How do developers make money? It’s a question I’m asked a lot, and unfortunately there’s no one-size-fits-all answer. However, that doesn’t mean independent developers face an impossible task when it comes to building a strong revenue model.
Like most business tasks, your road to monetisation will require a tailored strategy. To set goals and achieve them, you need a model in place.
Intelligent monetisation stems from an awareness of the models available, knowledge of the market, and mindfulness of the competition. Once you’ve mastered these pillars, you’re in a strong position to make monetisation decisions for your app and user base.
A lot of developers are making more and more money by monetising their inventory with in-app advertising. If you have a free to download app with an active user base, this a great way to get a return on your investment.
The popularity of mobile advertising is only increasing. According to Zenith’s Advertising Expenditure Forecasts report, mobile ad spend is set to overtake desktop next year, increasing its share from 10.4 per cent last year to 22.4 per cent. The total spend on mobile is expected to increase by $74.9bn (£50bn) between 2015 and 2018. This is huge! It’s great to see mobile ad spend on the up, but to take advantage of this, it’s important that you develop a coherent monetisation strategy.
The amount of revenue you generate will depend of the quantity and quality of ads, the amount of traffic received, and the competitiveness (CPMs) of having ads in your app. If advertisers can reach their desired audience through your app, they’re also paying to prevent other advertisers acquiring that inventory, and this means more money for you!
To generate maximum revenue, you need a strong understanding of your audience. The more you know about your users and the data parameters you can attach to your inventory, the higher the eCPM you can expect.
Another popular model is in-app purchases. If you’re a gamer, you’ll definitely have come across in-app purchasing strategies before. Gaming is one of the most common categories for the in-app purchasing model. Developers can give users incentives such as in-game boots, virtual currency, ad removal or add-ons such as extra lives.
Games like Clash Royale have utilised the model very well. The app is free to play but offers in-app purchases to help players advance in the game. Clash Royale has been one of the biggest revenue generators in mobile gaming. It has topped the mobile game revenue charts earning $133m (£90m) revenue in March 2016.
Clash Royale’s model is simple: they make you wait for things you want now (unless you’re willing to put your hands in your pockets). For each successful battle, you’re awarded a chest. But you can’t open it straight away, it comes with a wait time of up to eight hours. But of course, you can hurry the process along if you spend your in-app currency!
The in-app purchase model can generate great returns for certain apps, but the market is niche and can be difficult to crack. On the whole, the model works well for entertainment and e-commerce. Users must be heavily invested in your app if this model stands a chance, so make sure you have a valuable offering to monetise first.
Generally, subscription models are used by platforms that have access to high volumes of content. The model is very similar to the freemium model except it limits the amount of content users can access. Users can access and consume a limited about of content or even all content, for a limited amount of time. After this period, users are asked to subscribe with a subscription fee.
Examples of apps that use this model are Whatsapp and popular video streaming service, Netflix. Netflix’s major source of revenue is the basic subscription fee of £5.99 per month. This gives users access to unlimited TV shows and movies streamed over the internet to their mobile devices.
Whilst subscription services can be lucrative, developers will need access to large volumes of content for this model to work. If your app is evolving consistently, and has the potential to keep the user engaged for more than six months, a subscription model could be right choice. If not, ads or purchases may be a better option.
Retention should always be a key factor when choosing your strategy, if you don’t update your content, your user experience will stagnate and you risk losing your audience to competitors.
Monetising your app
Product quality is paramount to ensuring your app monetises well. Without a quality app, you will struggle to make money regardless of your strategy. Stay competitive, be creative and always consider the users’ experience when deciding on the right model for you.
Here are some things to think about:
- What is the purpose of my app and what problem does it solve?
- What category does my app exist in?
- Will the user experience by impacted by my choice of model?
- For in-app advertising, at what points in my app is there a drop in user activity? This will give you an indication of where to place ads.
To kickstart your strategy, look at how the top grossing apps in your category monetise. Research their strategy, pricing, and how they integrate it in-app. This will give you an indication of what works well.
It might take a while - and even some trial and error - to decide on your best monetisation model. So don’t be set back if you don’t get it right first time. We learn best from our trial, error and experience!
Ted Nash, co founder and CEO of Tapdaq