The 7 Mobile App Monetization Models

app monetization

Something I typically ask my startup clients is “how do you plan on making money?”Sometimes, I get a stunned silence in response. They’re so caught up in their idea that they never think about the monetization model. This is especially true for startups that include an app as part of the business model. So, if you are at the napkin stage of your next app venture, here are seven app monetization models to give you food for thought.

1. The Price of the App

The most obvious way to make money is by selling it on the app store. On the Apple App Store, the price can range from $.99 to $999.99. Both Apple and Google take 30% but have pretty good systems that will deposit the funds directly into your bank account.

Although from what I’ve observed, putting a price on your app is often a barrier for people to download your app. We had a client that had a fairly successful app with thousands of downloads a week (as a free app). As soon as they charged 99 cents for their app, it went from thousands of downloads to forty. If your goal is to make a profit, my suggestion is to figure out how to monetize a free app. However, if your app solves a business problem and there’s a definite ROI (Return on Investment), then you should charge accordingly.

2. In-App Purchases

Typically, in-app purchases for a free app allow users to:

  • Unlock features

  • Purchase a subscription

  • Buy virtual goods

  • Purchase additional content

Just as in the price of an app, Apple and Google Play take 30%. If you look at the top grossing apps in the Apple App Store, the top 30 apps are all free but offer in-app purchases.

3. Mobile Advertising

Mobile advertising nears $100 billion in 2016. There are 6 mobile advertising models and I discuss them in this article.

4. License

Essentially, if you build an app that solves a problem, you can license it. A good example is event apps. There are a number of companies with an app template that will create custom apps for organizations in need of an event app. They typically charge a setup fee and a monthly subscription. This follows a SaaS (Software as a Service) model.

5. Improving the Business Process

Although this isn’t exactly a monetization model, effectively implementing a mobile app can substantially improve business revenue. A good example is Fandango. Their revenue increased by 57% after they launched their mobile app in 2012. If you have an existing business or startup, implementing a native app that improves your business process may be a way to increase revenue.

6. Deliver a Service  

Uber is a great example of service delivery via a mobile app. In 2015, their revenue was estimated at $1.5 billion and they currently have a valuation of $62.5 billion.  Other examples of delivering a service via a mobile app are TaskRabbit and Doctors on Demand. For developers, one of the most requested types of apps is an Uber-style app. Essentially, the model involves connecting a resource to a demand, handling the transaction, and then taking a percentage of the transaction.

7. User Acquisition

If you look at WhatsApp and Instagram, they practically had no revenue model before getting acquired. What they had were a lot of users. At the time of their acquisition, WhatsApp had 600 million users and Instagram had 30 million users. Their apparent strategy was to acquire a lot of users then get acquired. WhatsApp was acquired for $19 billion and Instagram for $1 billion. Not bad for businesses with no revenue model.

If developing an app is part of your business strategy, then hopefully this article has helped you consider the right monetization model for your business plan and pitch.

 

By Rich Foreman, CEO / Apptology and Director of Startup Grind Sacramento. Rich co-authored the book Tap into the Mobile Economy and his blog has been listed in the Top 20 Mobile Marketing Blogs of 2014.  Follow Rich on Twitter at@ApptologyCEO or attend a Startup Grind Sacramento Event.

4 Ways to Make Money from a “Free” App

It seems counter intuitive that a free app is the best way to generate revenue.  When advising clients who intend to make money from their app, I recommend they don’t charge for the app.  In my opinion, the price of an app often becomes a barrier for people to download it.  For example, we had a client that had a successful app and it was getting thousands of downloads a week.  As soon as they charged 99 cents for it, the app dropped to a meager 40 downloads per week.  So how do you make money from a free app?  That’s the multiple billion dollar question.  I’ll cover 4 ways to generate revenue from a “free” app:

In-App Purchase:   the In-App purchase is what is described as the “freemium” model.  The app is free but there is an opportunity for the user to purchase additional services.  In terms of generating revenue from the app store, this is the biggie.  If you look at the top 20 grossing apps in the Apple App Store, all of them are free and use Apple’s In-App purchase mechanism (note:  Apple retains 30% of the revenue generated from this mechanism).    Some examples of In-App purchases are:

  • Unlocking “Pro” Version of the App:  This is typically a try it before you buy it model and there are several variations of this including:
    • Unlocking features of the app
    • Allowing the app to work after a trial period
    • Disabling ads
    • Some combination of the above
  • Purchase of virtual goods:  This is where you buy virtual goods with hard Clash of Clans Gem Boxcurrency.  Typically it’s used for games.  For example, Clash of Clans is currently the highest grossing app.  In this free app, you can buy a treasure chest of gems for the bargain price of $99.99.
  • Content:  The app has additional content like a song, video, story, game level, etc.
  • Subscriptions:  Typically used in content app like Zinio or for magazine apps in Apple’s Newsstand.  When the user buys the app, there’s typically some sample content and the user has the option of subscribing for additional content for some set amount of time.  Another example of a subscription can be seen in Pandora where you can upgrade to Pandora One for $3.99 / month.

Mobile Advertising:  The Mobile Ad Market is projected to reach $31.5 Billion this year alone.  Consequently, many mobile ad companies have sprouted with various revenue models.  Mobile Advertising can be used in conjunction with apps that have in-app purchase and consequently allows a free app to generate revenue even if the user doesn’t make any in-app purchases.

Deliver Service / Product:  This is where the free app is essentially a vehicle for the user to purchase a product or service.  Notable examples include:

  • Uber:  from this app, a user can request and pay for a ride sharing service.  Uber’s valuation at the time of this writing is $17 Billion.
  • Doctors on Demand:  this app allows a user to get a consultation from a licensed physician through a video conference for $40 for 15 minutes
  • Amazon:  this is pretty straight forward.   You can use the Amazon app to purchase pretty much anything that’s available through amazon.com

I would like to point out that if the app is to be used to purchase goods or services, you cannot use Apple’s in-app purchase mechanism, and you’ll have to use another mobile commerce vendor like PayPal or Authorized.net.

User Acquisition:  The poster child for this model is Whatsapp which was acquired by Facebook for a staggering $19 Billion.  On the surface, Whatsapp has no revenue model.  They don’t really have a subscription revenue model nor do they have mobile ads.  What they do have is a lot of users; 500 million by some estimates with 18 billion transactions a day.  Snapchat is also following the user acquisition model with no apparent revenue.  They have a reported 30 million users with a valuation of $10 Billion.  I think the model is get the users, monetize later; be it big data, advertising or something else.

Hopefully, after reading this post, you get the idea that if you want to develop an app for profit, “free” is the way to go.

iOS 7 is coming! iOS 7 is coming! iOS 7 is…

Like a modern day Paul Revere (or Chicken  Little  depending on how you view it), I would like to remind you that iOS 7 is coming sometime this month.  I’ve heard  rumors that the  launch will coincide with their big announcement on September 10, 2013 which we all believe will be the  debut of the next iPhone.

So what’s the  big deal?  Well in general, we find that that with any major upgrade with iOS, things tend to break with existing apps.  From personal experience, the very first app  that I worked on, the upgrade from iOS 2 to 3 broke half my audio files in the app.  Our development team had to work overtime to fix the problem and resubmit the app to  Apple.  We’ve done some testing on the apps  we developed against  iOS 7 beta and we found that the upgrade has caused some problems.

First order of business is insuring functionality.  So, if you already have an iOS app developed,  to be proactive, contact  your developer and ask them to test against iOS 7.  If they find any issues, have them fix it.  In terms of timing, you also have to remember that Apple typically takes  2 weeks to review an app (even upgrades to an existing app).

Skeuomorphic vs. Minalimist

Skeuomorphic vs. Minimalist

Longer term, you may want to consider redesigning  your app to match iOS 7’s minimalist design.  Currently, iOS 6 uses a Skeuomorphic design (where functions mimic real world objects) .  iOS 7, on the other hand,  will embrace a minimalist design.

More  importantly, in redesigning your app for iOS 7, you should consider leveraging some of the new iOS 7 features.

If you have an app  on the Apple App Store, hopefully, you’ve been aware of the debut of iOS 7 and have already prepared for it.  If you haven’t, I  recommend contacting your developer and ask them to test your app against iOS 7.

Cheers,

Rich Foreman

CEO / Apptology

 

 

SMS (Text) Marketing: An Effective Way to Reach Your Customer Base

In continuing my series on the  three pillars of a marketing strategy, the second pillar is SMS (Text) Marketing.  SMS stands for Short Message Service and  it’s  one of the primary ways  people now communicate.  To illustrate the change in communication, my cousin was complaining to me that her  kids (who are in their 20’s) never  responds to her emails.  When I talked to her kids, they laugh and basically said that they primarily text or  Facebook and that no one emails.

95% of text messages are read within 15 minutes.  Compare that with emails which has a 3% read rate.  Email use is declining and consequently, the effectiveness of email marketing.  However, I still feel that email marketing is still effective for B2B but if your business is more B2C, you really should look into SMS Marketing.

A&W SMS Campaign

A&W SMS Campaign

Here are some case studies that show the effectiveness of SMS marketing.  A&W burger chain was able to increase their revenue by a staggering 20% by using Text Marketing.    In similar fashion, Jamba Juice was able to increase their in store traffic by 10% with their Text Marketing campaign.

As a pillar to mobile marketing, SMS Marketing offers an effective means to market to your clients and if you business model is B2C, I highly recommend that you look into it.  (Shameless plug, Apptology does offer SMS Marketing packages).

In my next blog, I will look go  over the  third pillar of mobile marketing, Smartphone Apps.

The Population Has Already Adopted Mobile

This is a first in a series of blogs that will discuss how to use mobile technology to promote your business.   However, before I can really proceed, I first need to discuss what the impact the smart phone has on our society.   My contention is that the population has already adopted mobile.

I recently gave a presentation on this subject and I asked the audience what they did with their smart phone.  In the short 5 minute exercise, this is what we came up  with:

GPS:   since this person’s iPhone begin to provide  turn by turn directions, they no longer used their Garmin.

Watch:  this person uses his smart phone to tell time and no longer wears a watch.  One person mentioned that he also used it as an alarm clock.

Comparison shopping / scanning bar codes:  One person admitted that they used their phone  when shopping  and scans the bar code of  a desired item.   It typically came up with a list of sites that offered  the  item for less.  More often than not, he would show  the item to the sales clerk and they would match it.

Camera/Video Camera:  interestingly enough the smartphone has devastated the point and click camera market

MP3/Video/Streaming Media Player:  people used it to play music and video both resident on the smartphone or streaming like from Pandora  or Netflix.

Social Media:  Many of the mentioned they accessed their social media from their Smart Phone

Internet / Internet Search:  One person mentioned that the smart phone became the ultimate arbiter of disputes

Email:  Most of the people accessed their email accounts from their smart phone.

Texting:  This was universal

Games:  This person admitted that he was addicted to Star Wars Angry Bird.

Pedometer:  One person was trying to lose weight and downloaded a pedometer app.  He used it to track his walking and weight.

Apps:  The pedometer brought up the subject of apps and the countless possibilities.  Other apps mentioned were calculators and tracking expenses.

Phone:  Close to the end of this exercise, we were reminded that smartphones could also be used as phones.

I had to stop the exercise after 5 minutes but it proved my point.  The smart phone has become key to our lives and clearly the group I talked to heavily used their smartphone.

Wireless Subscriptions Overtake Populations

Wireless Subscriptions Overtake Populations

To reinforce my contention, an interesting statistic is that the number of cell phones in the U.S. actually outnumber the population.

Hopefully, with your own experience you can accept my premise that the population has adopted mobile.  What’s interesting, is that most business, organizations, government agencies have yet to adopt a mobile strategy.  Many that have already done so have seen a good ROI.  In my next blog, I will discuss the three  pillars of developing a mobile strategy.

Cheers,

Rich Foreman

Marketers Shift Spending to Mobile

In 2013, Mobile, Social Lead Shift From Traditional Media to Digital. Mobile and social media were the two categories expected to see the most increased attention in 2013. In fact, more than eight in 10 of those polled named mobile media as a target for increased focus, while just over three-quarters of respondents said the same for social media. Read more

 

Marketing Research Chart: Top Mobile Marketing Objectives

Whenever marketers begin to investigate the implementation of a new tactic, it’s likely that the first questions asked are, “Why should I do this?” and “What are our goals in doing so?” Mobile is no exception.

When asked about their top objectives, 63% of respondents indicated they hoped to increase sales conversion, followed by increasing lead generation (55%) and lead nurturing (50%). As we learn — somewhat unsurprisingly — in subsequent charts in the Benchmark Report, sales conversion was the top choice for B2C companies, while their B2B counterparts focused on lead generation.

If you’re a B2B marketer, do you see mobile as a viable lead nurturing channel? What types of lead nurturing tactics have you employed in your mobile marketing? What restrictions, if any, have you faced in nurturing leads through mobile efforts?

Despite the fact that increasing sales conversion was a top mobile objective for 63% of marketers, improvement of the customer service experience was a low-ranking category, at just 19%.

Has your company used mobile to improve the customer shopping experience? How have these efforts paid off for your company? Does your company’s approach reflect these findings, or do you feel focusing on the lowest-ranked categories might benefit mobile efforts?

 

 

 

 

Mobile Apps: We Interrupt This Broadcast

In the month of November, we measured over a trillion events from over 250,000 applications created by more than 85,000 developers.  Events are actions completed by consumers inside apps such as completing a game level, making a restaurant reservation or tagging a song.  In November, we also measured over 60 billion sessions, which is the start and a stop of an application on a mobile smart device.  The chart below shows the growth in events tracked since May of 2008, when we first made our analytics service available to developers.  This growth reflects the growth of the app economy. Read More

Sacramento Business Journal Profiles: Apptology.com

Folsom-based custom-app builder Apptology Inc. is adding a line of less expensive applications in a bid to broaden its market share.

The company began two years ago by developing high-end smartphone and tablet applications for clients ranging from the Wall Street Journal to Round Table Pizza. Now it is offering ready-made apps for about $550 that can easily be tailored for smaller businesses like restaurants.

So far, the new business is doing well, said Dana Smith, Apptology’s chief marketing officer. “We’re busy through the next four months just based on referrals.”

The company has 10 employees in the U.S., mostly around Sacramento, and another 100 programmers in India. It was founded by Rich Foreman, a 10-year executive with WebEx, which was bought by Cisco Systems Inc. in 2007. After a couple years with Cisco, he started Apptology in 2010 to focus on the growing app market.

WebEx developed and supports online video conferencing, so it’s no surprise that Apptology has chosen to operate as a virtual company. Apptology’s U.S. employees work remotely and meet only weekly at the company’s Folsom office.

The custom app development business differs from that of many app developers, who write apps in hopes of finding a hit that will sell hundreds of thousands of copies for $1 each, said Eric Ullrich, program director for VentureStart, the technology incubator for the Sacramento Area Regional Technology Alliance.

Developing custom apps is a more lucrative and steady line of work, said Chris Minnick, founder and CEO of Minnick LLC, which builds and designs apps, websites and videos. He has 6 employees and also uses programmers in India, as well as some in Romania and Bolivia.

Keifer Consulting Inc. has built both custom apps and apps for the general market. The general market is fickle, said CEO Greg Kiefer, who employs 33 people in Folsom.

“The best business is to have someone pay you to build it,” Keifer said.

Reprinted: http://www.bizjournals.com/sacramento/print-edition/2012/10/05/folsom-apptology-apps-small-business.html?page=all

Mobile Cravings…Here’s Why Restaurants Need a Mobile Application

Nearly 90% of mobile restaurant seekers make a reservation or call within the day they plan to visit or make a purchase from a restaurant. Smartphone users had the most urgent needs, with 64% converting immediately or within an hour of their mobile search activity, according to a recent study.

The findings from the xAd and Telmetrics Mobile Path-to-Purchase Study show that on tablets, 44% of users convert immediately or within the hour. It turns out that mobile restaurant search behavior has a high conversion rate and is more locally driven than travel or auto. In the travel category, one in five mobile travelers search for local business information. Some 33% look to make a purchase within the day, and nearly half go on to make a purchase as a result of mobile activity.

When it comes to smartphones and tablets, activities differ. On smartphones people typically make calls to restaurants, look up directions and nearby locations. On tablets, people search for ratings and reviews, find online coupons and promotions, and research menu and specific food items.

Meanwhile, three out of five people searches in the restaurant category do not have a specific location or brand in mind, but 75% notice mobile ads. And nearly three-quarters of the time spent with restaurant content on mobile devices is done in application, which means that new surface areas for search will continue to become more important in downloadable apps.

The social foodie — defined as typically male users between ages of 25 and 54 with an annual income of between $50,000 and $150,000 annually — and the on-the-go diner — a largely male audience between the ages of 25 and 54 typically bringing in less than $100,000 per year — don’t use search engines to find restaurants.  Ironically, the savvy patron does. This demographic is quick to search on engines for the perfect restaurant and have more than enough time to check social sites, along with other mobile Web sites and applications. Savvy patrons are largely Hispanic females between the ages of 18 and 24 making less than $100,000 per year.

The restaurant behavioral data support a larger study that aims to measure what consumers report they do on mobile devices, and capture their actual preferences and behaviors based on data from an online survey of 1,500 U.S. smartphone and tablet users and actual observed consumer behaviors from Nielsen’s Smartphone Analytics Panel of 6,000 Apple and Android users.

Reprinted: http://www.mediapost.com/publications/article/184524/study-shows-how-mobile-satisfies-the-i-have-to-kno.html?edition=52056#ixzz28SVpSmV7