If you want to create an app that forms a part of a successful business model then it's crucial that you have an app monetization strategy in place. Generating app revenue is no easy task - many app publishers are occupying an increasingly crowded space, with many developers having to compromise other important aspects of the app user experience in order to generate app revenue.
So, is the way it has to be? What's the future of app monetization as we move into 2018 and beyond? Will we be looking at mobile ad networks taking control of mobile app revenue or will there emerge an alternative app monetization option for developers?
We'll argue the case that there are some lesser known app monetization strategies that will generate app revenue in a way that will protect developers from the fluctuating app revenue involved with ad networks and will allow them to keep their app experience intact.
Which app monetization strategies are being used
First of all, let's look at how app monetization has changed over the last few years. In 2015 app revenue was around $70bn. By the end of 2016, this figure had risen to $88bn.
Time spent in apps increased from 700bn hours to 900bn hours between 2015 and 2016. Downloads see a simlar increase from 75bnin 2015 to over 90bn by the end of last year.
App monetization strategies are still dominated by in-app advertising. Ad formats are indeed getting better - incentivized advertising is driving app monetization and app revenue models are increasingly packed with advertising. Native ads are popular as well - something that the app ad space loves to point to as progressive in-app advertising.
Paid apps are still popular in both app stores with 20% of apps adopting these app revenue models. As an app revenue model this is remaining steady - but the growth of subscription models are becoming more popular as the idea of recurring income seems attractive to developers.
Most popular app revenue models
But what can you learn about your app revenue model by looking at these statistics around mobile app monetization?
It will be interesting to see how 2017 matches up. But for now, app ads are on the rise. But will developers see the bubble burst? There could be a reward on offer for apps that steer away from the advertising app revenue strategy in the future. And this is entirely possible with the growth of alternative app monetization methods.
App experience is more important than badly implemented app revenue strategies
The app experience is becoming less important for developers as they look to implement as many app monetization strategies as possible. Have we forgotten about user experience?
Many mobile app monetization strategies are based on delivering an advert to the end user. Whilst these can generate app revenue, little attention is given to the effect that this will have on the user experience.
Many mobile ad networks are making a lot of noise about native ads as a method of app monetization, but is this really the experience that users want from mobile. App revenue is growing but surely the messy in-app ad bubble will burst when developers realise there are alternative app monetization options that are big app revenue generators, without negatively affecting the user experience.
These strategies exist, and more developers are adopting these app monetization strategies.
Data as an effective app monetization strategy
Revenue from customer data has been commonplace in other industries for a while now. This can and should be extended to mobile app monetization. With CPMs that are much higher than advertising app monetization models, it makes more sense for developers to try generating app revenue from user data. Along with the added bonus that apps can hold on to their beautiful user experience as this app monetization model operated in the background.
Of course many are quick to criticise this method of app monetization. But the issue demonstrates a wider issue that is prevailing around app monetization in general. Users are so used to apps operating on some kind of free app monetization model that they generally forget that are paying with something other than money.
It can be flashing adverts or it can be data app monetization. Either way, the conversation around app monetization needs to be clearer. Users need to understand exactly why apps are free. Data collection process absolutely need to happen securely and they need to have a clear opt-in process, but that doesn't mean that it's not a viable app business model.
Powerful, first-party data
Data that you collect directly from your app is called first-party data. Many apps are not doing this, and they are sitting on a pretty large, untapped pile of app revenue. And that's fine - but in this competitive arena of app monetization, and along with the development of secure, non-identifiable data collection methods - apps should no longer be afraid of leveraging this data.
The data can be used for a developer's own needs - understanding user behaviour and interactions with app/features is one. By leveraging powerful and accurate user data, developers can understand how their app is used, where users get the most from their app and where to improve.
The data can also be used in tandem with an apps current advertising inventory to boost ad price. If you use data to trigger in-app advertising then you create more relevant adverts. This means higher inventory price.
Data should underpin everything that you do in your app, from app engagement to app monetization. With the development of advanced audience SDKs, developers should no longer be afraid of leveraging data from their app audience.
A clearer conversation needs to be had around why apps are free at the point of use - a data monetization model is no different from a subscription, freemium or ad monetization method. Stress needs to be applied around clearly communicating what it is that the user gets in return and providing clear opt-out channels for those who don't wish to share their data.