Software monetization in 2014 has evolved considerably from years previous. In this summary of the year’s developments, we’ll highlight some of the major trends as well as key developments that indicate the direction monetization will take next year and beyond.
Major Monetization Changes in 2014
Every time a new technology is introduced into the internet ecosystem, new monetization opportunities arise. And with those new opportunities come floods of new marketers, developers, and publishers who want to capitalize on the new market.
This has been the case with desktop operating systems, smartphone platforms, browser extensions, and other extendable platforms. Of course, with these new marketplaces comes new challenges…what’s here one day could be gone the next.
Browser Extension Monetization
Software monetization has always been a thorny problem for many developers, but browser extensions are even worse. It is quite difficult to monetize browser extensions while maintaining the user experience. Some of the best examples are cases where the developer has found a way to align the extension’s monetization solution with the user experience.
StumbleUpon’s browser extension, for instance, is a perfect “extension” of the company’s business model. Yet the monetization method is so well disguised that many users don’t know how the company earns money.
Search monetization is another example of a monetization solution that integrates functionality with revenue generation. Browser extensions or software programs that integrate this functionality into their browsers, for instance, earn money when users perform searches.
At the other end of the spectrum, however, we have developers who don’t integrate monetization and functionality. In some cases, developers have actually covertly hidden their monetization method in the code. In one case, for example, a developer used an extension to turn regular links into affiliate links without telling users.
This is one instance of a browser extension gone wrong. This extension may have been one of the factors that caused Google to update its terms of service in an attempt to force Chrome extension developers to keep extensions “simple and single-purpose in nature.” The result is a strict terms of service that makes monetization that much harder.
Pay-Per-Install and Bundling
Though extension monetization has hit a couple roadblocks in 2014, pay-per-install and software bundling are still two reliable monetization methods. A few years ago, Apple was throwing some wrenches into the works by rejecting some pay-per-install apps. However, this response on Apple’s part was a reaction to incentivized installs that were designed to manipulate user reviews or chart rankings.
For apps that don’t attempt to manipulate App Store rankings – or for software programs that don’t use app stores at all – pay-per-install and bundling are still one of the best ways to monetize the download.
Bundling can refer to rolling up several programs into a pay-per-install program. Or it can refer to bundling as a pricing strategy.
This strategy received some attention in 2014 when Thom Yorke, the lead singer for Radiohead, offered his music for sale as a BitTorrent Bundle. Though bundling itself is nothing new, it has taken some time for traditional industries – and even the software industry – to catch on and catch up.
As we move into 2015, it is likely that more software developers will realize the potential for bundling as a monetization solution.
Display and Video Advertising
New monetization solutions are emerging with new technology. Display advertising and video advertising, for instance, have begun to show promise even as other forms of advertising begin to decline. In the past, video ads were once too unwieldy to transmit over wireless networks or across multiple platforms.
But technology has helped advertisers overcome this hurdle. Major social networks, from Facebook to Twitter and Instagram, began introducing video ads into their content.
As wireless bandwidth increases, as technology itself becomes more robust, and as the cost of video production decreases, video ads themselves will become more widely available to more modest budgets…not just major brands on major social networks. Several video advertising companies already offer video ads to developers as a way to monetize apps. In fact, a 2014 study found that 3 out of 4 mobile video ads happen in-app.
As the crowds of consumer eyeballs move from desktop to mobile, so too do the marketers, software developers, and advertisers. Though freemium has been the most popular monetization strategy for most developers, in-app advertising produces nearly the same amount of revenue, despite being less popular.
Given the competitive nature of the app markets, it is only natural that consumers would avoid spending money as much as possible – after all, everything digital is free. Why should customers have to pay for anything?
For software developers, the above-mentioned monetization methods, such as pay-per-install, in-app display ads, and so forth, will be the way to go in 2015.
This year, we have seen several monetization milestones come and go. While the occasional misuse of browser extensions has thrown up some roadblocks for the rest of the development community, mainstream app and software monetization continues to plow forward successfully with installation advertising, bundling, and in-app advertising. If this year’s developments are any indication, the mobile-first future will also be display-first and maybe even video-first.