Monetize Your App - by hristo neychev

MONETIZE
YOUR APP
by Hristo Neychev

facebook.com/HNeychev linkedin.com/in/HristoNeychev twitter: @HristoNeychev

So, you have created this
amazing, useful app and now you
want to make some money with
it!


What is your favorite cocktail?


My favorite
cocktail

SEX
ON THE BEACH


Now…let’s talk
about

SEXY PROFIT
ON THE BEACH


SEXY PROFIT
ON THE BEACH

30% analysis

20% forecasting

40% marketing

10% finance


Build it and they will come!


Profit = Revenue – Cost


PROFITABILITY ESTIMATION

Total
New Number
Paying of Users
Number Conversio
Paying Users n Rate (to
Users Churn paid)

Revenue
Revenue Buy the
App
Average
Revenue In-App
per User Purchases
(ARPU)
Subscripti
on Fees

Profit Infrastruc
ture Cost
Hosting
Bandwidt
h
Storage

Cost
Developm
Staffing Support Marketing
ent
Cost
SEO

PPC
Marketing
Budget Social
Media

PR


Total Number
of Users
New Paying
Users
Number Paying Conversion
Users Rate (to paid)
Churn

Revenue
Buy the App

Average
In-App
Revenue per
Purchases
User (ARPU)

Subscription
Fees


Infrastructure
Hosting Bandwidth Storage
Cost

Staffing Support Marketing Development

Cost
SEO

PPC
Marketing
Budget
Social Media

PR


POTENTIAL REVENUE SOURCES
• Pay-per-download • Sponsorships
• In-app advertising • Promotions
• In-app purchase • Lead generation
• Affiliated web services • Analytics
• Subscriptions • Affiliate sales


PAID APP

 Prices from $0.99 up to $999.99
 The Apple/Google store keeps 30%
 Average price is going down
 One time charge
 Reduces adoption


PAID APP

30%  One time charge


THE 300 MOST POPULAR
PAID GAMES PAID APP

$2.50  Prices from $0.99 up to $999.99

$2.00  The Apple/Google store keeps 30%
$1.50
 One time charge
$1.00
$0.50

$0.00
JUN '10 JAN '11 JUN '11

facebook.com/HNeychev linkedin.com/in/HristoNeychev
www.distimo.com twitter: @HristoNeychev

PAID APP


PEOPLE  The Apple/Google store keeps 30%

EXPECT FREE  Average price is going down

UPGRADES  One time charge


FREE(mium) APP

 Freemium vs. Free Trial
 Freemium is a tricky game to play
 Very low conversion rates
 Beware of the marginal cost (MC)
 Wider adoption = wider advertising
 Set smart tripwires


FREE(mium) APP
• Conversion rates are in the range
0.5% to 4%  Freemium vs. Free Trial

• Look at Pandora, Dropbox,  Freemium is a tricky game to play
Evernote, Skype, etc.  Very low conversion rates

• Shoot for 1-2% conversion rate  Beware of the marginal cost (MC)


EXAMPLE:
MC = $1 FREE(mium) APP
ARPU = $5
CR = 1%
 Freemium vs. Free Trial
CALCULATION:  Freemium is a tricky game to play
Freemium users: 1,000,000
Monthly Revenue == $500,000  Beware of the marginal cost (MC)
(1,000,000 * 1% * $5)
Monthly Cost: $1,000,000  Set smart tripwires

SEXY PROFIT => UGLY LOSS 


LIMITATIONS BASED ON: FREE(mium) APP
• Features • Usage quota
• Capacity • Number of seats  Freemium vs. Free Trial
• Effort • Customer class
• Support • Bandwidth features  Freemium is a tricky game to play
 Beware of the marginal cost (MC)


IN-APP
ADVERTISING
REVENUE SOURCES

IN-APP ADVERTISING

 Need an app used multiple times a
day by the same user to get more
impressions
 Need a lot of downloads to make
any money
 Woks well with low MC freemium
apps


IN-APP
PURCHASES
REVENUE SOURCES

IN-APP PURCHASES
PAID

 Several options
 An example
In-App of each transition
Purchases
 Big revenue of potential

FREE FREEMIUM
 Multiple sessions lead to more
purchases


IN-APP PURCHASES

 Several options
 An example
of each transition
purchases


IN-APP PURCHASES

 Several options
 An example
30% of each transition
purchases

AGAIN 

REVENUE
POTENTIAL IN-APP PURCHASES
9

Advertising
8
Revenue 23%  Several options
7 IAP Revenue
 An example
6
5 18% of each transition
4
3
77%  Multiple sessions lead to more
2 82% purchases
1

0

2011 2012E
http://www.flurry.com twitter: @HristoNeychev

FIRST IN-APP IN-APP PURCHASES
[CATEG
PURCHASE
ORY
NAME] ,0  Several options
[CATEG
[VALUE]
ORY
NAME]
 An example
[VALUE]
[CATEG  The Apple/Google store keeps 30%
ORY of each transition
NAME]  Big revenue of potential
[VALUE]
purchases

http://www.emarketer.com twitter: @HristoNeychev

AFFILIATED
WEB-APP
REVENUE SOURCES

AFFILIATED WEB-APP

 Good for content based apps
 Make money on the service/content
not on the app
 Reach new customer audience
 Reach new search behavior


5 Common Mobile AFFILIATED WEB-APP
Search Behaviors
1. Fewer keywords
2. Location is key (GPS, Google
places)  Make money on the service/content
not on the app
3. Mobile experience
 Reach new customer audience
4. Time (more frequent on
evenings and weekends; the
 Reach new search behavior
opposite of desktop search
behavior)
5. Apps vs. Browser searches 27%
vs. 73% but growing

http://www.spydertrap.com twitter: @HristoNeychev

SUBSCRIPTIONS

(newspapers…
 …magazines, and comics)
 Not limited to those
 Low conversion rates (1-5%)
 Relatively reliable revenue


SUBSCRIPTION
BASED GAMES SUBSCRIPTIONS

(newspapers…
 …magazines, and comics)
 Not limited to those

http://www.insidemobileapps.com
twitter: @HristoNeychev

SUBSCRIPTIONS

(newspapers…
SUBSCRIPTION  …magazines, and comics)
CONVERSION  Not limited to those
RATE  Low conversion rates
1-5%  Relatively reliable revenue


IDEAS: SUBSCRIPTIONS
• Annual subscription
• Monthly subscription
• Automated recurring billing
(newspapers…
• Subscribe for a service/feature
• Subscribe for support plan  …magazines, and comics)
• Good/Better/Best account  Not limited to those
options


CHOSE THE RIGHT MONETIZING STRATEGY
• Simple Games = Free/Freemium + In-App Purchases
• Complex Games = Paid/Freemium + In-App Purchases
• Niche Apps = Paid with a Higher Price + Good Service
• News Apps = Free + Advertising
• Content Apps = Free + Subscription


NEXT STEPS
1. Choose your monetizing strategy
2. Build your Revenue and Cost forecasting models
• (based on assumptions)

3. Challenge your assumptions
• (research articles, studies, similar apps, marked data)

4. Finalize your forecast (World Domination Plan )
5. Go Live
6. Use real live data to constantly improve your strategy


And last, but not the least…
…have FUN on the beach!


Thank you!

facebook.com/HNeychev
linkedin.com/in/HristoNeychev
twitter: @HristoNeychev

Monetize Your App - by hristo neychev

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