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A Roadmap for Mobile App Monetization

August 01, 2018

 

 

 

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In today’s “there’s an app for that!” world, it comes as no surprise that the mobile application market is rapidly expanding—in fact, gross app store revenue will surpass $101 billion globally by 2020. However, with an extremely saturated pool of products available at consumers’ fingertips, new companies face increasing pressure to develop unique, disruptive technologies that also turn a profit to capitalize upon this expanding economy. With dozens of successful apps launched, our team at Swenson He knows which strategies work and which ones don’t. We’ve forecasted the future of monetization so that our clients stay on the cutting-edge of the app store. We’ve analyzed how various models work in the field, and have developed this step-by-step guide to choosing a profit-generating method that’s right for your business.

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Before Choosing a Monetization Route:

Research Your Audience

Keeping your target customer in mind at every stage of development is integral to creating a successful product, but requires a complete understanding of their wants, needs, and pain points. We recommend creating customer profiles that outline a potential user’s:

  • Jobs: anything a person is trying to accomplish, whether it’s a task to be completed, a problem to be solved, or a need to be satisfied.
  • Gains: outcomes and benefits of completing a job, such as cost-saving measures or general happiness.
  • Pains: roadblocks that make completing one’s job difficult, annoying, or impossible.
Conducting interviews with focus groups of potential customers can help identify these attributes. For more information on creating a customer profile, we suggest Strategyzer’s Value Proposition Design.

 

Spend Potential

In the vein of really getting to know your customer, breaking down your audience’s demographics, age range, and fields of work shows that different users vary on spending frequency and dollar amounts. For example, an education app that markets to lower-income elementary school students attracts users with a much lower spend potential than a travel app where the primary user base comprises of individuals in a high socioeconomic category. Understanding how willing your audience is to spend money in your app can help maximize the success of your monetization scheme.

 

Prioritize User Experience

Mobile app marketing has shifted its focus away from attracting new customers and toward increasing engagement rates among existing users. New research shows that this downstream user activity is the key to generating revenue from monetization campaigns. In order to increase user retention and boost engagement among an existing database, your product’s user experience most be a top priority. Introducing technology, such as heat maps, to accurately measure how people utilize your app provides vital information on how to best integrate revenue-generating components. Streamlining conversion funnels, creating aesthetically pleasing interfaces, and developing simple user flows will keep customers returning to the app and make the most of your monetization strategy.

 


 

Monetization Strategies 

Ads

Perhaps the simplest monetization method, an ad-based user experience can be seamless at its best, but a nuisance at its worst. There are a few ways to implement an advertisement revenue model:

  • Native: highly integrated ad experience that syncs with both the design and functionality of the app; common among social media platforms.
  • Banner: takes up spaces within the interface of the product and remains on screen while the user interacts with the app.
  • Interstitial: a full-screen advertisement that demands both attention and an action on the part of the user.
  • Value exchange ads: an emerging form of ad-based revenue that unlocks an aspect of the product upon ad-viewing. I.e. Pandora recently switched to an ad experience in which users watch a 15-second video in exchange for uninterrupted streaming.

Each advertising model carries its own pros and cons, so your choice is highly dependent on the type of product you’re developing. Advertisement models are undeniably outdated and intrusive to the user experience, so we recommend considering some newer, more naturally integrated revenue systems.

 

E-commerce

Contrary to popular belief, you don’t have to sell your own products to adopt e-commerce as your revenue stream. Whether you have your own store or generate affiliate revenue from product referrals, this ‘transactional model’ serves as a foundational block to monetization. Shopper conversion rates on mobile apps are roughly three times greater than on traditional internet sales experiences, so integrating an e-commerce platform into your mobile app can greatly reduce user turnover.

unnamed (1)Swenson He’s e-commerce interface created for simplehuman.

 

Freemium and Subscriptions

This monetization route offers customers a free product or service, but encourages them to upgrade to a paid version in order to unlock features that improve their experience or make their lives even easier. On average, only 1% of users opt for the premium account, so streamlining the conversion process and making the paid features especially enticing is crucial to the success of this model. A spinoff of the freemium model, subscription-based, or paywall, offers users featured content or capabilities, typically on a monthly or annual payment plan. The auto-renewal nature of paywalls guarantees a continuous revenue stream.

If your idea already has inherent levels or advanced features, integrating a freemium or subscription system offers a natural way to make your app profitable, so long as you maintain high free-to-paid conversion rates by: 1. reducing friction in the sign-up process 2. creating attractive, unintrusive calls-to-action and 3. offering free trials.

 

In-app purchases

Similar to the freemium model, in-app purchases allow companies to provide a free product to their audience while offering additional paid features to generate profit. Due to their addictive qualities, mobile games are highly successful with in-app purchasing schemes. Gamification represents an increasingly popular and extremely lucrative model, as developers have become quite innovative in boosting in-app spending. For example, instead of offering the traditional advanced play or performance upgrades, a creative profit-generating feature is allowing users to alter an avatar’s appearance, capitalizing upon a psychological need to look our best in the digital universe. However, most app stores take a hefty percentage of the profits from these ancillary purchases.

 

unnamedSource: statista.com

Paid apps

Charging your users an upfront fee on the app market may seem like the most obvious method of making money from your mobile application, right? Unfortunately, this model is incredibly difficult to execute successfully. In fact, only four apps on the Top 200 list required payment before downloading in 2015. Analyze your audience before selecting a paid app strategy; while regular customers will likely be immediately turned away by a price tag, this model has proven to be more successful in the B2B market.

 

Mixed

If you’re having trouble deciding on a monetization strategy for your mobile app, a blend of different revenue generation schemes can be easily achieved. For example, many apps employ the freemium idea to offer their users an ad-free experience on a rolling payment basis. Again, the most important ingredient in a successful, profitable app is seamless integration of the monetization method in order to generate high conversion and retention rates.

 


 

The Road to Success

After understanding how your audience operates and developing a user experience that keeps users coming back to your app, you can start investigating revenue models. Keep in mind that crafting the right strategy that fits within your company’s vision and satisfies your users isn’t an easy task. Swenson He is here to serve as your guide through the process of transforming your idea into a profit-turning business, every step of the way. While we have a wealth of experience in proven revenue tactics, we also stay ahead of emerging trends in monetization. Our firm offers a wide range of services, from business consultation, design/brand building, to full-scale technology development, so we’ve got you covered at every stage of your business. For more information on how to make your mobile app profitable, reach us at http://info.swensonhe.com/contact.

 

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