Mobile Apps Developer? Ad Monetization? Really?

There are so many mobile app developers nowadays. It is getting hard to keep track of what exactly each of us do. Whenever you veer into the Business and Revenue model discussions with some of them (us), you get to hear awesome things about Angry Birds! The pitch is to follow the Angry Birds revenue model. What is that you might wonder? Oh the Ad Monetization based Revenue models you are pitched.

But have you explored what App you would like to develop? What is the consumer and target groups you are going after? The utilities you enable for the target group? About other revenue opportunities?

As soon as these questions flow, it sometimes look like I catapulted a Black-Bird that explodes on contact at them, and the conversations flow like, Oh, we ‘thought’ about it, we have tried it ‘once’! those are pretty ‘hard’ things to do!

Thought about it? Tried it Once? Hard to do? I am gasping for fresh air at this moment.

You know, there is absolutely nothing wrong in aspiring on a good Ad monetization revenue model (even if you are not benchmarking Angry Birds here). I know several great Ad monetization businesses which are doing decent top-lines (some of them are good friends and well respected). So, before you break it down, its important to know what other Business Models exists.

At the very high level, the following are some broad brush strokes mobile app business models :

  • Enable mobile channel play for existing web channels which are non-ads based (Deals, Events, News).
  • Enable mobile channel play for Business LOBs creating new media asset (Leads, Branding, Merchandising).
  • Own a focused, curated content (created through your app), and charge for the access to assets (POI, Metrics, API).
  • Enablement of mobile mediation layers controlling access to existing enterprise services. (Enterprise Mobility).
  • Mobile device management and control platforms. (Enterprise Device Management).
  • Develop apps for other business as a service. (Software Services).
  • Develop compelling utility/game apps which users are willing to pay (Pay per download).
  • Develop compelling utility/game which are free (Ad monetization).

The Revenue models can be categorized as follows:

Not charging the consumer but charging a Business: (Free for consumer)

  • Charge for Action (Number of leads filled, Deals closed, Events booked, Close loop).
  • Charge for Impression, Click Through Rates (Brand content disseminated, Click on assortments).
  • Charge for Service to develop (Fixed Cost, Time & Material, Hybrid).
  • Charge the Developer or Enterprise for Usage (Charge for API calls, charge for throttled use of mediation layers).
  • Earn through Promotions (Ad monetization). (This is diff from ‘charging’ for Impression where you control the sourcing)

Directly charge a consumer:

  • Charge for Commodity (One time download fee)
  • Subscription Charge for Access (Subscription for monthly news, Stock tickers, Domain content)
  • The above can have a variant of free for limited features, different monthly fee for different capabilities.

Since we started on Angry Birds Ad monetization as benchmark (for a specific Business/Revenue model combinantion), you should know some high-level metrics of Angry Birds (as I write) if you are aspiring to be one. Angry Birds have in excess of 350 Million downloads (across all platforms) and has 200 Million minutes of play time everyday (that’s equal to 380 years of game time every day). Also, it is not just one game anymore. It is more a game platform with series of games for every season (Halloween, Christmas),  along with extension packs and Themes for movies (Rio) and Ports (Magic for Nokia). Angry Birds is rumored to have taken in excess of 50+ release attempts before it struck the exact game psychology with its adopters. They also have a paid version, where 12+ Million copies have been purchased on iOS.

Then, Of-course, you were kidding when you mentioned Angry Birds. Yeah, I know that. in that case, lets focus on the people who are making a decent living off Ad-Monetization, shall we. Lets take an analogy here, there are so many bloggers who are making a decent living off their blogs cause they are experts in what they write and have a focused audience. So when you say you would like to start a blog to earn money, be very focused on the audience. Even for mobile apps, audience and utility matters. Who are your audience? demography (age profile..)? psychography (likes, tastes…)? What app are you developing (Game, Lifestyle, Info, Travel, Shopping)? What is the experience you are targeting (Lean-Back, Lean-Forward) etc.. Once you have figured this, you need to worry about:

  • Hardware, Software, Device (and experience) fragmentation.
  • Compelling UX, Addictive Visuals, Theatrical Experience.
  • Content Refresh Rates (or game levels).
  • Challenges and Puzzles for the right psyche and device profile.
  • Context Awareness (Location Based, Event based…)
  • Seasonal, Theme or Memorabilia (Christmas, Disney, Harry Potter)

Next, you have to worry about the metrics of the mediation layer. In other words who shall give me ads? what shall I earn? when do i get paid etc.. Some of the Ad and usage metrics that you have to be aware of are as follows:

  • Dwell Time: The average time spent by the user daily.
  • Frequency: The number of times the consumer uses the app.
  • Time lags: The time between frequent visits (this can taper down).
  • Shelf Life (Half-life): The time that a app can keep a consumer excited, once a half-life is reached, the usage tappers down.
  • Impressions: Number of times a ad is served.
  • CPM: Cost per Mille of the ad impression.
  • Clicks: Number of people clicking on a served impression.
  • CTR: Click through rates, number of clicks by the number of impressions served.
  • Global Fill Rates: This is a percentage metric representing the inventory of ads that is served.
  • Funnel Fill Ratio: Number of new users, acquired users, median users, half-lifed users that are in your funnel.
  • Viral Coefficient: This is a fancy ratio, but in general this means, how many of your current users referenced new users.
  • Relevancy Metric: Is it in native language? Is it specific to a locale? is it specific to a demography? psychography?

Notice that you earn less money by serving impressions and more for covering clicks (clicks are considered as actions and are equivalent to leads) So, how do you increase your impressions and clicks? This is exactly where the rubber meets the road friends. If you do not know your audience profile, or track the usage metrics of your app, then, you are in complete doldrums here. You need to have a good analytical dashboard in the backend or rely on the one that your ad mediator provide (like InMobi or AdMobs).

Assuming you have a compelling App which has a addictive user Interface you ‘still’ need to ponder on:

  • Is this a lean-back app driving dwell times but is not so much focused about frequency?
  • Is it a lean-forward app relying much on recency and frequency?
  • Do you understand the events that produce the time lags?
  • How about your Relevance strategy? What are your ad promotion strategy based on such relevancy?
  • Do you serve text ads versus graphics?
  • What about the Global Fill Rates? Are the house ads (free ads) eating up your ad inventory?
  • Who controls the fill rates (you or the mediator)?
  • What is the seasonal cost of such inventory (Oh, these rates fluctuates beyond anyone’s understanding).

Just while you start interacting and getting a handle of some of the above, your half-life hits and usage tapers down, now you start worrying about Funnel fills, refresh rates & median CTRs for retention (through new versions, new levels, extension packs). What about virality? marketing budget to go after prime adopters? Yeah, I can go on, but by now you get the point right. If you are throwing more than one app out there to spread the bets on the portfolio, then you have to do all of the above for every app if you need a decent top-line. But then again, you can blindly just throw apps out there not worrying of anything and hope to make some revenues as well (Good luck if you are one of them).

Just in case if you think you are in the Ad monetization business because it is ‘Easy’. Think through again. Talk to established players and understand their metrics. Get a good product mentor on board. Most importantly be ready for a wild experience. Oh do not forget to have fun in the process. Cheers 🙂

[Guest article by VV Preetham, founder of Quantama, a LBS startup. Reproduced from Preetham’s blog]

Also see: The Lesser Ambitious Breed Called “Indian App Developers”

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