By 2018, less than 0.01% of mobile apps will...
iOS app monetization models
- 100% free. The model is often chosen by retailers and companies that sell associated products (IoT solutions) or employ customer loyalty programs (like Starbucks whose reward app has over 11 million users in the USA alone). In this case an iOS app increases brand awareness, engages customers or facilitates in-store experience. Macy’s, one of the largest US department stores, uses their free app to deliver digital coupons, shopping tips and beacon-triggered notifications to their customers. Sometimes a free version of an application is meant to promote the paid one and incorporates ad banners;
- Ads. According to AppAnnie, mobile app advertising is the fastest ad revenue generator across all platforms. Apps that use ads are usually free and show banners at irregular intervals. They often serve promotional purposes and push users to upgrading to an ad-free version of an application. Mind that gamers are more likely to tolerate ads than other users;
- Sponsorship. Although the strategy is similar to ad placement, you gain more control over banner content and display intervals. The approach is often taken by vendors who build an app promoting related services or live events. The organizers of the 2017 South by Southwest film festival, for example, have partnered with Showtime this way. Sponsorship also means better ad targeting and larger fees;
- Affiliate sales. Unused rooms cost hotels huge money. In order to attract visitors, hotels often discount accommodations. You can build an application similar to HotelTonight to offer last-minute booking opportunities to travelers and charge a commission from each payment transaction. Such apps are typically free and do not require using ads (although you could also partner with horeca companies and promote their services to users who stay nearby);
- Upfront payments (or paid apps). Next year the global revenue from paid applications is projected to reach $ 29 billion. Paid apps may have mass-market (like popular casual games) or niche appeal (business and educational applications). Popular apps are usually priced at $ 0.99 – $ 2.99; provided you get positive user reviews and create media buzz around your project, you’ll easily persuade target audience to spare a couple of dollars on a new program. Taking the niche approach requires a strong compelling value. Also, you can’t have competitors offering apps with similar functionality at a lower price or for free. Some of the App Store’s most expensive titles (like the DDS GP Yes! application for dentists) cost as much as $ 499.99. Before going “paidmium”, consider software maintenance and scalability expenditures (your annual spending should not exceed 20% of the dev costs);
- In-app purchases (IAP). By 2017, the global IAP revenue will reach $ 37 billion. Although only 5% of mobile users spend money on in-app purchases, they bring 2000% more money than all other users (including paid installations). IAP apps may provide limited yet compelling functionality for free and charge for extra functions, storage and ad removal or focus on consumable goods (like in-app currency or artefacts enabling users to unlock gameplay or upgrade to the next level). There are subscriptions, too. The strategy is typically chosen by content providers like Netflix which is currently #1 top grossing app on the store; they usually offer a free trial period to showcase their apps’ value. The model has been in use since 2009. As of 7 December, all of the 50 top-grossing iOS app store entries (overall category) use the IAP monetization strategy. You can also make extra money on non-paying users by seamlessly integrating ads into the app environment.
iOS monetization: top 3 challenges & their impact
- Rise of ad-blocking solutions. The growing adoption of ad-blocking software cost advertising companies $ 21.8 billion through 2015. Although ad blockers are mostly targeted at desktop and mobile browsers, Apple has recently allowed third-party programs to disable ad banners in both Safari and native app environment, causing quite a stir among the dev community. Google Play, on the contrary, restricted the use of applications which “interfere with other services, including but not limited to apps”. Does it mean the advertising model no longer works on the App Store? First and foremost, Apple has a long history of banning apps which are primarily designed to advertise products and services. The company is focused on user experience and expects vendors to deliver value to their customers. The rise of ad-blocking solutions will force marketers to revise ad monetization techniques and take a creative approach to displaying promotional content in apps. If you consider building a fitness app and advertise associated products (like sportswear and healthy food), Apple will most likely give you the green light. Want to prosper solely from ad impressions? You’d better go Android then;
- Android-first is real. The 90% revenue gap between Google Play and the App Store – as well as Android fragmentation and publishers’ reluctance to roll out OS updates – was the key reason why Android-first did not happen earlier. Things might change in 2017. More companies build apps to acquire new customers and increase brand awareness. Android dominates the emerging markets (including Latin America and China) which demonstrate the fastest growth in smartphone adoption. Google has gone the extra mile to create consistent developer guidelines and improve the OS security. As a result, 47% of companies now prioritize Android app development;
How to monetize iOS apps: summing it upThe choice of a monetization strategy largely depends on the type of your application and your target market. Let’s take IAP, for example. Asian and US users make 40% more in-app purchases than the rest of the world. The approach is preferable for game developers, although many successful vendors including Snowman (Alto’s Adventure; $ 2.99, #40 paid game) and Frogmind (BADLAND; $ 2.99; the game was launched 3 years ago and remains #161 on paid app chart) opted for one-time upfront payments instead. According to Johannes Vuorinen, BADLAND’s co-creator, launching a premium game requires an interesting gameplay, great design, excellent user reviews and extensive press coverage. Before BADLAND hit the App Store, the company put up a promotional website and made a nice-looking game trailer which generated 40 thousand views in no time. In order to promote the game, Frogmind emailed links to their video to Gamasutra, Pocket Gamer and other related portals. They soon attracted Apple’s attention and entered several mobile app development contests. As a result, they’d built the hype strong enough to propel the game to the top of the charts once it was launched. A year later the company’s COO said they’d like to explore the IAP model in the future since top-30 paid games’ revenue was falling year after year; however, they still released the BADLAND sequel as a paid application. iOS application monetization challenges (as well as the growing Cost per Install and diminishing conversion rates) may force some vendors out of the iOS ecosystem. What does it mean for those who decide to stay? First and foremost, you’ll have to focus on quality and opt for a flexible app monetization model. You may also consider adapting your offering for Apple TV. Although BADLAND is dying on iTunes, it is the most popular paid app on the TV App Store. Ater all, building a tvOS app is a no-brainer for software developers (both guidelines and tech stack are almost the same). In 2017, the global mobile app revenue will exceed $ 76 billion. Although less than 0.01% of all mobile apps will be considered commercially successful in the coming years, there’s room for everyone – provided you make a good product, choose the right monetization strategy and partner with a reliable vendor.
As a result, 47% of companies now prioritize Android app development