4 ways to monetize apps (other than display advertising)

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The forecasts show plenty of money pouring into mobile advertising. But there’s still a big gap between the percentage of ad spend marketers are devoting to mobile (1%) and the percentage of time consumers are spending on mobile media (23%), according to new research from Flurry.

Flurry cites a range of possible reasons for the discrepancy, including the immaturity of systems and standards that make it difficult to buy mobile inventory in volume. Ad buys are even more challenging on tablets, where media buyers are hesitant to invest in rich media ads that take advantage of tablet-specific features such as touch navigation until publishers build up the subscription bases of their digital editions.

Media buyers’ underinvestment in mobile is a missed opportunity for publishers. But you don’t have to sit idly and wait for the mobile ad market to develop in full. There are other ways for publishers to monetize their mobile content, particularly their tablet and smartphone apps. Here are four that are gaining traction.

Custom apps

As publishers extend their business models into marketing services, they’re getting more involved in mobile-specific services. A few are beginning to dabble in custom development of branded apps for their advertising clients.

B2B tech publisher IDG, for example, includes app development in the suite of mobile marketing services it launched last year under the Mobile@IDG service line. One early project involved a custom app for Juniper Networks that packages news feeds, technology tips and Juniper marketing collateral.

Mobile app development is part of Mobile@IDG’s emphasis on monetizing higher-value, custom media opportunities through services such as mobile ad units, mobile landing pages, mobile websites and apps.

“We set high growth rates for the [mobile] business and today we are in line with those expectations,” Matthew Yorke, president IDG Global Solutions, said in an email. “The metrics are strong and we see big services opportunities specific to mobile.”

Longer term, the company sees more potential in HTML5 development for clients than device-specific apps, Yorke added.

Utility apps

Publishers are also exploring utility apps as a way to engage with tablet and smartphone users beyond the digital editions of their magazines or newspapers. There are plenty of examples in the consumer space, ranging from Cosmopolitan’s Sex Position of the Day to the Men’s Health Eat This, Not That! nutrition game. But B2B publishers are also entering the game, with new types of utility apps for distributing content and even enhancing live events.

UBM TechWeb, for example, has created an app for its tech events that offers attendees access to event information as well as a variety of social sharing tools designed to increase participation.

UBM tested the app, developed by DoubleDutch, at its Enterprise 2.0 conference last fall, where about 30% of attendees used it and averaged an astounding 180 sessions per user during the event, according to Alex Dunne, general manager of the UBM TechWeb Online Live Events Network. Those numbers convinced the company to officially launch the app (and a companion mobile website) at last week’s Cloud Connect conference in Santa Clara, Calif.

UBM sold sponsorships to several aspects of the app, including the splash page, check-in badges and a sweepstakes push notification. Dunne is especially bullish on future sponsorship opportunities for badges, because the Foursquare-like check-ins and other game mechanics were a big hit with attendees.

Apps also provide a new channel for B2B publishers to re-package existing content, including vendor white papers used for lead generation. IDG released an iPad app last August that provides access to a collection of more than 6,000 IT white papers and case studies. Vendors can sponsor sections of the IT White Paper Library.

The app has been “a huge success,” Yorke said. “We smashed the lead gen goals and our own download goals.” Users on average spent almost 10 minutes inside the app per visit and downloaded three lead-gen assets.” An Android version is in the works.

Commerce

I’ve cited before the results from an MPA study showing that 79% of tablet magazine readers said they want to be able to purchase products and services directly from editorial features, with 59% saying they would like to buy products directly from the ads in digital magazines.

Magazine publishers are already diving in. Wired integrated “tablet commerce” features in its May 2011 iPad edition and its “Year in Gear” special edition app in October, and plans to expand the program this year. Product references in the issues include a “buy now” option for purchasing through Amazon.com.

Publishers considering so-called “tablet commerce” functionality can take some cues from retailers that are launching apps that suggest a cross between a magazine and a catalog. In December, Zappos released Zappos Now, a monthly “magalog” app about style and fashion trends – featuring Zappos products that can be purchased from the app.

  

Subscriptions

Subscriptions are the most obvious form of non-display revenue for consumer publishers, and early returns have been promising. Hearst Magazines disclosed in January that it was selling more than 400,000 digital editions a month, with a 2012 target of more than 1 million paid digital subscribers per month.UK magazine publisher Future made $1 million in new tablet magazine revenue within a month of debuting 65 of its titles on iTunes’ Newsstand.

Conde Nast’s Wired had an average digital circulation of more than 108,000 in the second half of last year, Ad Age reported, citing data from the Audit Bureau of Circulations. That figure includes print subscribers who activated free digital access, digital single copies and paid digital subscriptions.

Many publishers with iPad editions received a boost from the launch of Apple’s iPad Newsstand last October. Is the growth sustainable? The answer should be a resounding yes, considering the rapid growth of tablets and the release of mass market devices such as the Kindle Fire.

There are many ways to prime the digital subscription pump. My colleague Prescott Shibles suggested recently that publishers “should consider bundling multi-brand subscription offers to iPad users or cross promoting quickly after a single app purchase.” Shibles cited data from eDataSource showing that nearly half of transactions involving a magazine app were for more than $10 and consisted of more than three apps.

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