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Creating Your App Monetization Strategy

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Many app-entrepreneurs start with a great idea , create the idea and then  realize now they have to sell the idea.  If you fall into that group congratulations on the completion on your new App, now the real work can begin to get you paid!  

This article will focus on some basic strategies for monetization, some basic questions you need to ask your team in selecting the best strategy for your product and lastly some general terminology  that will help you on this journey.

 Basic Strategies  for App Monetization

Monetize means to convert an asset  into money (or generate profit).  This sounds pretty simple to do when you break it down : sell or convert a product  = make money.   Yes, it is that simple but there is a journey or sales cycle we all must go through to make that money.

Freemium

The word freemium is derived from the words free and premium . It describes a business model that has been an effective software model even before the development of Apps.  Skype has a freemium product that they have given way few years before the first app came out.  The freemium monetization strategy of simply giving away your core product to the masses to sell subset of that group your premium product is the strategy.  This business model  accounts for 97%  of the apps in the Google play store and 95% of the apps in Apple’s store.  I tell you this because if you choose one of the other strategies realize that you’re in the minority and your app really has to show some true value.

Paid

The classic paid app monetization strategy is straight forward and well-known by App Developers and platforms .  Revenue is proportional  to the app downloads, so the more downloads the more money you make.  The split of revenue in most cases goes 70% to the developer or publisher and 30% to the platform (Google /Apple app store).  In some rare circumstance the fees and pricing may differ, but it’s generally just a difference in a couple of pennies.  If you go with the paid strategy please be aware many people will be a little hesitant to pay you $0.99 or whatever you charge for the simple fact value has not been expressed.  Below are some reasons why some don’t like paid apps is because :

1)      Unfamiliar with your brand and quality.

2)      Unsure how or not familiar how to pay for the product online or  payment not setup correctly. 

3)      No refunds – Generally there is no way get a refund on an App purchase.

 

Hybrid / In-App Purchase (IAP)

There is a growing segment of Publishers that have  rolled out a Hybrid In –App Purchase model where they give away the core product for free but then insert a few ads to encourage upgrades or purchases of other Apps.  In February of 2013 71% of revenue was from purchases from within free apps downloaded.  I believe this is the best choice over all if done in a non-intrusive way that does not interrupt the user experience.

 Before you make  that final  choice on what strategy is best for you ask a few questions.

  •  Do you have specific niche market?
  •  What value do you think your audience within your market will put on your App?
  •  What platform will you thrive on and why? Android, IOS or Windows?
  •  Will there be any long-term updates your users will need? Is  it going to cost them anything down the road?

Selecting the correct business model for your App and I hope these questions help in marketing your product.

The last item that I wanted to discuss about Monetization is the terminology to help you maneuver through marketing your solution.  As we speak the terminology is changing and evolving but the following terms will remain the basics about monetization whether it be with Apps or Websites. 

Terms you need to get familiar with: Cost Per Thousand(CPM), Effective Cost Per Thousand (eCPM), Cost Per Click (CPC) and Cost Per Install(CPI) .

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