The Growing Importance of National App Monetization Strategies

11/12/15

When it comes to app monetization strategy, there are a number of ways to drive revenue from an app. The three most common are:

  • Charging for the app
  • Enabling in-app purchases (IAPs)
  • Paid advertising  

In fact, many apps seek multiple app monetization streams in order to generate more money.

National App Monetization Data

I was trawling the web for the latest data on app monetization strategies and came across a fascinating report from App Annie. The report covered a variety of topics, but the most interesting to me was how app developers make their revenue in wildly different ways based upon the country in which they compete. I am reproducing a tiny portion of the app monetization data below to give you a sense of the findings.

Mobile App Revenue Monetization 1

The chart shows the percentage of revenue that is derived from advertising versus IAPs purchased on the major app stores. As you can see, the Ad$/IAP$ splits by country show a large degree of variance. India, for example, delivers 70% of its app revenue via advertising, whereas in Japan the figure is only 19%.

While one might initially assume that the national variances would correlate well with per capita income, a further look at the app monetization results shows that this is not the case. The number two and three countries in terms of percentage of app monetization revenue from advertising are the UK and the US.

Paid App Charges: Not a Big Proportion of Mobile App Monetization Revenue

For those that are curious, paid apps generate a relatively small portion of total revenue for the industry in most countries. Most people prefer free apps. That doesn’t mean that app makers shouldn’t charge for their apps but rather that they need to reflect this reality in your planning and revenue estimates.

But back to the key issue. Why does advertising’s share, for example, fluctuate so much? Well, mobile in-app advertising demand varies pretty significantly by country. In addition, demand for higher-CPM full-screen and app video inventory also vary by region and country. So differences in ad demand may account for some of the variance. So too might the prevalence of APKs in some Android-dominated regions, because APK sales might not end up in the totals reflected in this chart. India, for example, has loads of APK activity. Since Apple requires all iPhone app installs and IAPs to be made through the App Store, we would see little or no impact on iPhone dominated markets.

I also suspect that a big part of the reason why the US generates such a relatively low proportion of mobile app revenue from IAPs is because we as a culture have been conditioned to expect most things digital for free. An aside: I once asked an online a retailer if the percentage of merchandise he sold on deal was increasing, and he jokingly replied, “Well, you can’t go up from 100%, so no.”

The So-What of National App Monetization Variances

But stepping back from the “why” question for a moment, the next most logical thing to ask is…”so what?”  How can we make these mobile app advertising and in-app purchase insights actionable?

There are a variety of things that app makers and app publishers should do to reflect these figures in their international expansion plans.

  • Develop your app with multiple revenue streams so that you can capitalize on the best monetization models for each country as you expand internationally. By having both advertising and IAPs built into your app, you can more easily adapt to the preferences in each market.
  • For your advertising stream, make sure that your ad network partners can deliver strong demand in all of the regions in which you compete. Many ad networks are primarily focused on serving a single market, while others have a truly international footprint. Whether you decide to work with global or national networks, make sure that you have the partnerships and deals in place to maximize your mobile app ad revenue in all markets, especially in those where in-app purchases are relatively less popular.
  • For ad-centric markets consider including more high value units versus just small banner ads. You have lots of options when it comes to integrating ad experiences into your apps – banner ads, video, interstitial ads, full screen bumpers, etc. Naturally, you need to be careful about your user experience, but in those markets where mobile app monetization is truly dominated by advertising, you need to ensure that your ad mix is rich enough to drive the return you need. You might consider, for example, judicious inclusion of video ads and interstitial ads, so long as they don’t significantly detract from the overall app user experience.

Ultimately, how you decide to monetize your app is a decision that should be based upon many factors and considerations. The point here is that national differences and preferences may be particularly relevant considerations to make.

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