Blue Rocket 2015 White Paper_MobileAppMonetization

A White Paper by

Five Proven Mobile App

Monetization Strategies A guide to plan your mobile app revenue.

© 2015 Blue Rocket, Inc. | 2

Despite the fact that there are approximately one million mobile apps available on both Apple’s App

Store and Google Play, monetizing a mobile app is not as easy as it seems.

According to Developer Economics’ State of Nation Q3 2014 report:

• 24% of mobile app developers earn $0 per month

• Another 23% earn less than $100 per app per month

• 22% earn between only $100 and $1,000 per month

• 19% earn just $1,000 - $10,000 per month

• A meager 9% earn between $10,000 and $100,000 per month

• And only 3% earn more than $100,000 per month.

Furthermore, according to Vision Mobile, the upper echelon of mobile app developers––only 2%––

typically claim 54% of all app revenues.

Finally, an extremely small number of mobile apps have been successful in producing huge success with

an equally huge payback to its developers. This includes apps like Zinio, Chipotle, Pandora, Skype,

Camera+, Candy Crush Saga, Angry Birds, and many others in that top stratum.

So if you want your next mobile app to be successful monetarily, then analyze and pursue one of these

five proven mobile app monetization models outlined in this whitepaper.

But which monetization strategy you choose––and how well you execute it––will ultimately determine

your financial success to produce income in the shortest time.

Introduction


As the most popular mobile app monetization strategy for smartphones, a free app encourages and

removes friction to download and try an app. These downloads can be turned into impressions

advertisers desire because the typical app user profile fits with their advertising target. In other words,

specific apps can provide highly targeted audiences for advertisers.

As an app publisher, you can create an engaging app to generate a revenue stream by selling targeted

ads that appear within the app, which is how most of the game apps like Words With Friends earn

revenue and entice users in before offering in-app purchases.

But an app providing productivity or another type of mobile solution, as well as apps like ESPN

SportsCenter and many others, can generate a high number of downloads.

What We Like About This Monetization Strategy:

• Many reports show that mobile is not the top channel where advertisers are spending their dollars.

• Targeted advertising generates higher ad revenue than general advertising.

• App publishers can collect all types of user data (e.g., their location, behaviors, page use and more)

to provide advertisers with targeting data.

• Can be effective if a moderate quantity and quality of ads are delivered as you geometrically grow

your user base.

The Downside:

• Users often can get annoyed with the sheer number of ads on a free app.

• The placement of an ad, if implemented poorly, can detract from an app’s user experience.

Example App:

Blue Rocket created the WebMD Pregnancy app with banner ad placement. This very successful app

was designed to offer information and customizable features that change week-by-week, based on the

user’s due date.

Monetization Strategy #1: Free with Targeted Ads


The second strategy is to offer a free app that demonstrates the core value proposition with basic

functionality as a way to entice users to want more sophisticated features and more value. If the user

wants to really unlock additional or more features because they like what they are using, an in-app

purchase is presented to the user within the app at various price points. This strategy is really a “test

drive” model. It’s like giving your users a free appetizer at a fine restaurant, then charging them a la carte

for the green beans, mashed potatoes, and garlic bread that accompany their entrée.

This monetization strategy has been successful at accumulating huge numbers of users and engaging

them with a great app until they are willing to pay for the next level of features. The Sports Illustrated

Annual Swimsuit Mobile App offers a Freemium version of the basic calendar images, but then asks

users to unlock it for $6.99 to see many more images and videos of the models, or $9.99 to see models

who appeared in the past three years.


• Enables app publishers to promote their app while building loyal users who won’t mind paying for

more features.

• Virtually any type of app can use this monetization strategy.

The Downside:

• Offering a Freemium version that’s too basic will not demonstrate value.

• A free experience cannot be an inferior user experience.

Example App:

Blue Rocket created the Life Noted app with in-app purchases to unlock advanced user features. This

popular app allows users to capture a moment of their life, record an idea, notes and observations,

import videos and photos, and even store memories of events and meetings alongside their iOS

Calendar’s day view.

Monetization Strategy #2: Free with In-App Purchases


This app monetization has been called m-Commerce (app-based). It’s the natural mobile evolution of the

e-Commerce (browser-based) strategy to sell goods and services available at a retail location within a

mobile app without having to pay Apple a percentage of sales since the retail items are not digital goods.

Let’s say you have a retail business like Macys, The Gap or Zappos.com. A mobile app that extends the

retail channel to mobile must be free to download and enables your customers to purchase real goods

and services like meals, clothes, shoes, software, hardware, airline tickets, car rentals, hotel rooms, or

accessories.


• Existing retail websites or online ordering channels can easily leverage the same back-end systems

to connect to a custom-designed and developed m-Commerce experience delivered by a native

mobile app.

• Can work with affiliate programs and partnerships to drive incremental revenue.

• A native mobile app experience has proven to drive higher sales than a responsive website on a

mobile browsers.

The Downside:

• The cost to design and develop an m-Commerce native app is not cheap and can only be justified

with adequate sales volume.

• The user experience needs to be flawless; otherwise, mobile users will turn to a better competing

service.

Example App:

Blue Rocket created Chipotle’s mobile iPhone app to give hungry customers the ability to order their

meal in advance, pay for it within the app, and designate a pick-up time to ensure fresh food. Ever since

its release in 2010, the Chipotle app has been the top fast-casual restaurant app in Apple’s iTunes App

Store.

Monetization Strategy #3: Mobile Retail


Both Apple’s iTunes App Store and Google Play offer “Paid Apps” for as low as 99¢ and as high as

hundreds of dollars. Novice app publishers often get big dollar signs in their eyes that blind them to what

it really takes to make the Top 200 Paid App list on these stores. The reality is the Top 200 has only

changed 2% since 2012.

Thus, this strategy is mostly for mobile app studios churning out games and mass-market titles. A better

goal for a new entrant to the “Paid App” marketplace would be to measure the percent of market

penetration relative to the number of app downloads for the category targeted.


• Mobile app publishers usually earn 70% of the selling price on an app store.

• There is typically not any in-app advertising to interrupt the user experience.

• A user willing to pay for an app is more likely to be a repeat user of that app.

The Downside:

• Competition from literally hundreds of thousands of well-developed free apps makes it difficult to

differentiate a paid app.

• Penetrating the Top 200 Paid App rankings takes a significant investment.

Example App:

GoodReader has been a paid app on the App Store for many years for iPad, iPhone and iPod touch

users. This killer app enables you to easily watch movies or read books, view maps or see pictures on

your mobile device.

Monetization Strategy #4: App for Purchase


Content providers are the main users of this monetization strategy to offer “premium” content for an

additional fee (e.g., in-app purchase). Some content providers provide a certain level of free content as a

“test drive” before it asks the user to pay for a content subscription on a recurring basis. For example,

you can hear a great many news stories for free on a certain site, but if you want to hear them as

podcasts, you’ll have to sign up for a premium version of the mobile app.

Another type of app is more of a utility app that can offer premium features on a subscription basis like

the fitness app called Strava. This is similar to an “in-app” purchase strategy, except the subscription to

the access premium features is time-based. In Strava’s case, premium features are offered on an annual

basis.


• A user willing to pay for content is more likely to be a repeat consumer of content and associated

ads.

• After the initial launch, a stable demand curve of revenue can be easily converted at renewal time.

The Downside:

• This particular strategy is limited to content providers and the most unique or niche utilitarian and

productivity apps.

• It’s difficult to generate an ROI due to the high creation costs of the service and its corresponding

app.

Example App:

Blue Rocket created the Zinio Newsstand mobile app to provide digital magazines for iOS device users.

Zinio is the industry leader in digital magazine delivery, offering over 4,400 titles and 100,000 issues from

around the world. It was the Top Grossing App from 2010 until 2012.

Monetization Strategy #5: Recurring Subscription


Based in San Francisco, Blue Rocket was founded in 2008 and has created hundreds of mobile

applications for Apple’s iTunes App Store and the Google Play app store. Blue Rocket is a leader in

creating innovative custom iPhone and iPad apps as well as native Android mobile apps.

Entrepreneurs and corporate product teams partner with Blue Rocket to create innovative mobile

concepts and strategies to launch, transform or extend their business. As a trusted partner, Blue Rocket

can bring a mobile product/service to market in 12 weeks or less.

Contact

Markus Duffin

(415) 581-0500

[email protected]

www.bluerocket.us

About Blue Rocket

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