The app payment landscape is changing, says Inneractive, and charging for apps is becoming increasingly risky
By now, it is clear to everyone that mobile technology is infiltrating every possible aspect of our lives including music, health, shopping, life-style and the list goes on.
Mobile is everywhere. If you take a step back and watch the developments of the mobile space from a bird’s eye view, you might notice that in many ways it is following the lead of web advertising, which became the primary way to monetise websites long ago.
Of course, there are other ways to generate revenue from a site besides eCommerce, just as there are other ways to monetise mobile apps besides in-app purchases and search revenue.
The question is: which revenue model is getting the most traction among developers and which is generating the most profit? The answer is pretty straight forward and the winner is mobile advertising.
With predictions for the mobile advertising industry to reach the tens of billions of dollars in the coming years, many independent mobile developers are already generating serious monthly revenue of tens of thousands of dollars, and sometimes more. However, just like web advertising, the potential downsides of advertising within an app are present and need to be addressed.
Below are some of the characteristics of web and mobile advertising that cause concern amongst developers/publishers and need to be addressed in order to fully monetise your site or app.
Not every mobile developer can generate significant revenue from ads just as not every web publisher can effectively monetise a website. The name of the game is eyeballs and clicks. How many people read your site and what percentage of them click on the ads. In order to generate serious revenue from apps, the assumption is that you have enough people using your apps on a regular basis and actually clicking on ads.
That is a huge assumption but not one that is beyond your control. It’s the same as attracting users, in other words it’s up to you to do sufficient promotion and marketing of your app; which if done right, will bring the eye balls. But once you have the users, how do you get them clicking?
If you have ever been within ten feet of the worldwide web, you know how annoying banners and popups can be. Does anyone really click on banners that obnoxiously disrupt your reading or content consumption on the Web? Doubtful.
The same goes for mobile apps. If you integrate an ad into an app that will prevent the user from playing the game they are currently using, or from using the utility they need at that moment, you can lower any expectation of generating revenue from that user and his or her clicks.
If, however, you leverage the ability of local targeting to provide relevant and practical ads to a user, the chances of that user clicking just increased significantly. The ads need to enhance the user experience of the app, not destroy it.
Definite vs potential revenue
Another point many developers bring up as a reason to avoid in-app advertising is that when you charge for the download of an app, the revenue it generates is definitive. However, if you depend on mobile advertising, you may or may not see any real revenue. Interesting point.
For starters, let’s address the type of revenue the pay-per-download model generates - a one-time pay day. However, by adding ads into an app, assuming it is done right, the revenue is ongoing and in direct correlation with the time users spend in your app. The better the app, the more the users engage with it, the more revenue you make.
But what about the definite vs potential argument? Well, let’s break that down. In 2011, 81 per cent of app downloads were free. That means one thing. Users do NOT like to pay for mobile apps and can you blame them with so many free apps available?
So to say that if you charge for your mobile app, you will definitely generate revenue, is to fool yourself. On the flip side, if an ad placement strategy is implemented and the ads in fact enhance the user experience of the app, the revenue is in fact as close to definite as possible.
Again, if the web taught us anything, it taught us that advertising is a sustainable and profitable method of generating revenue from free content. In fact, a small company named Google makes the vast majority of its revenue from advertising and the same company is replicating that model onto mobile devices as we speak.
In conclusion, a recent Distimo end of year report showed how in-app purchases are in fact growing, but in terms of traction and actual revenue, nothing compares or competes with in-app advertising done right!
Hillel Fuld is the head of marketing at mobile app monetisation company Inneractive. His views do not necessarily reflect those of Develop.