The Bright Future of Apps Monetization

One in seven million four hundred twenty-five thousand. That could be the pessimistic, or realistic, answer to the already classic “go build an App and make a lot of money”. There are 7.5 million apps published (iOS + Android) by 2.8 million publishers and around 12 million developers of mobile apps worldwide. The 1% of those 7.5 million Apps, produces 94% of the global revenue of the industry, or we could say, 75 thousand apps are worth about 47 billion dollars. And if you want to be a bit more pessimistic, you could say that 55% of app developers do not generate income, or say they are below the poverty level (of the industry).

But despite these big differences between the few above and the many below, all have something in common: Users who use their apps. The 3.4 billion people, or users, who downloaded apps during 2016 have invested a total of 1.6 trillion hours in them.

And each one of those users and their minutes spent using each app, is worth money. And it’s worth a lot. A first reference to the value generated by the use of apps could be taken from the numbers that moves the advertising within the apps: 80 billion in 2016 in total or 23.50 USD per user. And of course, the apps that more users have, the more they get. And those who have few users, generates nothing. But they actually generate something: DATA.

For an industry of 1.3 trillion USD (ads, in-app purchases, m-commerce) to work, you must use a lot of information: how to get to a customer, what to offer, how to get my app to be used, how to keep using it , how to do so that you enjoy and recommend it, who you would recommend, how much you could spend, when you could spend, etc., etc., etc. And all those questions, and more, have answers, calculated based on what is known about the user, or presumed to know.

But where is so much information generated that is then exploited by this 1% that takes the entire business? Much of that information comes from the “Long tail” of applications. All those apps that have a lot to lose and nothing to gain, that have a few thousands of users that only generate a few cents of income each month.

Each app uses on average 18 “libraries” or third-party software to add some kind of functionality to the application. 82% of apps use an analytics SDK, while 75% use at least one SDK to show ads. And here is where you usually tend to summarize two transactions in one, where the owner of the app probably ends up giving more than what he or she receives. The first and most obvious transaction is called “inventory”. A developer integrates an Ads SDK, free, and begins to generate spaces where, instance by instance, publicities appear. Depending on the effectiveness of those ads (number of clicks) is what the owner of the app will receive as income. Inventory for shared profits, first transaction. On the other hand, integrating an SDK to your application implies “opening up” to a third party, who can in many cases obtain data from users without even notifying the owner of the app. The SDK is free, or better said, not paid with money. Data for free SDKs, second transaction.

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And what kind of data is collected and processed? There are many types of data that apps can access, some of context or metadata and many others indicated by the users themselves, depending on the functionalities of each application. For example, an app like Sleep Cycle that offers to measure your sleep cycles, has data in the Health category on each of its users. Or an app like AccuWeather, it has information about the geographical movements that each one of its users performs, data in the Location category. But there are many more, registration data, demographics, social media, vehicles, travel, finance, shopping, etc., etc., etc ….

And how much is the data worth? There are many ways to measure it and, like any market, it depends on who is going to buy it, how much profit they think they can get and how much they are willing to pay. What we know for concrete, is that large companies, generally speaking, rate users in the range of 30 and 45 USD. Obviously with these estimations come into play things such as the CLV (Customer Lifetime Value) or the ARPU (Annual Revenue per User), when companies calculate how much income each of these customers will generate throughout the relationship. But what about cases like WhatsApp and Facebook? Why did Facebook pay $ 19B, or $ 30 per user, for a product that does not generate any revenue? What is WhatsApp’s biggest asset for Mark Zuckerberg to say he paid cheap? How is the CLV of WhatsApp users measured? At the time of sale, WA had 600 million users who sent about 34 billion messages daily. Today it already has 1 billion active users per day and more than 55 billion messages sent daily. What did Facebook gain? Knowing more about the users.

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If instead you prefer hard data to estimate how much information is worth, a university in Italy found that participants of a study would be willing to sell their activity data from their Smartphone for an average value of 2.72 USD. On the other hand, Datacoup offers to pay USD 8 per month to access data from your social media accounts and banks. Or we can quote Luth Research, which offers a tracking app for Smartphones, with free access to activity data, for a monthly payment of 100 USD.

The most important question, looking at all this data circuit, may be what users gain with all this. We know that where that data is being generated (Apps) in general do not gain anything (except the famous 1%) and that large accumulators / data processors like Facebook and Google seem to know how to make the most of this information, but we do not know what users receive. Well, they do receive something. Gmail is an example. A very useful and very well developed tool, full of functions that could be sold in the market at a high price, is free for users. Or, better said, it is not necessary to pay with money. But not only they gain “free” tools or services, but in many cases they also gain better experiences. 55% out of 13,200 people surveyed by Microsoft responded that they would be interested in adopting technologies that offer suggestions or recommendations based on one’s needs and wishes. In another survey, 82% of respondents indicated that they are willing to share activity data in exchange for services that provide suggestions for improvement. Data for personalized experiences.

Imagine for a minute that each App could generate about 5 cents per each user, regardless of the volume of active users. Imagine that any of the 6 million apps of the “Long tail” that has 50 thousand users could generate at least 2,500 USD and get away from poverty. Imagine developers getting a cut of the multibillion information business. How many innovative use cases of information could come up if we let 2 million publishers think of new ways of working with data?

It is possible to democratize the data business. Join us.

If you want to learn more about data monetization for your app shoot me an email bryan@mofiler.com

Co-Founder & CEO at Mofiler

Originally published at https://www.linkedin.com on February 1, 2018.

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Bryan Tafel

Co-Founder and CEO at @mofiler - one fact is worth a thousand PPT slides. Twitter: @bryantafel