Quick Overview of the Main Mobile Monetization Techniques

Pablo García Montes- @pabgarmBarcelona – 07/2014

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The majority of app businesses are not sustainable at current revenue levels.

50% of iOS developers and 64% of Android developers are below the ‘app poverty line” of $500 per app per month.

At the top end of the revenue scale there are just 1.6% of developers with apps earning more than $500k per month.

Developer Economics Q3 2014: State of the Developer Nationhttp://www.developereconomics.com/reports/developer-economics-q3-2014/

Mobile Monetization Techniques Paid apps Freemium apps / In-app purchases Subscription Anonymous statistics Advertising

Display Ads Interstitials Video Ads Native Ads Incentivized installs Playable Ads

Surveys

Free84%

Paid16%

Android Free90%

Paid10%

iOS

Paid AppsUsers pay to install an ads-free app.

Pros App monetization from the beginning Guaranteed revenue with every user Less distracted users (no ads)

Cons Lower volume of downloads Limited revenue/user (Price of the app)

Users download a free basic version of the app, which is monetized with extra paid functionality, in-app purchases and/or virtual currencies.

Pros Removes entry barriers Higher volume of downloads Allows upselling

Cons Value perception of the product may be lower May not generate revenue from every user Difficult to set up (can give away too much or too

little)

Freemium/In-app purchases

Users download a free app which requires a subscription to access the content. It is usually combined with a trial period.

Pros Removes entry barriers if the user gets a trial version at the

beginning Allows upselling

Cons May not generate revenue from every user Apple gets 30% of all subscription transactions via the app

Subscription

The mobile application is distributed for free, trying to reach and engage as many users as possible, so all the usage/location data is sold to 3rd party companies interested market data.

Pros Market data can be very valuable if it is properly segmented Monetization via in-app advertising may not be needed if the

volume of data gathered is enough, providing a better user experience

Cons This approach requires a high volume of data to be worthy It may create discomfort and mistrust amongst the users

Anonymous Statistics

Users download a –usually- free app, which is monetized with advertising.

There are different approaches to show in-app ads:

Display Ads

Interstitials

Video ads

Native Ads

Incentivized installs

Playable Ads

Advertising

Pros Easy integration of ad networks Predictable income generation

Cons Reduces available space on the screen Reduces user engagement, as the ads are

usually interruptive or block the user’s interaction with the content

Display Ads

Ads that are displayed full screen taking over the mobile screen after the user either lands on the site or makes any action.

Pros More visible ads, since they take over the whole

screen Users are forced to interact with the ad, either

to close or click on it, so better CTRs Tend to be better appreciated than banners

Cons They are very intrusive, so they have to be

implemented carefully and shown in strategic points

Interstitials

Similar to interstitial ads, a full-screen video pops up and is automatically played. For 15-30 seconds. Some allow the users to skip them after 5 mandatory seconds.

Pros: More engaging than regular banners Can be entertaining if placed during pauses or long

waiting times required by the app

Cons: Can make the user to leave if the timer is too long

and blocks the regular user-app interaction

Video Ads

Ad units aligned with the design of the organic content.

Pros Better user experience, as these ads are

less intrusive Better ad performance, since users are

becoming more aware of traditional formats

Cons Users can be confused or deceived. They

may think they’re being tricked Requires more effort to integrate with ad

networks, as the formats aren’t standard

Native Ads

Users of a free app download another mobile application in exchange for something else, usually in-game virtual currency or goods. This approach is not allowed by Apple.

Pros Better perception from users compared to regular

banners Users can get something out of interacting with

the ads

Cons Interrupts the user’s activity as they are redirected

outside the main app

Incentivized Install Ads

Similar to video ads, a full-screen video pops up with a trial version of a game for users to test it before downloading it. These interactive ads usually run for 15-40 seconds.

Pros More engaging than regular banners or videos Can be entertaining if placed during pauses or long waiting

times required by the app These ads deliver a better performance than regular ads

Cons They may not work in all kind of apps, as they interrupt the

regular usage of the main application. Can work with apps that require a long pause by design.

Playable Ads

Image Source: Inmobi Playable Ads

While running the main application, users get the option to fill in a survey in exchange for a reward. For each completed survey, the developer gets paid.

Pros The user gets something for participating, which can increase

the conversion Depending on the implementation, it can be not very intrusive,

as the user decides whether to fill it or not. These ads deliver a better performance than regular ads

Cons Users can lose focus on the main application by interacting

with the survey It is a technology at a very early stage, which means there may

be a low volume of demand, being too repetitive for the users

Surveys

There’s a growing trend of share of freemium business compared to paid apps. Free apps with in-app purchases generate the majority of the revenue in app stores.

http://www.distimo.com/download/publication/Distimo_Publication_-_January_2014/EN/archive/

Summary

Summary In terms of popularity of advertising formats:

1. Display ads are the preferred format in most of the apps/mobile sites

2. Interstitials and video ads are becoming more common

3. Native is the big bet, but it is still in a very early stage

4. Incentivized installs aren’t allowed in iOS and most of the advertisers on Android platforms aren’t

allowing publishers to use it. This approach is loosing traction.

5. Playable ads could be the next big thing for mobile game advertising, but it is still at a very early stage

6. Monetization via surveys is starting and is not offered by too many companies yet.

Developer Economics Q3 2014: State of the Developer Nation http://www.developereconomics.com/reports/developer-economics-q3-2014/

The History of App Pricing, And Why Most Apps Are Free (Flurry) http://www.flurry.com/bid/99013/The-History-of-App-Pricing-And-Why-Most-Apps-Are-Free

Distribution of free vs. paid Android apps (AppBrain) http://www.appbrain.com/stats/free-and-paid-android-applications

How the most successful apps monetize globally (Distimo) http://www.distimo.com/download/publication/Distimo_Publication_-_February_2014/EN/archive/

References

Who am I?I graduated from Universitat Politècnica de València in September 2008,  where I completed a bachelor in Computer Engineering.

After that, I started working as a Program Manager at Microsoft Ireland for the Mobile Advertising Platform in September 2008.

After almost 2 rainy years, I moved to Seattle in April 2010 to join the Microsoft AdCenter Mobile Business Intelligence Team as a Program Manager too.

Missing the Spanish sunshine, I joined Softonic, in Barcelona,  as a Product Manager in May 2011 leading the native advertising platform.

I’ve recently completed a Master in Direct and Digital Marketing at the Barcelona School of Management.

Contact me if you have any comments, feedback, or if you’re in Barcelona and want to grab a coffee.

Twitter: @pabgarm Linkedin: http://es.linkedin.com/in/pabgarm

Let’s talk!