How to Make Money from Apps: A Look at Monetizing Mobile

Back when “mobile first” was still a new strategy, releasing an app was a revolutionary approach to increase mindshare and create another monetization channel for your business.

In those early days, it was easy to stand out and discern how to make money from apps. It was so easy, in fact, every developer or small business owner who could — did.

That flurry of development to create apps for task management, organization, entertainment, education and more landed us in our current straits — up a sea of apps without a paddle.

How big is this sea to be exact? 1.5 million apps in the Apple App Store and 1.6 million apps in the Google Play Store — with more added daily. Yet, only a few become an integral part of users’ routines.

Now it takes more than just a good idea to break through the noise.

How to Make Money from Apps, a History by Phase

Simply developing an app isn’t enough anymore. There must be a more calculated strategy and intended target audience behind every idea, especially when considering how to make money from apps and their development. It’s imperative that the function and experience of the solution stand out.

This year at MobCon Central, the MentorMate-founded mobile technology conference, Adobe’s Vice President of Mobile broke down the phases of mobile adoption when considering how to make money from apps. After the initial flurry to develop for the two primary app stores, Apple and Google, continued user acquisition became the focus. Followed by an analysis of what was or wasn’t working.

Then PANIC.

The market was flooded. How could existing apps grow? Revise and refine their user experience to make the most of and convert traffic.

The stages in other words…

1. “There’s an app for that!”— The first highly romanticized phase of mobile development. During this time, there was a high development of mobile apps and reasonable discoverability. If an app was released, users could search in the topic area, and there was a high probability it would be found.
2. User app acquisition — After the initial influx of new apps, the successful tier of apps continued to improve and steadily gain users.
3. Analysis — After user acquisition slowed, a period of intense behavioral study began. Businesses and developers wanted to understand how people were using apps to help decide whether continued creation or amendments to existing mobile apps made sense.
4. “There are a lot of apps for that!” — It became exceedingly difficult for app makers to attract and convert user traffic.
5. Iterate on user experience — This is modern state. User experience for existing apps and other web technologies has become more important than solving the problem with a wholly new solution.

App Darwinism — It’s an App Eat App World

Only the strongest survive as the owners of these mobile moments are becoming increasingly consolidated.

The sheer number of apps in each marketplace makes discoverability for small to mid-size brands without an enormous advertising budget behind them a serious challenge.

Beyond that, the cost to acquire downloads has risen astronomically. Some might say that the dream of the lone developer whose entire monetization plan included creating an app, releasing it and striking it rich is now highly unlikely.

Fifteen out of 20 apps in the app store don’t generate any revenue, according to Comscore, as presented at MobCon.

Looking beyond the limited number of apps actually generating revenue in the app store, 81.3% comes from games. Deconstructing that even further, over half of the games generating revenue are:

• Strategy
• Action
• Card
• Casio
• Puzzle
• Role playing

Competition Meets Changing Systems of Interaction

Two factors have made it increasingly difficult to stand out with mobility:

• Increased companies operating in the mobile sphere (as demonstrated by the rapid offering growth in the app store)
• Changing systems of interaction

Let’s break it down.

Increased competition. Brands today must either defend their position in the marketplace or disrupt entrenched enterprise through innovation. Take big-box retailers like Target compared to Amazon. Target leveraged mobile to help defend its position as a viable retailer in competing with other options that allow customers to access virtually any product from the comfort of their sofa. With Cartwheel, Target rewards the shoppers who do venture outside and into a store serving them proximity-based coupons through the app.

Changing systems of interaction. Beyond competition, there is a paradigm shift at work here driven by the younger generation of consumers. Younger people want to interact with technology differently. They want to engage their financial institutions on the bus. They want to track spending on entertainment consumption vs. funds spent at coffee shops vs. the grocery store. They want to control the temperature of their homes from their phones. Tech mainstay Google even reorganized under Alphabet, allowing them to further diversify and satiate this changing tide of consumer needs via Nest.

So, when does it make sense to develop in considering how to make money from apps?

3 reasons a release makes sense for your business:

1. Integrated experience — If releasing an app improves the total customer experience. According to Forrester, only 14 percent of businesses are leveraging mobile in this way.
2. Line-of-business — Less work has been done developing mobile for audiences inside the enterprise. Opportunity exists for visionaries who want to play in this space.
3. Behavior — Your app reimagines an existing process or interaction to match changing systems of behavior

Pro-tip: While some apps rely on in-app purchases or primary purchase of the app to monetize, in-app advertising offers another option to continue competing for revenue in a cramped marketplace.