In business, designing and building mobile apps is solely about making money. Making money from mobile apps comes in many different forms, but all are all called monetization. The original definition of monetization is that you legalized something as money. Perhaps a new government decides to distribute paper and magically call them dollars or euros, and proclaim them as legal tender for the purpose of trading them for goods or services. In today’s vernacular, monetization is simply defined as the many ways to make money off a mobile application. There are several ways to monetize mobile apps. Mobile apps can use a singular monetization method or a combination of methods.
Selling Mobile Apps
Some contend that simply selling a mobile app is not considered true monetization. Forbes Magazine states that only 10 percent of all mobile apps make 90 percent of their profits off installation sales. That means of the millions of mobile apps from the Google Play and Apple iTunes Store, only 10% of them have a financial model that depends on app sales to be profitable, and the rest have to depend on other monetization methods. Successful games like Angry Birds and Candy Crush could rest on their laurels and stay in the “10 percent” category by only selling their mobile apps, but instead, employ several monetization methods to increase their profits. The point is that almost all mobile app developers (90 percent) have to depend on monetization models and methods other than a sales only model. A concern of the “sales only” model is that it may not be financially sustainable. Even if a mobile app has promising initial sales, it doesn’t mean that success will continue infinitum. Mobile apps can lose their popularity and eventually fade into obscurity.
Google AdSense / AdWords
In March 2003, Google launched a revolutionary product called Content-Targeted Advertising (CTA), which is a contextual advertising program. The idea was that an advertisement on a website, say a banner ad, would be able to “read” the website’s content and place an appropriate ad based on that content. For instance, an acupuncture website with Google’s new CTA would have automatic ads for acupuncture clinics and wellness centers show up in a banner wherever the webmaster placed it on the website. The CTA would also read the IP address of the client’s computer and only serve ads within the IP’s general vicinity. That meant that an end-user of the acupuncture website who is located in Boston only saw acupuncture clinic ads around Boston, and another end-user looking at the same acupuncture website in Los Angeles only saw ads for acupuncture clinics in Los Angeles. In April of 2003, Google purchased a company called Applied Semantics to gain technology to further bolster Content-Targeted Advertising and renamed it Google AdSense, which will be renamed again in 2018 to Google Ads.
This sort of targeted advertising is very effective for all involved. For instance, the acupuncture website owner is assured that only appropriate ads show up in their banners, instead of an ad for a casino or car dealership. They also know that their end-user will likely be interested in their ads and apt to click on them. When the end-user clicks on the ad, the website owner is paid an undisclosed amount of money from Google AdSense. The original advertiser is satisfied that their ads show up on appropriate websites and keyword searches that make sense for their business.
Google AdSense and AdWords make up a large part of Google’s overall revenue with millions of websites participating, generating billions of dollars. The question is; does AdSense work for mobile apps? The answer is “yes.” Google previously had a product called AdSense for Mobile Content, but discontinued it in 2012 and replaced it with Google AdSense as the lines between desktop computers and mobile devices blurred. From a mobile app standpoint, Google AdSense is probably the easiest way to monetize.
Although Google AdSense is the most well known, many advertising models exist with similar functionalities, often called native ads. Native advertising is an online advertisement that matches the form and function of the platform upon which it appears. For Instance, Yahoo.com employs a white background with black hyperlinks that turn blue during hover (when the mouse hovers on the link.) Articles are arranged vertically so the end user scrolls down the screen to find content. In between the articles are native advertisements designed to look exactly like the articles themselves. The native ads have the same color hyperlinks, hover colors, fonts, and font size as an article. The idea is to fool the end user into clicking on an advertisement when they think they are clicking on a legitimate article. This practice is often criticized and often drives end users away, as well as being highly questionable as a potentially unethical business practice.
Charging for a Mobile Application
As previously stated, only ten percent of mobile app developers make most of their revenues from making an end user buy their app, either from Apple’s iTunes or Google Play, or any of the endless Game repositories. That is not to say that charging for your app it is a bad monetization strategy. However, this strategy is still rife with problems, starting with oversaturated markets. Unless you catch a viral flyer like Flappy Birds, it’s likely that your game is not unique and mired in anonymity and obscurity with millions of other mobile apps. In reality, most mobile apps are never downloaded once, let alone purchased.
It is important to note the return on investment (ROI) of charging for a mobile app. For instance, consider Apple’s iTunes Store. Mobile app developers need to apply for an iTunes Connect account to be eligible to sell their apps on the iTunes Store, which costs $100. iTunes will not allow any mobile apps to be uploaded to the iTunes Store from anything other than an Apple product, like a MacBook Pro. Once the mobile app developer is approved, iTunes takes 30% of the price of any app purchased on their platform. In very simple terms, this means that if the app costs 99 cents (the most common price on iTunes), you would have to sell the app 145 times to break-even and cover the iTunes Connect cost alone. Ninety-nine cents minus the iTunes fee of 30% equals .69 cents means you don’t break even until you sell 145 mobile apps.
Of the millions of mobile apps on the iTunes Store, Google Play, and every other possible repository, the majority never get sold, let alone downloaded even once. This should not at all be discouraging to the burgeoning mobile app developer. On the contrary, it helps you understand that there is so much more than coding when it comes to successful mobile app development.
Not everyone is interesting in coding, let alone learning to code. That doesn’t mean they aren’t interested in having apps in app stores. Perhaps they feel they can do a great job promoting an app through social media or advertising. Often developers can license their code to a third party who might make a minimal amount of changes like rebranding of a game, and sell it as their own. For instance, a developer might license their “Candy Crush” knockoff programming to a third party, and with minimal effort they are able to rebrand it as, perhaps say, “Candy Crunch.” Because the original mobile app developer practiced smart code reuse in their programming, the transformation to the rebranded third party version was not difficult. Now the third party can take their chances on in the app store stratospheres, and they original developer might determine that they get .20 cents on every sale of Candy Crunch as a licensing fee.
Freemium Model / In-App Purchase
Some mobile app developers simply give their apps away for free, like Strava. Strava is a free, or “freemium” version, is a fitness app to track a user’s running, biking, or hiking activities using GPS data. Strava is betting that once a user is impressed with the freemium version, that they would be willing to pay a monthly fee for their premium version that allows users to do much more, like track other Strava users. This is also considered a subscription model. The difference is that a subscription model doesn’t necessarily have to start as a freemium model, but often does. Freeium modeled mobile apps also employ a strategy called in-app purchases, especially games. Often, a game player can buy “credits” that allows them to play longer or build larger virtual environments.
Sponsorship models can be successful, but are very difficult to maintain. Unlike Google AdSense that works automatically, sponsorships require the mobile app developer to secure the sponsorship themselves, which can be difficult get, and difficult to maintain.