Tablet Apps: five monetization strategies

Prescott Shibles's Blog
Tablet apps: five monetization strategies

The iPad has ushered in a new era for the magazine and newspaper industries, but many publishers are still launching products first and finding business models second. Luckily, five business models seem to be emerging as successful archetypes.
Subscription workarounds
In-app single purchases
Advertising
Location-based offerings
Social media sharing and aggregation
1. Subscription workarounds for iPad and tablets
While some publishers are pushing Apple for an iTunes-based subscription offering that provides end-user data, others are finding unique ways around this challenging issue. ESPN The Magazine, for instance, is offering free apps with premium content only available when you use your Insider login. ESPN is leveraging its existing subscription management system, which integrates online user accounts, premium online subscribers (Insiders), and print subscriptions. Existing subscribers can input their username and password in the same way that many Web-based apps do. Those who want to subscribe can via your website.
Pros: The revenue is sustainable and can auto-renew just as other Web-based subscriptions. It is easily extendable as an add-on bundle to existing subscriptions.
Cons: It requires that you have an integrated audience management solution. However, publishers should consider these solutions in any case so as to better manage their data. Another con is that it requires users to leave the app and visit the publisher's website to subscribe. While the usability issues aren't as much of a factor on the iPad as they would be with a smartphone, the conversion rates will be much lower than in-app purchases. Success in this strategy will ultimately depend on if the lifetime value of a subscriber is greater than the revenue lost from lower conversions.
More on monetizing your mobile content outside of Apple's ecosystem.
2. In-app, single-issue purchases
For those without a means of creating integrated subscriptions, single issue purchases are a viable strategy. The key, however, is to make the app free with some minimal content and take advantage of in-app purchases for issue sales. Wired reportedly sold over 100,000 copies of its premier, $4.99 app, and PixelMags recently reported a 235 percent increase in sales from its library in the four months following the iPad launch.
Pros: This is probably the easiest path to implementation and launch, and it's straightforward and proven.
Cons: There is no ongoing revenue stream, and you have no access to user data, which makes selling advertising difficult. One potential workaround is to build in-app surveys, which push data back. iPad users of the comic book app, ComiXology, have proven that consumers will respond to surveys in an iPad environment. This could be combined with an ad recall survey to further measure advertiser ROI.
3. Advertising
The Financial Times recently disclosed that it had generated over $1.59 million in ad revenues so far from its iPad app, and Conde Nast has released guidelines for iPad advertising. Through the company's usage software, Conde found that users are spending an average of 160 minutes per month with each downloaded edition across brands. The Vanity Fair app is averaging more than 200 minutes per issue, compared with the 65 minutes per issue that readers spend with the print edition, said Scott McDonald, Condé Nast’s SVP of Research.
The fact that most respondents to the in-app survey were not existing subscribers bodes well for incremental advertising sales, as iPad users are not cannibalizing time spent using the print product. What's more, Android mobile advertising is outpacing iOS/Apple, which means that you are well-positioned if you plan on publishing on Android-based tablets.
Pros: Tablets are new and hot, which means it's easier to command advertising premiums and less pressure to live up to metrics.
Cons: What budget is this going to come from? Apple's iAd strategy has been to target TV advertising, as mobile budgets just aren't well-defined. Also, how are you going to measure return-on-investment for customers? If every publisher uses different metrics, they all become meaningless.
4. Location-based offerings
Facebook Places, Foursquare and Gowalla have made consumers far more likely to allow apps access to their location. By integrating location-awareness into an app and combining it with Groupon or personalized coupon offers, magazines and newspapers can offer unique and customized marketing solutions that benefit readers as well as advertisers. Starbucks and L'Oreal are already experimenting with location-based coupons, and in this economy, it's a trend that's likely to continue.
Pros: This combines two of the hottest mobile offerings into a high-fidelity advertising environment.
Cons: There is complexity in integrating these systems, and it requires that the tablet be connected to the Web.
5. Social, sharing and aggregation
Flipboard, an app that aggregates content based on your social media connections, launched with incredible hype and has backed it up by selling over 10,000 apps at $4.99 with no original content. Hearst's LMK apps are more aggregator than sharing engine, but they've found a way to go from idea to app in under 60 minutes. With production scale like that, you can sell apps, sell advertising, and collect tons of data on what's driving engagement.
Pros: Cost-effective: Flipboard was built in one month with no investment. LMK is highly scalable and works with Facebook as well!
Cons: Getting advertiser support on a product as nebulous as this is challenging, but one has to wonder why more magazines and newspapers aren't taking advantage of social media integration in their apps.