3 Ways to Monetize an App

11/08/10

We’re often asked our best guesses at the future of mobile monetization. Every developer wants to make money, but the results overall have been disappointing in terms of optimizing monetization. You’ve read our warnings, cautioning publishers against using the same flawed logic that led to the dot-com bust. Now let’s talk action. One good way to predict the future is to learn lessons from the past; here, compare web apps to mobile. Web apps today use 3 tactics to monetize: online ads, transactions within the website, and subscriptions. These same monetization strategies are available to mobile apps. Listed below, each area will appeal to different verticals and company sizes, and each will call for different expertise and tools.

Which one should you choose?

Strategy #1: Ads
Best for: Consumer apps with large audiences (ex. Pandora); highly targeted apps

Some publishers will be able to monetize with ads, but unless your app is a big consumer mobile app with a large audience or a highly targeted app within a vertical, it’s not your best bet. Size and targeting will matter here: if you have the sheer number of eyeballs, then you won’t need targeted ads. One way to compensate for size is by offering a targeted audience to your advertisers.

Strategy #2: In-app transactions
Best for: Mobile commerce apps; gaming apps; lead gen apps; publishers with a large number of apps in their portfolio

Thanks to in-app purchases, iOS (and hopefully soon Android) developers are starting to scratch the surface of in-app transactions. Off the top of our heads, developers could cross sell to another portfolio app, up-sell to a pro version of the app, or generate online or offline leads. (In-app transactions encapsulate more than just in-app purchases. Consider lead generation; the transmission of information is a very powerful, and monetize-able, transaction.)

Strategy #3: Subscription models
Best for: Content (e.g. magazine, newspaper) apps; professional & consumer services apps (e.g. the upcoming “Business Model Canvas iPad App”, Life 360); telecom apps (e.g. Skype)

Good examples currently come from telecom apps, but expect the subscription trend to pick up. Subscription models help developers increase the life value of their customers. The key success factors here will be lowering customer acquisition costs and reducing churn over time. And don’t forget strategy—monthly trials or free offers will be valuable approaches.

So, tried any of these? What’s working for you?

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