Five Things You should Know about Mobile App Monetization

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After working hard to develop a great app, you deserve to make money from it. Considering that around 54 percent of app revenues are claimed by just 2 percent of developers, though, it’s obvious that many fail to achieve decent results. That’s often due to poor monetization strategies and a lack of effective analytics. Learn the basics of app monetization by familiarizing yourself with the following five concepts:

1. Identify the Best Business Model

When it comes to monetizing a mobile app, you have several options at your disposal. All too often, developers choose one at random and then wonder why their apps miss the mark in terms of profitability. For optimal results, plenty of thought, consideration and research are required.

Assuming your app is ready to go, ask yourself a few questions to determine which model is right for you. What problem does your app solve, and why? What makes your app so unique that people would be willing to pay for it? What other types of apps or features would your target demographic also be willing to pay for? Which business models do your closest competitors use, and how effective do they appear to be?

These days, you have six basic options when it comes to monetizing your mobile app:

  1. In-App Ads – Users download your app for free. After a decent number of users has signed up, gather information about them using mobile app analytics. From there, sort the information you’ve gathered and sell it to app publishers, who will then pay you to include targeted ads on your app.
  2. Gated Features – Also known as the “freemium” model, this involves offering basic features for free and then requiring users to pay to unlock more advanced features.
  3. Paid Apps – The trick to this monetization model is creating an enticing app listing that includes enthusiastic user reviews, compelling screenshots and plenty of information. If you are successful, you will earn money up front with each download.
  4. In-App Purchases – Sell physical and/or virtual goods from within your app. For instance, users can opt to pay for additional game currency, or they can buy actual goods and services that you offer. The latter option is particularly effective for e-commerce businesses.
  5. Paywalls – If your app delivers content, consider monetizing it with a paywall. Allow users to access certain amounts of content for free — in the form of a “sneak preview” — and then require a subscription to unlock additional content.
  6. Sponsorship – Partner with advertisers who offer rewards to users for completing in-app activities. You will receive a share of the revenues of the redeemed rewards through this incentivized advertising model.

2. Use the Right Analytics Tools

You can’t hope to continually grow and improve your monetized app without tracking how well it’s faring. The right mobile analytics tools will make a huge difference here, but don’t wait until your app is live and in app stores before finding them. Rather, seek out mobile data analytics tools that make sense for your app before it goes live.
Powerful analytics tools for mobile apps provide a rich array of information that can be used to optimize, grow and improve your monetization scheme. Use them to find out how many people are downloading your app and how much money it’s generating. Dig deeper to learn about how many active users you have, the frequency with which your app is typically used, the average session length, user demographics, the types of devices they use and more.

3. Learn the Tricks of the Monetization Analytics Game

The best analytics applications effortlessly reveal the most pertinent information about your monetized mobile app, letting you see at a glance how well it is working. To make the most of it, though, it pays to understand how various metrics are analyzed and assessed in the first place. A few of the most useful examples include:

  • eCPM – The effective cost per mille, or thousand impressions, reveals how well your app is earning money from the ads you’ve published. The higher the eCPM, the more money you’re making from advertisers for every 1,000 impressions. This calculation is used: total earnings/total impressions x 1,000.
  • Fill Rate – This is the rate at which a publisher has sent and received requests for full ad impressions from an ad network. Due to technical issues, not all ads appear to users. If you sell 50,000 impressions and 100 fail to appear, the fill rate is 49,900/50,000, or 99.8 percent. The higher the fill rate, the more opportunities for clicks you will have.
  • Average Mobile Ad CTR – The average mobile ad click-through rate, or CTR, reveals how many times an ad has been clicked on. The calculation is total number of clicks/total number of impressions. The higher the number of clicks, the more revenue that’s being generated. This is affected by the value of an ad’s impressions and the quality of the ad format.
  • Install Rate – The install rate reveals the number of downloads a developer gets from their ads. It’s calculated using the following formula: total number of installs/total number of clicks, which results in a percentage.

4. Calculating Revenue

It’s crucial to know how much revenue an app is generating. A well-designed analytics application will make short work of this for you, but it never hurts to understand how this is calculated.
One way to calculate ad revenue is by multiplying the eCPM by the total number of impressions. Another option is a little more complicated and is reflected by the following formula: revenue = (number of ad requests x fill rate) x (CTR x bid x IR x 1,000).

5. Mobile App Optimization

Finally, learn how to make sense of — and effectively use — the information obtained from analytics tools. By constantly analyzing the performance of your monetization model, you can continually optimize your apps to ensure optimal profitability. Sometimes, optimizing an app is as simple as tweaking the types of ads that are shown or otherwise adjusting the model you’ve using. Other times, however, it means switching to an entirely different model. In either case, ongoing optimization is the only way to ensure a steady flow of revenue from your mobile app.

By understanding the basics of mobile app monetization, you can help the apps you develop realize their full earning potential. Whatever you do, remember this: No matter how brilliant your app is, it’s not going to generate money if you don’t analyze its performance and use that information to select the most effective business model.

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