When developing a new app, the million-dollar question is always“How will I make money?”
Investors will only pay attention to profitable apps, but users aren’t eager to fork over cash for a basic service, which makes subscription-based models, pay-as-you-go plans, or one-time download models challenging.
While every business model has its pros and cons, relying on advertising revenue allows you to raise capital without having much traction. With ad dollars coming in, you can communicate your long-term vision and how you plan to continue making money.
But this doesn’t mean earning ad revenue and building a business on it is easy. Because your app and company are young, advertisers won’t be vying for facetime with an undetermined user base. So, it’s crucial to understand what it takes to get them on board and start funneling in ad dollars.
Here are five ways to attract advertisers and wow investors:
- Change Consumer Behavior
Infamous ad-tech companies like Facebook and Google started as consumer products. More specifically, these products changed the way consumers behaved.
You don’t need a mass market like these giants to earn ad dollars, but your product does need to be addictive and consistently helpful to your audience. If most users aren’t returning on a regular basis, you can’t scale up to the size you need in order to command high ad dollars.
- Collect Unique User Intent Data
If you aren’t already collecting user data, start now. Consumer data is what makes the advertising model so profitable. The more you know about your consumers, the higher you can market ad prices. Advertisers will know they’re reaching exactly the right audience, and that information is invaluable.
Leverage the devices you’re using to build your next-generation consumer app to learn about your customer base. Wearable technology and the Internet of Things are opening doors to exciting new ways for developers and startups to capture meaningful consumer data with smartphones.
- Take Control of the Ad Appearance
You’re responsible for the look and feel of your brand. Don’t let advertisers dictate how their ads appear on your product; explain how you envision their messages being integrated into your product.
For mobile, disruptive banner ads are dead. But native ads are picking up steam. Users taking advantage of free tools expect ads, but you need to think carefully about how you incorporate them. Make sure they don’t impede the user experience, and actually educate or aid consumers, or you’ll run the risk of frustrating users and driving them away.
- ScaleUp Your Revenue Streams
After running a few experiments and determining the perfect native ads for your app, it’s time to start scaling up your revenue streams.
Media buyers purchase ads two ways: UIs and APIs. Your buying user interface should expose deeper data about consumers so that advertisers can create targeted campaigns directly in your buying UI. Facebook and Twitter do this well by allowing advertisers to see in-depth demographic data that helps them market to the exact customers they want. Adopting this method will make it easier for buyers to push campaigns to your ad system from whichever buying software they use.
Another method for scaling up your revenue is to build a different kind of buying API based on OpenRTB protocol that allows demand-side platforms and agency trading desks to purchase your inventory.
- Take Advantage of Third-Party Resources
Don’t fix what isn’t broken; there are countless services that can take care of basic development needs.Instead of building a datacenter,use Amazon Web Services. Consider Parse and Twilio for your app backend and a voice SMS backend.
In the same vein, the infrastructure you need to power your ad stack can now be open-cost advertising as a service for your startup. Do your research, and find the right partners to outsource common advertising technology needs.
Understanding the role advertising plays in your business model is crucial, especially when speaking with potential investors. If your primary revenue source isn’t advertising, you can still frame it as a secondary revenue stream to justify your valuation or the funding you’re seeking.
Generating ad dollars isn’t like turning on a switch. But when you commit to monetizing your app with ad revenue, you can better plan product roadmaps, be honest about revenue projections, and focus on building a great team and culture.
Image credit: CC by Blake Patterson