A better approach to app monetization

A recent report found that a mere 0.19 percent of all mobile game players contribute a whopping 48 percent of revenue to the games’ publishers. With this staggering statistic in mind, how can publishers not only nurture known high-spend users but also increase the value of the remaining 99-plus percent of players?

Obviously a one-size-fits-all monetization approach isn’t going to cut it.

When it comes to app monetization, segmentation is the more intelligent solution. By understanding the spending likelihood and characteristics of each player, publishers can adapt their monetization approaches to the individual. Said another way, publishers need to focus more on monetizing users, rather than monetizing apps. But how exactly do they do that?

Differing approaches according to app user

A publisher’s monetization approach to in-app purchasers should differ compared to non-spenders. Of course, to implement this blended approach, publishers must first identify individual users according to their spending habits. Predictive analytics make such segmentation possible and enable publishers to adapt their approaches as follows:

• Confirmed in-app spenders. As the recent Swrve report noted, the most lucrative in-app spenders represent only a tiny fraction an app’s overall user base. That said, such users are quite valuable and, as such, need to be treated in a way that respects that value and preserves the customer relationship. In general, known in-app spenders should not be subjected to ads. The revenue generated from in-app purchases by known spenders will likely dwarf that of ad revenue generated from the same user.

• Potential in-app spenders. Predictive analytics aren’t completely black and white as it relates to spenders and non-spenders. There is certainly a group that falls in the middle — those users who haven’t spent yet or have only spent a little, but demonstrate the possibility of higher spending if handled correctly. For these individuals, it might make sense to serve ads to them, but perhaps at a lower frequency to enhance the user experience. Likewise, this group might be particularly susceptible to messaging that encourages in-app purchases by demonstrating the value and appeal of such purchases.

• Unlikely in-app spenders. And of course, as every app publisher knows, there are users who will not spend inside of apps regardless of the incentives you throw at them. They just won’t do it. In fact, Swrve data has shown that less that 2 percent of active players make purchases in a given month. With these users, advertising is likely the best and possibly only monetization option. So, rather than wasting your time with continual urgings to make in-app purchases, focus instead on dialing up the frequency of external partner ads served to that individual and optimizing the value of every impression.

Audience targeting for better monetization

When it comes to the third group of users, the unlikely in-app spenders, publishers need to maximize the value inherent in these individuals. To that end, embracing the enhanced granularity with which advertisers today can target their spends yields higher CPMs and fill rates — and overall greater profitability — as it relates to this large base of users. On average, developers that have enabled targeting in their ad serving have seen more than a 30 percent lift in CPMs and 50 percent lift in fill rates. In one case, a developer that enabled targeting saw a 300 percent lift in fill rate that resulted in more than 1 million extra impressions per day.

Enabling advertisers to target audiences based on location and demographics is key to success in today’s crowded app marketplace. Developers must keep this requirement in mind and ensure that they have the ability to pass through user data to better inform the monetization of the individual. Particularly in the ever-expanding programmatic landscape, capturing and passing through information related to a user’s location, device and known demographics is vital to user monetization. Often, this data is right at developers’ fingertips; they simply need to remember to (literally) share the wealth.

As COO of AerServ, Andrew Gerhart oversees daily operations, ensuring clients, employees, and partners get the solutions necessary to success in a social/mobile world.