that?

Because the top 10 percent of app developers (mostly gaming publishers) make a significant percentage of all app store revenue. But just because a few people make most of the money doesn’t mean other developers can’t make a little more by getting creative. Here are a few emerging approaches to monetizing your apps and finding out if you should be chasing installs or re-engaging your loyal customers.

Common App Monetization Methods

The typical app developer makes use of two techniques for app monetization: advertising and in-app purchases. For in-app advertising, banner ads, rich media and video ads continue to dominate. Consider the economics of an app that has over 100,000 installs. This could translate to 10,000 Monthly Active Users (MAUs) of which 30 percent are Daily Active Users (DAUs). These DAUs are avid gamers who play the game 30 minutes/day. In a month, cumulative ad impressions generated are 900,000, which brings in about $900 in advertising income each month. Not exactly awesome!

Next, let’s consider the case of in-app purchases. Again, those same 3,000 DAUs will likely buy virtual currency so they can continue enjoying their games. Let’s assume that 20 percent of them buy $1 of goods each month for about $600/month in income. Still above the poverty line, but by no means impressive.

The New Focus

Since ads and purchases aren’t enough, what’s the path forward? App developers, large and small, need to focus their attention on app re-engagement – that is, building on their loyal base of existing customers and generating incremental DAUs and MAUs instead of new installs. Developers should also think about establishing cross-promotion of app functions and states that effectively build an inter-connected “highway” that users can rely on to navigate between apps with ease.

Two approaches to app re-engagement are deep search and re-targeting. Deep search makes the static and dynamic functions of an app discoverable via a search engine so users can search for content inside apps. App re-targeting uses non–personally identifiable user information to target display ads and bring back inactive users so they can re-engage with the app.

Both of these approaches rely on making your app compatible with deep linking. To do that, identify the different states with your app, such as the hotel profile page of a travel app, or a local restaurant profile page in a restaurant reviews app. (See our post on deep linking standards for more detail.)

A more innovative revenue stream emerging in the app ecosystem is identifying contextually relevant apps that offer an opportunity to cross-promote the functions of another app. For example, showing an action to hail an Uber car when a user has booked a restaurant reservation, or book a guided tour when you look up an attraction in TripAdvisor.

Learn More Monetization Techniques

While in-app advertising and in-app purchases will continue to be mainstay revenue streams for some time, these emerging monetization approaches offer a fresh perspective and give users and app developers an improved user experience that also monetizes more effectively. Come join our session tomorrow at the MoDev Conference at 11:30 AM in the Dome Theatre to learn more about making money with your apps.

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