Is this business model for a mobile app realistic?

[Breeze_Interface]

I want to make mobile apps and earn money while doing it. The problem is that I have a moral problem with the way the ad based buisness model is implanted.
Because I target the Android platform charging for an app is really difficult. On the other hand putting ads is quite easier.

I don't have problem with the principle of having ads show in a mobile app. The problem for me is that I want absolute control on what ads is presented to the user and currently there is no (viable) way of doing so with the AdMob from Google.

In order to get around the issue I've thought of adopting a model similar to the billboard model. Basically, the advertiser pays me directly to put his ad on my app for a given time in exchange of an amount of money discussed beforehand. This way I would be able to screen which ads I find acceptable on a case by case basis.

When starting out I will probably have no one paying me to put their ads on my app. That's why the dedicated space where ads will be put will show a comment saying that if you would like to rent the space to put your ad you can contact me at this email.

I'm wondering if this idea of monetization realistic? Would greatly appreciate thoughts on this especially from those who make their money building software.

 

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[csalvato]

This is an advertising business model called Direct Buys. As an advertiser, direct buys are great because they are targeted, predictable and usually cheap.

The problem with this model is you need to generate the interest in advertising on your site. This can take a long time, because you first need to generate a ton of traffic to start generating any real source of revenue.

A middle ground is to start with the ad platform RTB model (ie AdMob) and then transition into a direct buy model when you have traffic/significant users.

 

[Breeze_Interface]

Thanks for the response.

I'm interested in knowing what you mean exactly by "ton of traffic". What is the scale?

In the past, when I was a teenager I tried to make money via Youtube. My channel had roughly 1.5k and ~1k views per video. It turned out that even with (Adsense) advertising I made peanuts in terms of money.

I think it's probably best to make no money at first building the audience and than use the direct buys model.

What I want to know is how big the audience for my app should be for it to interest advertisers? What if I target a specific niche of people for my apps?

i.e: Computer Science students in a particular region of the world. Should I myself go out of my way to contact advertisers who are in the field of selling computers or school furnitures?

 

[NMdad]

You're basically looking at monetizing traffic. It's a similar issue whether you're doing it via a mobile app, a website, a YouTube channel, etc.

In my experience (monetizing a website via infoproducts) & observation (of a colleague using ads to monetize a 130k+ pageviews/month website, as well as other colleagues monetizing websites both via ads vs. infoproducts):

• monetization via ads is typically more passive, but lower RPM (my colleague gets ~$20 RPM, optimized up from an initial ~$8-10 RPM)
• monetization via direct sales (e.g., infoproducts) is more work (initially, to make the infoproducts) but WAY higher RPM (I made ~$142 RPM)

So, you might consider:

• Do you want the revenue to be more passive?
• How much traffic--realistically--can you expect from your app?
• What options are there for monetizing via direct sales via your app (e.g., upgrades, add-on features, users buying virtual items, redirecting app users to purchase your products outside the app, etc.)?

 

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[csalvato]

I'm interested in knowing what you mean exactly by "ton of traffic". What is the scale?

@NMdad hits it on the head I think. FYI, because there's some jargon in there:

RPM = Revenue per mille (thousand views) of your website

Personally, $20 RPM seems high in my experience, so I think his friend is doing awesome.

Either way, the ad industry considers the CPM (cost per mille) and RPM (revenue per mille) metrics as their standard, so you should understand them.

This should say something to you - the smallest unit of measure in display advertising is in thousands of views. So if you think your app will only get about 10k hits/month, this business model is broken (unless you are ok with making tens of dollars from all your hard work).

IMO, advertising models only really work when you can think in terms of millions of active users/impressions per month OR prove your platform is so valuable per mille, that people will pay a huge premium for it (which is incredibly rare).

EDIT: TLDR: while this business model is valid, it might not be viable for this particular business, depending on how much traffic you think you can generate, and how much advertisers would pay to advertise on your site. IMO it seems like you're making more work/trouble for yourself before your idea is validated on the side of the end-user.