Application monetization - where does the money lie, or why is all this advertising?

One of the most frequent requests from mobile application developers that we hear at our events is a request for monetization reports. Everyone is interested in success stories about how someone made millions of dollars. Everyone also wants to.

Everyone wants to eat.

We see controversy and throwing between which way to make money is better. What to choose: paid applications, free, but with advertising, or free, but with internal payments or fees for additional functionality. Trials, donations ...

“Paid or free with ads?” - a traditionally raised question. And not by chance! Many of us remember the good old days when there were desktop applications with built-in advertising - and today they have almost disappeared (as a class). Advertising in the application seems nonsense and disrespect to the user. We are accustomed to advertising on websites, and are so accustomed to being mostly accustomed to ignoring it - and we perceive it as a completely normal manifestation of the desire of website owners to earn money on it or, say, pay for hosting.

But advertising in a (mobile) application? "Fu!" - for sure, you say ( as a user ).

Advertisers who provide various APIs / SDKs for inserting ad units, of course, say that the market is growing and they have the direct turn from those who want to advertise in your applications.

And they ask developers why they don’t insert ads. And the developers say that they consider it unnatural and it is easier for them to make money on paid applications. (Honestly, something like this happens.) And the advertisers responded: “Nuuu, let's take it ...”

But if you can’t pay, because a hundred thousand developers will stamp the same, but for free, but it’s unnatural with advertising , then on what, in the end, make money?

Or is it all prejudices and is it time to master the insertion of advertising in mobile applications? Or do paid apps really buy too?

Or, let’s say, this eternal dispute between the sale of products and services? Sell ​​a finished product or try to build a service with a subscription or micropayments, which will generate revenue from each user gradually. And there are a lot of discussions about this.

Or, also an interesting question, do two parallel versions: paid and free with advertising or limited functionality - or one trial, but with the ability to buy additional features? Is this a purely technical problem or is there a practical business component in it?

There are many such questions. And by the way, they will be more and more relevant not only in the light of mobile applications, but also beyond tablet and desktop applications and any others.

Do you know what I think of them? I think that all these disputes and alternatives - they are, in fact, about the same thing - about advertising.

This is all advertising.

First of all, I must say that no matter what method of making money on applications you choose, it will always be a question of advertising. Once you agree that this is a matter of advertising, all alternatives begin to play in a completely different light.

Watch it!

Free and Advanced Paid

Let's start with the classic story. Two versions of the application are being made: free with limited functionality and paid with advanced features. You can call the first lite version or the second pro version, or even call them different applications - this is all marketing husk.

Another thing is important: you earn on the fact that someone still buys a paid version from you. Perhaps, of course, some of these people buy the paid version right away, because this is exactly what they need. But, most likely, you are betting that some users of the free version will decide that this is not enough for them, they will want more - and here you offer a paid one.

And, if you think about it, it turns out that all your investments in the free version are ads for the paid version. Advertising can be direct (in the application) or indirect through the name of the application in the store or, say, through the site.



If at this moment you split into “yourself doing the free version” and “yourself doing the paid version”, then it should be clear that the “first you” makes money from advertising the “second you”, while the “second” makes on direct sales.

Perhaps it will even be easier for you to think about your creations not in terms of the “A” application and the extended “A +”, but in terms of the “A” and “B” applications, in one of which you sell advertising for the other.



The free version is a fundamental investment in which you need to invest part of the (future) income from a paid one, it also needs to be promoted and maintained. The free application advertises the user with the idea of ​​how he will feel good (even better) with the paid version.

This is similar to launching flights with economy and business classes. In any case, you will have to invest in a plane and you will simultaneously serve passengers of both classes, hoping that some of the economic will someday go into business. But on a bad plane, if there are alternatives, they will not fly even in economy.

Example

gMaps and gMaps Pro are popular mapping applications based on Google Maps services. The first of them is free with advertising, the second paid without advertising and with advanced functionality.

Trial and additional functionality

The second scenario - similar, but different in details (in particular, in implementation details) - instead of two applications, do one with extensible functionality.

You give the user the opportunity to play with your application or toy, get a taste and maybe even solve his main tasks ... Just a little more and he will fall into your dexterous addictive networks - and he will pay you his money to get all that magical functionality that you so wanted to give him, but were shy.

Application features may be limited, hidden or hidden over time. You can make a trial with the integration of payment through the market or provide the user with the opportunity to buy more opportunities through some other service. You can even create your own subscription mechanism for the application. In essence, in the context of our thinking, there is not much difference in limiting time or limiting functions.

If you wonder what the key role of the trial version is, it turns out that it is needed just to advertise paid functionality - to promote the idea in the user’s head to continue using your application indefinitely or to buy additional features.

In the example with airplanes, this looks like one general class, but with the possibility of surcharges for additional services: food, alcohol, etc., which the helpful and lovely stewardesses advertise during the flight. Another interesting analogy: the construction of a free road with earnings on related infrastructure (hotels, cafes, gas stations, parking lots).

Trial is a way to get on your way.



I repeat: all the basic functionality exists only because it advertises paid features or removing restrictions. As in the case of the model of free and paid versions, this is a fundamental investment, from which there is no escape, in which you also need to invest resources.

In practice, there may be various psychological nuances and differences between how you place accents and what exactly you advertise. If you give the user a trial for 30 days, this is one situation that immediately forms the user's expectation that in the end they will have to pay a certain amount.

If you give the foundation for free and offer to pay for additional functionality, then the expectations are different: no matter how much you put effort into the basic functionality, it is free for the user - and he subconsciously already estimates the cost of the additional functionality, and not the full application. Therefore, especially if there are alternatives on the market, a balance must be sought between the importance of additional functionality and its price.

What is the difference between pay for features and free + paid versions? Well, besides the purely technical differences in implementation? In my opinion, there are two key points. On the one hand, this is just the nuance indicated above: free + paid more clearly divides what the user pays for. If you evaluate your complete application, say, at $ 2, then in the case of a trial it will be $ 2 for additional functionality, and in the case of a paid one, it will be $ 2 for the entire application. On the other hand, the implementation in the form of a single application with a built-in ability to purchase functionality is much closer to the user than a separate application with full functionality, and this should give a large conversion.

In practice, you need to experiment.

Example

Doodle God’s game provides a trial version with a limited number of levels and some functionality blocked in the trial (for example, achievements, which, by the way, remind you of the opportunity to buy a paid version).


Read more about creating trial applications for Windows Phone on MSDN .

Content Selling

The third popular scenario concerns the sale of some additional content built into the application. In general, it doesn’t really matter what you sell: tangerines, articles, books, music or swords, shields and virtual gifts for friends.

You can argue here that it is one thing to make a social game with built-in sales of nishtyachkov and quite another when your application is, for example, a shell and a mazin for books, cartoons or articles. And they say do not equate them ...

Yes, yes, yes. But in each of these cases, the main role that your free application plays is advertising the opportunity to buy something.

You may be making an incredibly beautiful and cool game, but the purpose of this game is nothing more than advertising for paid content. Perhaps, even technically, you will spend 90% of the effort on developing the game itself, and the remaining 10% on the content sales service is not important anymore, your game has become an advertising platform for shields, swords, armor, magic potions ... or whatever is fashionable now ? Cabbage, carrots, pigs?



Your application advertises with all its essence the opportunity to get additional happiness: by receiving content, nishtyachki or saving time on growing potatoes.

Service sale

Often a free application acts as a client to the service. The user pays for additional services of the service itself. For example, for extra gigabytes, computing power, reliability, support or additional functionality of the service itself.

You will again say that this is just a client for the service - and you will be right, but ...

But your client is nothing more than an advertisement for your service. The more the user uses your application, the more he uses the service and the more he has a dependence on the service and the desire to get more from him - and at that moment he brings you a denyuzhku.

Even the fact of having a client for your service in the application store is the most advertising service.



When you receive income from your clouds one way or another, you invest part of the service’s advertising in the form of clients for various platforms, which also increase the use of your service and, for example, the occupancy of a free space.

Example

Evernote is a client for the popular service of the same name for taking notes, earning on users who buy a premium service with advanced features.

Using user base

Now that we have reviewed the main scenarios of monetizing applications through self-promotion of something of our own, it's time to move on to classic advertising scenarios when, in fact, you are selling access to your users.

It’s worth remembering: “if you were given something for free, it is likely that they are selling not to you, but to you.”

You probably already wonder what I can tell you new, except for the insertion of the traditional advertising blocks that we discussed at the very beginning? Now…

Scenario 1. Classic

You insert ads of other offers inside your application. In fact, you rent a place, an advertising space - and this is a classic advertisement, for example, inserted by some advertising block using the SDK from one or another advertising network.

But there may be more interesting twists: for example, you can insert ads from other applications! This may seem strange, but in fact it can sometimes be quite meaningful, especially if the advertisement does not promote competitors, but some kind of complementary solutions, possibly even not directly related to your area.

For example, you make a geo-targeted service, then your application may offer applications related to a particular place (application of a particular restaurant, museum, etc.).



Geo-targeting and contextual targeting in general is an extremely rich topic, and in the application market we all have a long way to go to master this area. The mobile form factor is interesting in that you can "sell" not just a user, but a user "here and now."

(And ... if you close your eyes to some technical aspects, in fact it is no different from advertising inside your free application of yours, but paid.)

Example

To insert ads into the application, you can use your own, perhaps more contextual and tailor-made solutions specifically for your audience, as well as ready-made platforms like Microsoft Advertising ( SDK , help ) or Russian Begun .

This is a classic of the genre. Think this is all? No matter how!

Scenario 2. Branding and integration

Remember the trial versions and the sale of additional functionality? What about the sale of additional "alien" functionality? You can think of it as plugins or extensions.



Your popular application offers basic functionality and opportunities for the implementation (integration) of functionality that promotes other services or other companies. For example, you can make additional level packs in your game, as Angry Birds does on different platforms. Some kind of sponsorship expansion packs or just branding.

But first, of course, you need a popular application, or, more likely, a popular toy.

Or, for example, you can create a platform for organizing events and sell customization for a specific event to users or organizers (platform, schedule, etc. - everything inside your application with additional extensions).

Scenario 3. Content Store

How about selling someone else’s content in your application with the corresponding deductions?

What? Are you already selling someone else’s content, as we already discussed this a few minutes ago? No no. We talked about your own content. But what exactly do you think about the site with your users to provide space for someone else’s content?



For example, it can be just articles of popular publications or not very popular ones that want to expand their audience, but are not ready to write their own application, and you can offer their submission in an interesting format. Or you can make a mobile platform for untwisted, but talented musicians or photographers.

Wider assortment - more users. And vice versa.

(And, of course, this includes any shops for reselling other people's content.)

Given mobility, you can develop various interesting contextual scenarios: photographs of the sights I see, guides to the museum I am in, a recipe for what I I’m eating music or words to what I’m listening to now.

The hackneyed topic of “taxi services” is also the resale of someone else’s content: information about transportation services that advertise one or another taxi driver or taxi fleet.

Or maybe just branded carrots for the garden ...

Example

Amazon Kindle is a free client (unfortunately, it is not yet available in the Russian market) for e-books sold through the Amazon service, which actually acts as a publisher and a sales store. Amazon invites authors to publish books electronically directly to kindle devices and applications across platforms.

Scenario 4. Operation of services and barter

(Looking back ...) We have already sold someone else’s ads, additional “alien” functionality and built a platform for someone else’s content. I feel you have already guessed what the fourth scenario will be about?

That's right, you can offer your audience, especially if it is large, to third-party services.

Of interest is the fact that many Internet services provide APIs for developers so that they can write their own solutions based on these services or their combinations. This opens the way for both creating your own clients (possibly paid or with advertising) to these services, and for expanding the functionality of your applications through third-party services (for example, by introducing social mechanisms of Facebook).

An important question, however, is who pays for the service and to whom, because if you pay for the service, this is another story ...

Most often, an external service makes money on users in two ways:

• users pay premium services - for example, an increase in network storage (classic of the genre - Dropbox),
• users of the service itself see ads and / or the service needs an additional audience or constant interaction with the audience (for example, Twitter).

In both cases, the service exposes a free API for developers in exchange for attracting users and generating additional contacts with the service.


In fact, this is barter: giving users away you will save on your costs and get the cherished functionality, but your application acts as an advertisement for an external service.

Perhaps there are some interesting examples when the service will pay you extra for using its API, but such examples (except, in fact, inserting ads :)) are unknown to me. If you know, tell me!

I hope now you believe me that all monetization is built around advertising?

Bonus!

Bonus topic - advertising their services. Good applications, even free ones, often turn out to be good advertising for the developer or the company providing the corresponding services.

In this case, monetizing the application itself is no longer your headache. You get money for the flow of applications:

Nameplate

Summarizing all of the above, here is a small tablet:

	Own	Alien
A place	Free + Paid: a free application advertises paid.	The application advertises other people's applications or offers.
Functional	The trial version advertises paid functionality.	An additional “alien” functionality is integrated into the application that advertises the sponsor or is necessary for the user.
Content	The application promotes additional content: articles, books, carrots.	The application is a platform for the sale of other people's content.
Service	Приложение рекламирует платный уровень вашего сервиса.	Приложение использует бесплатно чужой сервис, получая дополнительную ценность, или получает доход от продвижения сервиса.
Приложения	Разработка приложений для продвижения себя как разработчика приложений: трудойстройство или разработка приложений на заказ.	Магазин приложений с заработком на доле от продажи приложений или рекламы.

На практике конкретное приложение может зарабатывать деньги, применяя только один способ или комбинацию нескольких:



Например, в одном приложении может сочетаться свой и чужой контент или ваш сервис может использовать только в вашем приложении или также быть доступным и снаружи для других разработчиков:



И, конечно, вы можете рассказать о себе с помощью магазина приложений, обзоров приложений или специальных ресурсов вроде appprofessionals.ru:



(Вообще говоря, и сам магазин приложений можно рассматривать как заработок на рекламе — рекламе приложений, размещаемых в магазине.)

Заключение

Well, the final remark. Sometimes different approaches can be combined with each other, the line between functionality, service and content, as well as between one’s and another’s, can be very arbitrary, completely erased or absent.

What exactly and how specifically to do? No one will give you a reliable answer to this question. Everything is known only in practice, but it must be understood that different methods of monetization are suitable for different types of applications and the tasks they solve. Something is suitable for the lazy, and something requires capital investment and serious work. Something gives returns quickly and in rather large chunks, and something can be milked for a long time, slowly and in small portions. Somewhere you need to focus on the number of users, and somewhere on the number of returns. The world is complex.