How to Monetize an App and Generate Mobile Traffic

While many apps are marketed free to the consumer, spending on mobile applications continues to increase at a rapid rate. This article examines how to monetize a mobile app and create a revenue stream.
From: Tyler Hansen
October 29th, 2013 | 0 Comments

The mobile Internet has fast become a boom market in recent years and likely for years to come. With the proliferation of smart phones and tablet devices, everyone from teens to the elderly is using mobile technology daily. Every day new mobile apps are developed and consumers just eat them up. While many apps are marketed free to the consumer, spending on mobile applications continues to increase at a rapid rate. This article examines how to monetize a mobile app and create a revenue stream.

Sell Advertising Space
A traditional media model that has its origins in newspapers is to sell ad-space to advertisers and embed those ads into the content. This same model is used for television with 10 minutes of commercials for every 20 minutes of content programming, and more recently even motion pictures are cashing in on ad placement revenue. The Internet has also used this model for the past 15 years with ad revenues reaching the $36 billion mark in 2012.

This model is also used on the mobile platform and can generate real revenue. By placing small ads at the top or bottom of the screen while the user plays a game, or checks the weather, the advertiser will gain exposure and traffic to their sites. The app company hosting these ads is paid and advertising fee. However, the major drawback to this approach is that it is much harder to create attractive, enticing ads on such a small screen. App developers want to make money, but don’t always want to sacrifice too much screen space that may interfere with the operation of the app.

The “Freemium” Approach
Another popular method for monetizing an app is to create at least two versions. The basic version is offered for free and has some of the features removed or locked and often has ads embedded. A Premium version is then made available with all the features and no advertising. Of course, the Premium version is a paid version and depending on the niche can get anywhere from 99 cents to $4.99 per download, or sometimes even higher. This concept is sometimes referred to as “Freemium”, combining the two words “Free” and “Premium” and has become very popular in recent years. When carefully considered, this method can be quite lucrative, but there is one key drawback. When the bulk of users are downloading the Free version, they will by definition get an inferior experience. If the Free version is too dumbed-down, a lot of negative reviews and feedback can result and this can limit sales of the Premium version making it a lot less profitable.

Affiliate and Referral Programs
Another monetization idea developers are doing lately is affiliate marketing with mobile apps. Essentially, instead of selling ad space to an advertiser, the advertiser offers an affiliate program where links embedded in the app will generate revenue for the publisher of the app based on an app recommendation. In affiliate programs, the advertiser pays only for leads or sales that are generated from an affiliate. The system can track these “clicks” and if a consumer clicks through to an advertiser’s site the app developer gets a commission. Alternatively, they may only get a commission after a sale takes place, but either way it is a good method for creating revenue for an app. The major drawback to this is that most affiliate programs are sales-based and not lead-based, so the app company only is paid for actual sales made.

On the flip side, combining a Freemium program and your own affiliate program can be a great way to monetize your app. Having other apps and websites advertise your app for commission when a user upgrades to the premium version is a great way of building a huge user base.

With the tremendous growth of the mobile app market in today’s digital economy, developing and launching a useful mobile app is a great way of attracting consumers to your business. It can also be its own revenue stream when monetized properly. Working with a professional mobile marketer to develop a custom solution tailored to your particular app is the best way to get started.