Launchpad Online: Understanding Mobile App Business Models

Hi, my name is Desiree Motamedi. I cover mobile app
advertising at Google. We’re going to look at the
various business models you can use to make
money on your apps. A successful business model
maximizes the lifetime value of every user while delivering
the best experience. You’ll want to evaluate
all revenue stream options and pick a strategy
that includes some sort of hybrid monetization model. At a high level, mobile
has three categories of monetization, free,
freemium, and premium. Free is either
purely ad supported or directly connected to
a larger brand, generally for promotion of a product or
service, such as Uber or Lyft. Freemium offers users an
app that’s free to download, but might include in-app
billing, in-app ads, subscriptions, or donations. Premium apps require a
payment before installing. These types of apps
include paid apps, apps in which
subscriptions are required, or even a hybrid
model, such as paid app that has an in-app purchase. Now, let’s dive deeper into
these three approaches. We love anything that’s free. So it’s no surprise that users
are more likely to download free apps and games. But you’ve got to
make money somehow. If you have a separate business
that’s driven by your app, like that of eBay
or Netflix, you don’t need to generate income
directly from your app itself. But if your app
is your business, you could give it away
for free and place ads inside the app to
make your money. Every time someone sees
the add or, in other cases, clicks on it, you get paid. Different ad networks
have different ways of integrating the ads. For example, with AdMob,
Google’s mobile ad network, you’ll have control over the
types of ads your app will show and where they’re
placed in your app. A purely ad
supported model isn’t your only option for making
money from free apps. There’s a freemium model. One very popular freemium
solution is in-app billing. This allows you to
sell digital goods that are durable or consumable. Durable, once purchased, the
item, like an additional app feature, for
example, will always be available to the user. Consumable, these are items
that might be used progressively or expire after a period
of time, such as currencies or points. Between the two, by
far the most common is consumable for
in-app currency. Most games allow you to
buy currency that can then be spent on in-game items. Comparatively, few will
sell you the items directly. It’s common to have two
forms of currency in a game, one that can easily be earned
by advancing in a game, and another that’s
very difficult to earn and must be bought
with real money. In-app purchases
are often impulse buys and can be a big
moneymaker, especially in gaming. Using Google Analytics and
AdMob also allows you to segment your users. If a user’s providing a revenue
stream through in-app purchase, you can choose not
to show them ads. We’ll explain this in greater
detail in a later video. Another freemium
strategy would be to offer the app for free
with limited features, or with full features
for a limited time. Then, highlight that there are
in-app purchase items available that can unlock the
full, unlimited app. In addition to games,
the freemium model has successfully expanded
into other categories, such as dating, music,
messaging, and news. Premium apps. Charging users to
download your apps is a simple, convenient
monetization model. You create a merchant
account in the app store you’re using
for distribution. Then set your price. While the premium model
can be a great approach, it may limit your app’s
monetization potential. You may be able to achieve
greater revenue using a combination of ad
supported, freemium, or subscription models. Increasingly, apps and
games are finding success with hybrid monetization models. In fact, Google found
that game developers who are combining ads
with in-app purchases are getting more than
double revenue per download than the developers only
focusing on in-app purchases. Some other hybrid options
would be show ads in your app and remove them if a
user buys a subscription. In addition to selling
your app outright, you could also choose to
include advertising or use in-app billing to sell
additional features or content. This model could work
well for any app or game, but it’s most appropriate for
apps with extensive features or those that address
a narrow niche. An example would be
productivity tools, like creating tasks, and paying
a monthly fee for reminders. You can also dynamically
combine in-app billing with ads. Since only about 50% of
users make in-app purchases, you can use Analytics to
identify the other 85%, and shift to showing them
ads instead of offering them in-app purchases. You’ll need to consider
the function of your app and your user base to choose
the right monetization approach. For our next session, we’re
going to focus specifically on monetization with ads. Thanks for watching. Be sure to check out our
other videos and visit for
more information. [MUSIC PLAYING]

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