This is a contributor post by Natasha Starkell, producer of AppInTop mobile app marketing podcast.
Games, Music, Business, Social Networking, the category choice goes on. Free, free-to-play, freemium or paid app, which monetisation model do you use? Should you go for global release or focus on a few selected markets and, if so, which ones? Building your next app involves a lot of careful thought and painstaking research.
Even if you have thought of the next ‘must have’ app that will be the go-to subject of water cooler discussions everywhere, you still need to work out if it will be able to generate enough revenue to cover the costs of developing and marketing it. With more than 1.6 million apps in the App Store alone, without the resources to promote yours into the top less-than-one-percent you will have a hard time making it successful as a business. Making decisions At first, you need to:
- Decide what territories you are going to market it in.
- Find out how much similar apps make in that territory.
- Find out how many downloads these apps get.
The data about app revenue and downloads does not come cheap. If your budget is tight, browse Quora forums or industry publications to find examples of how many installs an app requires to get to the top ranks. If not, prepare to spend upwards of $10,000 per year on App Annie Intelligence service, which will offer you the number of installs and revenue for any existing app.
Top Grossing iPhone Apps
Typically the most profitable categories of apps include free-to-play games, music, dating and gambling. If you look at the top app store charts, these apps are published by the giant companies (many of them public) where investors have poured in tens and even hundreds of millions of dollars in funding. Here are a few big names:
- Games: King.com, Supercell, Electronic Arts, Glu Games, Machine Zone.
- Music: Pandora Music Radio, Spotify, Smule, Rhapsody, Rdio, Shazam, TuneIn.
- Dating: (social networking). Zoosk, Match.com, OkCupid, POF, Grindr, eHarmony.
- Gambling: Big Fish Games, Playtika, Zynga.
Most of the top publishers have ample marketing budget to spend on advertising, ensuring they maintain their top positions in the app stores where most users find their next download. So the question you need to ask yourself is whether or not you have a good marketing channel and budget to maintain the level of downloads needed to keep up with the big guys. For mobile games a developer needs between 30,000 and 70,000 daily downloads to stay in the top ten overall rating in the US App Store, according to the head of marketing at Wooga, Eric Seufert. With the cost of downloads rising to an average of $2 each, to maintain that level of downloads a company requires between $60K and $140K per day to keep going.
In the gambling space, a high-profit user, also called ‘a whale’, has a lifetime value of $1000-$2000, compared to $100-200 in free-to-play games, said the CMO of Gamblit Gaming, David Chang, in an interview with AppInTop mobile app marketing podcast. He also advised that novices not to try to enter this category, as the existing players are prepared to spend much more than an average app publisher on user acquisition, and they have the resources to do so.
What countries should you select as your key markets?
Launching in a particular country means localizing your product for that country and dedicating a portion of your scarce marketing budget to acquire new users. A smaller country in terms of population means that you will need a smaller, more affordable budget to get to the top ranks – for example 2000 downloads. But fewer downloads also means less revenue. In general, the US, Canada, Australia, and most of Western Europe are good places to start. In Asia, Japan, China and South Korea lead the way as the key mobile markets, whilst in countries with large populations but smaller GDP per capita, such as Indonesia, Philippines, Vietnam or Thailand, the monetization opportunities are few and far between.
According to Kirill Sofronov, the founder of mobile marketing agency TapGravity, Russia and Brazil are increasingly popular markets amongst app publishers, as they have large audiences that are willing to pay for apps. Be careful, though, when judging your app’s potential success based on GDP only. Small, but wealthy countries may be just too small. This is why the founder and CEO of eRepublik Labs, Alexis Bonte, decided to soft-launch the company’s new game Tactical Heroes in Spain after an unsuccessful attempt in New Zealand.
Source: CJ Netmarbles
Take into account a country’s specifics. For example, according to Jan Hinrichs, the founder and CEO of Beluga Linguistics, in South Korea people prefer apps made by Korean companies. Localization of an app for Korea is a linguistic nightmare as well. Another important aspect of South Korea, the home country of Samsung and LG, is that Android platforms represent 95 percent of the market. To enter China you should always consider partnering with a local company, and be aware that hundreds of Android app stores dominate the market there, according to Evgeny Kosolapov, the CEO of iFree Asia, whilst Google Play has very little presence.
Deciding what kind of app to build goes hand-in-hand with a decision about what monetization or a revenue model your app will have. According to the Developer Economics Survey in Q1 of 2014, here is how app developers monetized their app business.
- 35% earned revenue through in-app advertising, selling ad space.
- 32% earned through selling apps in the app store. The challenge of this model is competition from freemium or free-to-play apps and games, accounting for more than 95% of all the mobile apps.
- 30% generated revenue from in-app purchases.
- 26% went for freemium model, where the basic app is free, but extra features must be purchased.
- 14% sold subscription services, for example, news, music or video streaming apps.
- 14% monetized their apps indirectly.
- 11% apps focused on m-commerce.
- 10% generated revenue from royalties and product licensing.
- 7% earned money from the Affiliate/CPI model, selling other products and apps through their own.
These different monetisation strategies can work with nearly all categories of apps, so long as you can guarantee the audience. To show potential advertisers and affiliates you have the audience, you need to climb up and stay high up in the charts, and that all comes down to your marketing budget. With the price you will have to pay in advertising to reach the top being anywhere from $1.5 to $3 per install, you’re back to working out if your app can still make a profit after you have recovered the marketing costs. That will be the main factor in deciding what kind of app to build.
AppInTop is an automated mobile app marketing platform that helps mobile app publishers optimize cost of mobile ads. The company produces weekly AppInTop mobile app marketing podcast and a mobile app marketing course. If you find our materials useful for your profession, please subscribe for our podcast via iTunes or TuneIn and sign up for a mobile app marketing course here.