4 awesome ways to monetize your app

These days, every Tom, Dick and Harry wants to build an app. While many do it for vanity reasons, a lot of us want to develop a great product and make money out of it.

Happily, app monetization has seen plenty of innovation over the past few years, which is why we’re able to gather 4 ways (and many sub-variations) you can monetize your app.

These tried-and-tested methods were discussed at length by app developers at the Apps World Asia forum in Singapore recently, and will be a main topic at the next Founder’s Drinks on 27th September 2011.

Since mixing and matching the right methods can be tricky, we hope this little guide can assist you in making the right decisions.

1) Display advertising

To be honest, display ads are a little passe. After all, they hail from the era of billboards and newspapers, which means they may not translate well to your smartphone. But if used right, they’re still effective.

Display ads are awesome if you have, like, a gazillion users/downloads/impressions for your app. They work best if your app is constantly updated with new content, which means users will come back day after day, driving up ad revenue.

Typically, eCPM for mobile ad networks can vary a whole lot. But for example, if you’re getting an CPM of $1, then 100,000 impressions will get you $100. Variables like fill rate matter too — if your banner ad space gets filled only 10% of the time, time to switch to another ad network.

You can also consider display ads if you have a targeted audience — mothers like ads for baby equipment, sports fans like ads related to sports, and so on.

Display ads may also work better on tablets and larger devices, from a usability perspective. With a larger screen real estate, you can afford to put in a banner ad or too without irritating the user too much.

However, if the only users of your app are your wife and two kids, forget about display ads.

Consumers often find banner ads annoying too, and it’s worse if the ads are often irrelevant and untargeted.

But don’t write off display ads too quickly, says Zhou Wenhan of 2359 media. “This model will be sustainable as people are reading more and more on the phone,” he told the audience at Apps World Asia.

2) Paid apps

Getting users to pay for using your app is probably the most straightforward way of earning money off it, but implementing the right payment scheme can be tricky.

Upfront app payment

If you’re an upstart developer publishing a new app for an Asia market, charging users to download your product can be a recipe for disaster.

Aldric Chang, CEO and founder of app development firm Swag Soft, and Charles Tidwell, vice-president for marketing at SmartRoam and ChatTime, told the crowd that starting off as a paid app didn’t work for them. ChatTime only took off when changes were made to it.

While Western smartphone users are accustomed to the idea of paying for an app, many have noted that Asians are more resistant. They generally refuse to download an app of an unknown quality.

User reviews and word-of-mouth recommendations can certainly bridge the gap, but that cannot happen unless enough users love the app and are willing to serve as product advocates.

So, asking users to pay upfront may not work if you’re building a mass market, consumer-oriented app.

However, if you’re producing a niche product, not only can you charge users, you can even get them to cough up a large sum. Some examples of niche apps include a legal dictionary and an enterprise CRM app that corporations may want to buy in bulk. While these kinds of apps won’t generate millions of downloads, you make up for it by charging a higher price per download.

Long before smartphones even existed, developers created ‘shareware’ on PCs to entice users to eventually pay for the full software. Many of them offer a 30-day trial, after which the software can no longer be used.

This time honored (and time honoring) method is still relevant in the app world today, although it doesn’t seem quite as fashionable. It may not be the most optimal way of generating revenue compared to the next method.

The freemium model

This is a good way to introduce consumers to your app. Use it over the free trial model if your app relies heavily on network effects — where your app becomes more useful if there are more people using it.

Dropbox is a good example — it sucks if only your family and your dog are using it. The freemium model allows Dropbox to retain all its users by keeping basic features free, thereby ensuring the service takes advantage of network effects. At the same time, users who love the service can pay a premium for extra features, in this case more space.

Subscription-based model

This often works hand-in-hand with the freemium model, as many services do charge users a monthly fee to access premium features.

It works well if users have a reason to come back to your app again and again — for instance an app that allows you to check the latest stock prices, or any app that constantly receives news or information updates. Why do a one night stand when you can have a monthly affair?

Rent-to-own

Android app developers generally find it harder to make money out of their apps compared to iOS developers (see here). However, game distributor WildTangent (also read this) has opened up a different monetization opportunity for Android and PC game developers.

It operates a rent-to-own app store where users can try a game for a day at a fraction of the total cost. If users like it enough, they will keep paying until — finally — they fork out the full price and effectively own the app.

Steven Frank, business development director of Wild Tangent in Asia, is bullish about this approach. “There’s a lot more room than just charging users 99 cents or $1.99,” he said.

3) In-app purchases

In-game purchases have been prevalent in MMORPGs for a while. More recently, it has become popular for casual games on social networks like Facebook. Gamers can now purchase additional items using Facebook Credits to give themselves an edge .

But non-gaming apps can also take advantage of in-app purchases. Recently, I wrote about SingPet, a new retail app that allows users to purchase pet food and other pet-related items directly.

Daily deal sites like Deal.com.sg and Groupon have also incorporated this model in interesting ways by allowing users to browse, purchase and flash their coupons to merchants through the smartphone.

4) Get paying clients

Besides earning from consumers, third parties can also provide an important source of revenue for you. This is applicable in two cases: When you’re a hired mercenary for big corporate clients, or when you’re acting as a middle man between consumers and other businesses.

Start a boutique app development firm

If you can get a corporate sugar daddy to fund your projects, why not? It’s what buUuk and many other app developers do: They became an app development firm. Instead of huffing and puffing to make a money-spinning app, get others to pay you to do it.

The good thing about this is that you’re not putting your eggs in one basket. Success does not depend on whether you can create that One App to Rule Them All, but whether you meet your client’s specifications. Some of them may not even want to monetize their app, but are just as happy paying you.

If you do decide to take this route, being picky about clients may not be a good idea when starting out. Which means it’s your job to please them; they’re your paymasters after all. Sometimes, clients think they know more than you (when they clearly don’t), which can lead to unnecessary wrangling.

Get companies to pay for placement on your app

Imagine movie placements, but for games. Think about it: Isn’t it cool for users to get a Starbucks Cafe Latte that boost their character’s energy, or a Subway sandwich that adds to their health?

This method works marvelously for games. It has been useful in the publishing space too: Sponsored in-app items are actually called ‘advertorials’ or simply ‘sponsored’ content, and that’s old news. Placement can also manifest in tie-ups, like what Rovio did with the hit movie Rio to produce a special edition of Angry Birds.

But like display ads, placements only work only if your app is well-used. Don’t expect the corporate types to brand an item after them if no one is going to download or use it.

Location-based services have also taken advantage of this model, but in a different way. Singapore’s ShowNearby, a location-based directory app that allows users to locate services in their vicinity, earns by charging clients for prominent placement on their business listings.

Another company, Chalkboard, started by Bernard Leong who also co-founded SGE, charges merchants to place their promotions on his app. Chalkboard essentially allows users to find out the latest promotions and offers from nearby establishments in their location.

Conclusion

Monetization is about picking the right strategy and approach that best suit the needs of your company and app. While putting up banner ads is a venerable, time-tested approach, doing it blindly would deprive you of alternative revenue streams that might be a better fit.

This list is definitely non-exhaustive, since there are many ingenious app developers like yourself constantly experimenting with new methods. Do share with us if you know of more interesting ways to monetize an app!

This is the last in a series of articles based on Apps World Asia. Also check out ’5 trends that will shape the app world’ and ‘The future is shiny for Asia’s mobile apps ecosystem’ if you haven’t.

Top image: Bart Claeys

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