Mobile App Monetization: Think Business Model, Not Ads

Article

According to statistics released from the Interactive Advertising Bureau, mobile advertising spend rose to $3.4 billion in 2012, up 111 percent from the prior year's record levels, and mobile advertising now accounts for 9 percent of all digital revenue.

Spending on mobile devices continues to accelerate at an aggressive pace; naturally, advertisers are following the consumers. Despite this growth, the traditional display ad model of advertising that dominates the Internet just does not translate well to the several inches of screen available on the typical smartphone.

On a 21-inch screen, a small banner ad simply becomes part of the scenery, and doesn't take up so much real estate to impact the user experience. While mobile-specific ads are designed to be less obtrusive, they still occupy a significant number of pixels – space which could have been used to improve the app experience.

Freemium

Popular with many games and some service-oriented applications, the "freemium" model offers a stripped down experience for free and a fully featured app for those who pay. Freemium can be a way to drive initial traffic, but it does have its downsides.

Affiliate and Referral Marketing

Affiliate marketing through links is one track mobile developers are taking to monetize applications without devoting valuable screen space to a third party. New services are automatically transforming existing mobile links into revenue-generating links by directing the user to one of thousands of retailers.

In-App Purchasing

Beyond display ads and affiliate marketing, a major and growing mobile monetization strategy is in-app purchases. Buying these virtual goods typically provide deeper levels of engagement with the app content.

Which monetization strategy to choose depends on several factors including the purchasing habits of the target audience and the type of application. Monetization should not be an afterthought for developers. Business models should be considered first, and then developers should create or integrate technology that will enable the business model to be successful.