inneractive's Hillel Fuld on why ads are the key to apps success
If you consider yourself even remotely geeky, chances are you, or some of your friends, have considered the idea of developing a mobile app. All the wild success stories we are fed daily about developers like Rovio (Angry Birds), Zeptolab (Cut the Rope), and Outfit7 (Talking Pets), have us dreaming of achieving similar success.
The thing is, Rovio, if we are going to take one example, actually developed dozens of apps before Angry Birds, and as you know, those apps are not talked about or downloaded by the millions.
There are many challenges that accompany the launch of a successful mobile application. These include discovery, user retention, and monetisation. Of course, like any other business, you can generate downloads and have a tremendous user base, but if there is no business model in place, well, some might say you are wasting your time.
So, putting aside the challenge of standing out among the hundreds of thousands of mobile apps out there, what is the best way to generate substantial revenue from your mobile app?
There are many options available to monetise mobile apps such as the old-fashioned pay per download model, in-app purchases, as well as in-app advertising, and others.
To make the claim that there is one model that fits all would be misleading, but here at inneractive, we analysed all the options and the revenues they generate for mobile developers. We then reached a concrete conclusion that if done right, mobile advertising is the way to go if you want to generate significant income from a mobile app. Here is why:
Every developer’s initial thought when it comes to monetizing apps is “Why not just charge the user for the download?” Today we know that is not a smart move for many reasons. The numbers show that 81% of all app downloads in 2011 are free apps, and that number is only growing. So why is the pay per download not a good option?
It is actually simple logic. When you charge for your app, whether you are asking $0.99 or $4.99, you make that money once, and only once. When the user downloads the app, you get paid, but that is where it ends. With mobile advertising, you get paid for impressions and clicks and since you worked so hard creating a stellar app that will bring users coming back for more, there is no reason you should not be paid for that engagement. Mobile advertising is the way to do that.
Taking Down the Barriers
So, you want ongoing revenue and not a one time payment. That makes sense. But why mobile advertising? Why not offer virtual currency in your app and charge for an in-app purchase? That can bring a steady flow of income, right? Well, there is no debating that this model has had some traction lately, but the fact remains, mobile users do not want to pay for apps or anything in the app.
If we have learned one thing here at inneractive, it is that free apps actually make more. Think about your patterns. You find yourself on an app’s landing page in iTunes or the Android Market, what is the first thing you look at? 9/10 people will say it is the price, and a price tag that says anything besides “Free” means one thing, time to move on. That is what’s called an unnecessary barrier.
When trying to reach mass market, which should be a significant part of your app’s strategy, nothing beats giving away the app for free and cashing out on integrated advertisements. When you offer your app for free, by definition, you can expect to multiply your downloads, which means more traffic, and more advertising revenue for you.
Everyone is Doing it
Sounds like a bad reason, right? In this case, there is nothing wrong with looking to the pros and seeing what monetization model they have chosen. Yes, there are some that use other options but if you look at the big developers across all mobile platforms, you will notice that almost all of them have a free version of their app with advertising. It is true for Angry Birds on Android, it is true about EA, Digital Chocolate, Firemint, Gameloft, Pico Brothers, and the list goes on.
Some might say this is a naïve argument, but I think it is safe to say that Rovio and the others on that list know a thing or two about developing and monetizing apps. The way I see it, as a developer, you are not working alone, and you can learn from the developers before you who have made it in this space.
One of the major advantages to advertising in the digital era is targeting capabilities. When buying a full page ad in a newspaper, you have no idea who saw your ad, what percent converted to a sale, and what type of awareness the ad generated for your brand. That is not the case with digital advertising in general, and it is most definitely not the case with mobile advertising.
In today’s day and age with over 300 million mobile users in the US alone, combined with the advanced targeting abilities of a mobile advertising campaign, you can decide exactly who and where your target audience is, and get your brand in front of them at any time and any place. Of course, measuring the results of the campaign is a no-brainer, something some might take for granted with the web advertising industry continuing to take off.
A Proven Method
Since we already brought up Web advertising, one of the obvious characteristics of the mobile space in general, is that it is clearly following in the footsteps of its older brother, the Web.
This is true for features and functionality including search, multimedia content, and high speed internet access, and it is true for the ability to monetise an app.
If you want to see how big the mobile advertising space can become, just take a look at a small startup called Google that makes the majority of its billion upon billions of dollars from advertising. The numbers are in, and the mobile advertising industry, according to many, will reach numbers as high as $50 billion by 2015.
Whatever the case may be, there is really no debating the effectiveness of using the mobile advertising model to monetize apps. Of course, it is crucial that mobile ads are displayed properly, and not in a disruptive and annoying manner, but that is a topic for another time. The important thing to emphasize is that with proper targeting, relevant content, and top-notch design, mobile advertising can generate more money for a mobile developer than any other monetization strategy out there.\