A Detailed Guide to Calculating The ROI of Your News

If you are struggling to test the feasibility of your news app, here is how you calculate its ROI and chart out future prospects:

A Pew study found that more than 8 out of every 10 American consume news content on their smartphones. With such staggering figures, it is no surprise that the mobile app market is flushed with news applications that serve virtually all niches. But there is also a popular notion that news is something that people expect to be free!

So if that is truly the case, how do so many news apps sustain themselves? And more importantly, if you have a new application, how would you decide if it’s a profitable venture? Let’s find out:

Investment

Operating mobile apps as a business is quite an intricate task that requires investments at multiple fronts extending beyond what generally meets the eye. To sum up, the total investment in your news app, count these three kinds of costs involved:

Development Cost

This includes payments you made to mobile app developers you hired to build the app along with all the other cost of development tools. In short, every penny spent in turning your idea into a product will be added to the development cost receipt.

Marketing Cost

The next cost involved is that of projecting your news app to the audience. There are basically three kinds of costs involved here- 1. The cost incurred in ad campaigns or other channels for user acquisition; 2. The cost incurred in user retention though notifications or another medium; 3. Promotional activities like limited discounts or luck draw that appeal to both active and potential users.

Maintenance Cost

It shouldn’t come as a surprise that apps don’t run themselves once built and used by a large number of customers. From the cost of cloud services to the cost of the content itself and beyond, there will always be some kind of investment required to keep the app running smoothly.

One point worth mentioning here is that while the app development cost is static that needs to be calculated only once, the other two are dynamic and depend on your business approach, which needs to be calculated every quarter or so.

Returns

Just like you have to invest in multiple avenues to build and run your news app, it also offers returns from multiple fronts once operations. Here are the ones you need to take into account.

Ads

Depending on the kind of ad strategy you plan to use, consider fetching revenues from:

Video Ads- Revenue collected from showing video ads.

Banner Ads- Revenue collected from showing banner ads either on full screen or within news pieces.

Native ads- These are relatively new kind of advertisement in news business where you post ads about any product or brand that seems like a genuine piece of a news article.

Subscription

This is the simplest but possibly the toughest way to make money from a news app. To calculate your revenues from subscription, you just have to multiply the number of subscription fee from all the subscribers.

Licensing

These revenues include the money you collect from other applications or businesses for publishing your content. If you create research-based authentic good quality content, this can be major source of revenue in the long run.

Non-Financial Returns

Now if your returns are greater than the investment, rejoice! But chances are that won’t be the case right after building a news app. In fact, it may be months or even years- depending on the market, before you actually see positive economic returns. This where the importance of measuring non-economic ROI steps in- it shows the growth trajectory of startups not in financial but market terms and gives a time frame during which the cash burn would start turning positive.

Here are two crucial non-financial return metrics that you must not miss:

Traffic Analysis

As mentioned earlier, customer acquisition is a very resource-draining process and unless your app is able to retain them, real growth will always be elusive. So the first benchmark you need to test is the user retention rate. Thereafter you can analyze the traffic data to get a deeper insight into your audience’s behavior and formulate future strategies accordingly. Which types of users spend the most? Which type of content are they watching? At what point does a freeloader turn into a subscriber? These are some of the crucial questions that determine how much returns are you most likely to have from your investments.

Market Perception

Another subtle way to measure future prospects is to look at the perception your application has created in the market. While it is tough to put this factor in an objective term, you can always look at the brand image and referral rates to understand the impact.