Affiliate marketing – the new business model for mobile app developers?

The dominant business models for app developers at present are user payments or display advertising, however, affiliate marketing could be a new and potentially much more lucrative way of monetising many apps.

User-payment driven models can be very lucrative for hit applications, especially games.  Howevever, there is increasing that application prices are suffering from downward pressure towards free.  New types of payment models such as subscriptions or in-app payments are promising although not all application types are suited to these approaches.

Display advertising can pay the bills on free apps if there is sufficient scale of usage.  Using ad networks like admob or potentially integrating mutliple ad networks using a mobile ad optimizer such as smaato or mobclix can deliver significant revenues for some apps.  However, the growth in mobile inventory, and falling click-through rates mean that it is becoming harder to make this model work.

Affiliate marketing is an alternative revenue stream to user payments and display advertising that is just opening up on mobile and is creating a big opportunity for mobile app developers.  Affiliate marketing is already a major category in the online advertising world and its now moving onto mobile.  Unlike current mobile advertising which is typically sold on a CPM (cost per thousand) or more usually a CPC (cost per click) basis, mobile affiliate programs payout based on a CPA (cost per action) basis in a single payment or a revenue share.  In some cases the payments for particular actions (e.g. in the mobile casino space) can be very high – up to $50 in some cases.  As a result, with the right approach affiliate marketing can be more lucrative for mobile application developers than traditional mobile advertising or mobile payments from users.

A number of players are now offering affiliate programs for iphone apps including William Hill, Offerpal and  Allslots/ Brightshare.  In addition, the iphone appstore affiliate program run by linkshare has also been extended to work on mobile.  Android-compatible affiliate programs are also emerging, taking advantage of the more open nature of the android appstore ecosystem .  Developers on other platforms such as Java, Symbian, Blackberry and mobile web can typically choose from an even greater range of different mobile affiliate programs and networks.

There are also opportunities for application developers to use APIs from online shopping services to build affiliate-revenue driven apps.  For example, apps could be developed for specific dietary requirements around online grocery APIs or to aggregate affiliate feeds from a range of retailers into a single app.

Another approach is to link mobile applications to the massive growth in vouchercodes.  For example, the UK-based vouchercloud iphone app is a mobile-focused way of grabbing a slide of the discount voucher market.  Whereas there is little room for new players on the web, vouchercloud has been able to build significant traction by being the first to market with a high quality voucher-driven iphone app.

Finally, the ability for mobile applications to interact with real world retail stores presents another affiliate marketing opportunity.  Services like the shopsavvy iphone app allow users to scan a product barcode in a store and get pricing information from online suppliers.  The affiliate potential of such applications is potentially enormous.

So – application developers need to look seriously at the opportunities presented by affiliate marketing, and consider this business model right from the intial concept stage in the design process.

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