Home Open Mobile Summit: 4 Ways to Monetize Apps

Open Mobile Summit: 4 Ways to Monetize Apps

This morning’s focus at the Open Mobile Summit in San Francisco was how developers can make money with their apps. Several high-profile developers and app publishers were on hand to provide their insights on the various ways they’ve successfully monetized their applications through mobile ads, game mechanics, virtual goods and scaling.

In-App Ads

To discuss mobile advertising opportunities, Pandora CFO John Trimble explained how the streaming music application became one of the top mobile music players today.

When the Pandora iPhone app was introduced back in summer 2008, it altered the direction of the company, not just in the user experience but also the monetization opportunities. Over time, the listening curve for the service began to look like more like terrestrial radio, meaning listening occurs over evenings and weekends, too, not just 9 to 5.

Some quick stats on Pandora: The service has 35 million listeners, half of which are on mobile devices. And in the future we’ll see more Pandora embeds in autos, appliances and TVs, said Trimble. Pandora sees 52% of its traffic coming from mobile devices and its mobile hours streamed has more than doubled since January. Mobile activiations have more than doubled since January, too. The service now sees more than 100,000 mobile activations per day.

Ads are served in a very personalized environment, so as not to disrupt the user experience too much, he explained. Shorter length commercials that offer a value proposition up front (tap to call, tap for more info or tap to email, for example) are vastly better on mobile devices. Unfortunately, he said he couldn’t reveal any actual statistics on this.

Trimble did say, however, that less than 1% of registered users pay for an ad-free experience on Pandora.

In-App Purchases and Virtual Goods

Check-in based mobile social network Booyah’s co-founder Brian Morrisroe discussed how game mechanics can affect retention and conversion rates for app developers.

He spoke about Booyah’s virtual goods model, noting that “utility” items are greater than “vanity” items in terms of sales, but Booyah offers both. It also offers new content to extend the games or provide variety to the existing experience and offers rare items and exclusives.

When it came to monetization, Booyah decided that it didn’t really like using banner ads because of how those affect the user experience. Banners aren’t always relevant, which was another issue, said ?Morrisroe. To solve this problem, Booyah leveraged virtual goods and other game mechanics relevant to where the users are and what the users are doing.

The result was that branded ad items became “collectible” items within the game. This provided advertisers with persistent ads and users had an emotional attachment to those items. Users even began to horde these virtual goods (he mentioned H&M branded items, for example) and  even began demanding more of them.

Other participating brands on Booyah besides H&M now include MTV, P&G, Powermat, Microsoft, HP, Kaiser and Disney.

FarmVille’s Director of Mobile, Jen Herman, then came on stage to talk about the revenue potential of virtual goods. She gave the audience a look at FarmVille’s virtual goods machine, including supply and pricing consideration and consumption trends.

FarmVille’s parent company Zynga was founded in 2007 by Mark Pincus and includes games like Farmville, YoVille, FrontierVille, ZyngaPoker, Cafe World and Mafia Wars. FarmVille has ?60+ million active monthly users, 15+ million active daily users and 24 million Facebook fans. ?80% of its daily users engage in core farm game play. ?Farmville now has Web, iPhone and iPad versions, she said, and on the iOS platform, 45% of players are mobile-only on any given day. As for demographics, 60% of FarmVille’s users are female, 40% are male.

?Within Farmville, said Herman, 90% of revenue comes from in-app purchases.

The company monetizes its game using the freemium model using in-app purchases. Because the billing process is so streamlined and trusted on iOS, users are willing to make purchases without hesitation, she said.

The company has also introduced branded sponsorships with custom campaigns that provide “meaningful integration” into gameplay. Current parnters include Cascadian Farms, Farmer’s Insurance and McDonald’s.

Monetizing on One Platform Only

Smule CEO Jeff Smith came on next to discuss how his company leveraged just one platform – iOS – to become successful with a full line of mobile applications.

He began by talking about why mobile 1.0 failed – it was because of the hardware. The hardware limitations prevented developers from being able to innovate. Another issue was fragmentation – the different form factors, operating system versions, device capabilities, etc. He also talked about how Android’s fast release schedule for new OS versions is difficult to work with and how Android’s official Market was not as good for distribution as iTunes is, although, he admitted, that’s beginning to change.

But for Smule, the company felt that it needed to see a real ROI on its investments, and it couldn’t accomplish that by developing cross-platform apps. “A true engineering ROI requires a 7x return,” said Smith. “If it doesn’t, you can’t build a software business of scale.”

Smith also mentioned that the “write once, run anywhere” philosophy for app creation is just “a recurring pipe dream.” Meanwhile, porting apps throttles innovation and a “porting” core competency does not create enterprise value.

“I’m not saying it’s a one size fits all thing,” Smith said. But it was what worked best for Smule.

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