Managing and growing a sustainable mobile business can be tricky. The primary monetization methods can be convoluted, difficult to navigate, low quality, and ever-changing. Today, more than half of developers in IoT and Mobile are making less than $500 a month in revenue. Most of us are familiar with the common mobile monetization channels, like subscription models and mobile advertisements, but we often think of them as mutually exclusive, and can struggle to successfully combine them,when in fact they can work in perfect harmony.
It turns out that mobile monetization strategies often fall into two main buckets: Long term and short term gains. Of course, with any business it is critical to design around both, weighing your risks and rewards.
Short term monetization tactics are suitable for:
Long term strategies are suitable for:
An example of a mobile business that would find short term monetization tactics fruitful, for example, is Flappy Bird. Flappy Bird soared on the app charts, and fizzled out soon, after, but in its short lifespan, was rumored to be earning $50,000 a day from ad networks. Meanwhile, an app like Lumosity that expects long term engagement (as people come back for subsequent brain training modules) thrives on a long term monetization strategy through subscriptions. Let's explore this more.
Mobile Advertisements: Low Hanging Fruit
Mobile advertisements are generally a short term monetization tactic since businesses are often able to see immediate results in terms of metrics and revenue. Additionally, advertisements are generally short term in nature, running on a campaign basis with clear end goals. Small and large companies alike rely on mobile advertisements to drive significant revenue, because ads are seen as easy to implement and predictable in their revenue stream.
Expect to see continued growth, but also continued change in mobile advertising. Many mobile ad networks still provide banners and interstitials that were simply ported over from desktop, but have sub-par performance on mobile because of their illegibility, viewability, or screen size constraints.
A Shift Towards Native
Native ads have emerged recently with the goal of integrating better into mobile experiences, but these even receive criticism. One reason for this is because although they are designed to be a part of the content, they often feel out of place and obtrusive to the user's experience. Another is that they sometimes are meant to do the opposite and blend in with the organic content, thereby "tricking" the user to engage. As a result, mobile ads often annoy users and that annoyance can often translate into low retention rates, meaning they are a short-term strategy to capture revenue.
Subscriptions on Mobile
The subscription model is one way to think about a long term monetization strategy. While it has existed in the past, it is trending toward becoming even more important in the coming years. Apple is even increasingly advocating for subscription models by lowering the percentage of revenue they take, from 30% to 15% for all apps that operate with yearly subscriptions.
From a financial perspective, subscription models make perfect sense. They allow you to have a steady stream of predictable revenue. From a business perspective they're also logical as a subscription model provides an opportunity to build an ongoing relationship with customers. Since subscriptions depend on continuing to deliver value to your users over the long-term, they align perfectly with both the business' goals, as well as your users. They also create a pipeline of loyal customers from which you can leverage insights such as how they interact with your product, commonalities with churn, which features they upgrade to, and more. The subscription model is built for your own business as opposed to being built for another's.
Partnerships and Shared Revenue
In addition to the subscription mode, another long term strategy is partnerships, many call this affiliate, where two companies join a revenue-sharing relationship. From the perspective of the publisher, or the one promoting a company's product, this strategy offers the ability to monetize content in a way that aligns with users' goals; you can put products, offers, or actions within the context of your content in a way that feels relevant and helps users solve a problem or seamlessly take their next intended action. For example, offering an Uber ride to your users when they look up a hotel, restaurant, or music venue providing a valuable user service while also generating revenue for the publisher.
Another action you can offer is the ability to install an app. App installs have helped Facebook overcome their problems of mobile monetization; the company offers an ad that connects users, while on mobile, to an app and creates a loyal customer for advertisers (who, by the way, are willing to pay increasing amounts of money for). Publishers have realized they can similarly replicate this model, through partnerships that drive traffic to apps within the context of their experience.
With affiliate, enough data can be collected to ensure you're providing users with the most contextual offers, which is proven to increase time spent in your app or mobile website at a later date. Many companies have begun to figure this out, like Quidco who saw a 24% increase in time spent in their app after implementing an affiliate mobile monetization strategy.
How Do I Choose?
While a short term play like mobile advertisements is necessary if you need a quick way to monetize, they can work in tandem with long term tactics and strategies that are more in line with your users' interests, like affiliate marketing. Affiliate placements can often exist within the product in places where ads would not be appropriate. A mix of both approaches will ensure a swift path to monetization, and incremental revenue that comes with added engagement and helps create a sustainable business from positive user experience.
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