4 Barriers to Monetizing Mobile Apps

Alex Genadinik
by Alex Genadinik 17 Jul, 2013

Mobile apps are big business, which is why nearly everyone in the digital space wants a piece of the pie. 

Despite the general excitement about creating apps, however, making a business out of an app isn't easy. Just like any other type of a business you may start, there are challenges to overcome, especially if you want to make money. And, who doesn't?

Challenge 1: High Failure Rate of Innovation 

The app stores are still somewhat new, and many app ideas tend to be innovative and unexplored. Innovation and differentiation are not only what investors want to see out of a product or service, but also help your product stand out from the crowd. Innovation also carries extra risk. When you are innovating, you are experimenting with whether your innovation will work as promised, and whether the way it works will be something that meets and exceeds expectations when users interact with it in real-world settings.

Unfortunately, even some of the top product designers don't always correctly predict whether a certain app will be a success or not. The only solution for this, if you do accept the additional risk associated with an innovative product, is to iterate on the product once it had been launched, and continuously try to improve the product. Technology seldom works correctly from the first try. Typically, it needs to be iteratively refined after launch.

Challenge 2: Building the Product

If you do decide to face the risks and move forward to create the app, the immediate challenge becomes to actually create that app. There are two immediate skill sets needed to create a good app. The first skill needed for most apps is design. And the second skill needed is the ability to code the actual app. 

Considering the high failure rate of innovative products, in most cases it is better that people either learn to code the apps on their own, or find technical partners who can create the apps. This would be the lowest-cost approach.

In some cases, paying to have the app created can work, but make sure there are not too many features, and the app is not difficult to make. If the app is too complex, it would drive up the development costs. And since usually technology is never quite right from the first few tries, having a complex product from the beginning may lead to wasted effort.

Whatever path you choose to get the app made, make sure the product you are making is something people would want. That would make it much simpler to market the app.

Challenge 3: Marketing the Product

Most apps get the bulk of their downloads from the app stores. After that, depending on the app, the next biggest sources of downloads are Web searches and social sharing. 

Having the app store and Web search be the biggest drivers of downloads means that if the app was a sort of a thing people search for, it would have a far greater chance to get discovered and downloaded. 

There is quite a bit that can be said about app promotion in the app store. Here is the crash course version of what you need to know and do. Use the keywords in your app's name and description that match what people would search. But make sure to keep the app's name and description compelling to users, as well. Have beautiful app icons and screenshots that stand out. Once people get the apps, make sure the app has high engagement, as the time spent on the app and the number of times people open the app seems to have an influence on app ranking. Also, make sure the app itself is good so that people give it great reviews. If you do all that, you will be in great shape to begin getting downloads in nice volume and be able to monetize those downloads.

Challenge 4: Monetization and business model

A business must eventually make money, and apps are no different. But apps are especially tricky to monetize for a few reasons. The first reason is that you cannot be too aggressive in your monetization because people will just give the app bad reviews and that will damage your marketing efforts, effectively losing you money. Another reason it is difficult to make money with apps is that not all users who get your app around the globe have credit cards. Nevertheless, it seems that the biggest reason it is difficult to make money with apps is the culture of mobile. People just don't like paying for apps. Plus most apps are not necessities, so people just get what they can for free and move on. 

One way to monetize every user is by publishing ads on your app, but ads make much less on mobile apps than on the Web. Plus, users hate ads much more when those ads are on their phones. Therefore, publishing ads should be a last resort for most app developers.

Before you create and market your app, try to have a very strong business model for your app that can work. To learn about different kinds of business models, take a look at an article I wrote earlier about different business models and how they compare. Probably the single best business model for mobile apps is a subscription model, but not all apps are repeat-use apps. So if there is no repeat usage, then there is nothing to subscribe to. So the business model must match how your app is actually used.

And overall, keep in mind that for most apps, the per-user monetization will be very low. The only way to make up for it is in achieving a high volume of downloads.

Author Bio: 

Alex Genadinik is a mobile developer and the creator of some of the top business plan apps for iOS, Kindle and Android. Alex holds a B.S in Computer Science from San Jose State University. He also advises companies like G33kTalk on their mobile and marketing strategies. Please say hello to Alex on Twitter @genadinik and let him know what you thought of the article.