Generating Revenue With Apps

Melinda Gates recently spilled a little tea on the idea of the importance of apps:

 

 

The quote is intense, for sure -- but the fact is, many apps do help you “do good” or change the world, and to be fair, the point of apps is often to drive revenue. Dog-centric apps such as the one in this example tend to generate a strong amount of revenue. Makes sense, as lots of people have dogs, and those same people can’t always be home to walk said dogs, so… a company like Wag, which is app-only, can still be valued at $650 million or more. (And it’s not the only pet-care/dog-walking app on the block, either.)

 

Apps can make a ton of money for a core business. You probably are familiar with some of the core revenue models for apps, to boot: advertising, subscriptions, sponsorships, in-app purchases, etc. You’ve also potentially heard of some notable revenue-boosting, competition-slaying apps like Domino’s, which used its app ecosystem as a major boost over rivals like Pizza Hut.

 

But in a world where “the App Store feels like the lottery” and over 50% of the most popular apps are created by behemoths Google and Facebook, how do you get bread for your core business through an app?

 

Data, data, data, and data again

Here is the great promise of mobile technology, in a nutshell: users allow you to have their information, up to and including their current physical location, because they want better, more personalized experiences. Unfortunately, brands don’t consistently deliver on that -- and when you factor in high-profile news stories about privacy issues, to the point that The New York Times launched a privacy project in early 2019, potential consumers are increasingly weary of how their data might be used.

 

If you can rise above that noise, then, it’s a path to moolah.

 

Consider the power of data in this example:

 

Riga-based Ask.fm, billed as the biggest Q&A discussion platform in the world with more than 215 million registered members across 168 countries, knows the value of its app data and the importance of compliance. “Data is an industry trend and if you don’t monetize your data in a responsible way for relevant advertising then you are out of step with the market,” Artem Pavlov, Product Manager at AskFM, tells me. But it’s not just about the cash. It’s about the boost when quality data comes together to add value and ensure advertising is aligned with audiences. “Showing an 18-year old an ad for Marshall headphones is a much better experience than serving him ads for real estate, for example,” Pavlov explains. “Here is where we get additional revenue from advertisers because our ads get higher CPMs.”

 

Better data --- > better profiles of users --- > better CPMs --- > better relationships with advertisers.

It’s an ecosystem. No one wants to get push notifications about irrelevant stuff. We’re all getting pinged left and right all day. But when we get that targeted ping about that John Mayer concert we’ve been eyeing, well, that’s powerful. Powerful means revenue.

 

Free apps often monetize around the power of data, and the highest-grossing apps by revenue in the world in 2018 are all largely data-driven, with Netflix -- at almost $800M -- being No. 1.

 

Worry less about advertisements and more about selling the service

Advertising is a great, and standard, way to monetize an app. An increasingly popular revenue approach is “service-based monetization,” whereby you attempt to become a “Super App” by cultivating relationships for the benefit of the audience. Again, most of their success also comes from data, notably having the volume of it to predict what their users will want to see or be informed about next. Service-based monetization eventually leads down a path of data-driven advertising and pushes, but it’s a bit of a “relationships before revenue” play. At a time when younger generations increasingly look at brand story and perspective, this does matter.

 

Getting bread is about…

… ultimately, people pay you value. You can have philosophical discussions all day about whether iPhones need to be as expensive as they are, but the fact is, iPhones sell well. What does that mean? It means millions of people in the world saw some value of that combination of features. Now, that specific market might be drying up, but the core of any business is providing value in exchange for a form of compensation back from the end users. Value is the fulcrum point on which everything rests.

 

So, can you make an eye-popping amount of money with an app? Of course. The app has to provide value, though, and that value is going to come from using data to cultivate relationships.

 

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