During the App Mania of 2009 – 2010, many developers where not sure on what the best way was to make money from the apps. At DigiMix, we were frequently asked by app developers: “How do I monetize my app?” Or “Can you help me create a monetization strategy?”. In the case of iBetOnGolf, we were tasked with developing a monetization strategy to maximize the revenue from the app. The key question was: “Should I sell the app or should I advertise?”.
Beginning with market research, we surveyed users and analyzed the competition, finding that there were allot of golf apps for iPhone was a highly competitive space. However, iBetOnGolf focused on one thing and it did it really well, calculating golf wages and games. It’s basically a golf score card with built in calculators for Skins and other popular golf betting games. With that in mind, we set out to conduct our first set of A / B testing, comparing the revenue from the app being free for download monetized by trafficking ads from the AdMob network (yes, this was pre iAd), to revenue occurred from a $.99 download price. An analysis of the data revealed that charging the $.99 for the download was actually a more profitable model. But how was it possible that more people where not downloading it if it was free? There are a variety of factors, but our focus groups with end users indicated that their was a perceived value of app when it cost money, that was not existent when it was given away for free. People were reluctant likely to invest time into something that was free, unless it was recommend by a friend or social influencer. Additionally, there was not enough traffic on the app store for golf scorecard apps to support the critical mass necessary to produce the require revenue derived from advertising.
Our takeaway was that unless you have a substantial amount of active users, advertising on mobile apps is not profitable, and that mobile app users perceive an inherent value in apps when they cost money.