Table of Contents
After months (maybe years) of development, you finally launched your mobile application. Now it’s time to kick back and watch it make you some money, right?
Wrong. Your work is far from over.
You need to figure out how you’re going to get the app to make you money. Even if the app has been up for a while, it’s never too late to start monetizing it.
Don’t brush over it. If you want your app to have a real shot at success, then you need to sit down and develop a solid mobile app monetization strategy.
What’s App Monetization?
App monetization is it sounds: a way to generate sustainable revenue from a mobile app.
Where a publisher is offering their app for free, they can still generate revenue in other ways.
Why is App Monetization Important?
App monetization is important because nearly all apps are free at the point of installation. So, unless the developer comes up with an income model that picks up from there, then it’s highly likely the app wouldn’t generate any revenue.
In the app economy, your app needs to generate revenue to stay afloat. So, unless you’re the next darling of Silicon Valley, sitting on a war chest of cash mountain in venture capital funding, we suggest you read this guide to figure out how to convert your app users into real revenue.
Statistics and Figures Around Mobile App Monetization
The global mobile app revenue has tremendously grown since 2014.
As you can see, the mobile app market is seething hot.
And if the current trend is anything to go by, then the generated revenue is projected to hit $1 trillion by the end of 2023.
It’s a serious market to tap into, with billions to be made.
In-app Advertising Still Dominate
- Among the mobile app monetization strategies, in-app advertising still dominates.
- We have better ad formats.
- Incentivized advertising still drives app advertising.
- Worth mentioning is that most app revenue models are packed with advertising.
- Native ads have also become popular.
Paid Apps are Still Popular
Paid apps are still a viable revenue model. Speaking of which, 20% of apps still use this app revenue model.
However, the number of people adopting this revenue model remains steady, as subscription-based revenue models peek up. We can say developers are more attracted to the idea of recurring income.
The Biggest App Stores
The two leading apps stores are Google Play and Apple App Store. Google leads by hosting over 2.87 million apps, with the Apple App store trailing on its heels with 1.96 million apps.
|Google Play Store||Apple App Store|
|2.87 million||1.96 million|
Global Consumer Spending on App Stores
|Google Play Store||Apple App Store|
|$1.3 billion||$19 billion|
The Average Prices of Apps
|Google Play Store||Apple App Store|
So, what can we learn from these Mobile Monetization stats and figures?
Free App Downloads is the User’s Most Preferred Way to Use an App
Users prefer it when they’re allowed to download and use an app for free. That explains why most app are free to download.
So, as a developer, you have to look for other ways to monetize your apps.
Speaking of which, the subscription model has proven to be the most successful.
And, should you decide to charge for app downloads, then try to keep it on the low considering a vast majority of the apps go for under $5 in the app stores.
App advertising is on the rise as you can see.
But how long will it be before we see this developer’s bubble burst?
It’s safe to say that there are great rewards for apps that choose to steer away from this revenue strategy.
App advertising could be the most popular mobile app monetization strategy. But with more apps adopting it, then it’s a race-to-the-bottom in terms of revenue per user.
Pay Per Download (PPD) is on Decline
PPD is on the decline, as more developers look for ways to monetize their apps after the point of download.
Subscription Revenue Streams Are Picking Up Steam
Developers seem to be attracted to the idea of recurring income. Most of them have now opted for pay-monthly models. Look at the likes of Spotify, Netflix, or Hulu.
Developers are coming to term with the fact that having a user-pay you regularly is more lucrative than having them make a once-off payment.
We’ll discuss all these in detail later as we expound on the different app monetization strategies.
3 Things You Should Know Before You Choose a Mobile App Monetization Strategy
Here are three things you should know before you choose a mobile app monetization strategy:
Know Your Target Audience: Before you choose a monetization strategy for your mobile app, you must take some time off to figure out who your target audience is.
Figure out what’s their demographic and, most importantly, their app usage patterns.
You have to analyze user data and make sure your efforts align with their behaviour. How do they consume content? Are they heavy on text or do they like to consume it in video format?
Identify Your Core Set of Users: Does the app solve a specific pain-point associated with a certain group of users or caters to the general audience?
Instead of just targeting a general audience, focus on offering a lot of value to your core set of users and ultimately increase your profitability.
It also provides a great opportunity to create an experience that’s specifically tailored to this particular group of users.
Offer Value: What value is your app providing to the user? Try to build your monetization strategy around this.
It’s simple. The more value your app provides, the more your app users will be willing to spend on it.
Think About Monetization: Don’t wait until the app is up and running before you start thinking about monetizing.
If anything, you should have a monetization strategy before you even think of developing the app.
Analyze Your Competitors: Research your competitors and the monetization strategy they’re using. That’s the only way to find out what works in your industry and what your users are willing to pay for.
4 App Monetization Tools You Must Have
You can start by choosing a monetization strategy, and then decide which digital tools you’re going to use to implement it.
Here are 4 monetization tools commonly used by app developers:
- Revenue Cat: Revenue Cat is a subscription tool for mobile apps. It also allows you to analyze customer data, come up with in-app subscription plans, and grow your app.
- Smart Look: Smart Look is an analytics tool that lets you gather important data on your app users to inform your marketing and monetization strategy.
- Braze: Braze is an excellent choice of app monetization tool that lets you create personalized user experiences in real-time. It ultimately contributes to user engagement and loyalty.
- App Pie: With App Pie, anyone can build an app. It’s a no-code app building platform that allows you to build a fully functional app without laying down a single line of code.
All you need to do is drag and drop different widgets and play around with the provided features and you’ll have your app.
It even allows you to make seamless social, business, and shopping integrations.
6 Mobile App Monetization Strategies You Need to Know
After laying down the groundwork for monetizing your app, you can go ahead and choose the right strategy.
In which case, you have six different monetization models to choose from:
1# Pay Per Download (Premium Model)
This is the oldest mobile app monetization strategy in the book. It’s the only way developers knew how to make money during the early days of mobile apps.
However, this revenue model has been dwindling in popularity, as many apps opt for subscription or in-app purchases.
And, depending on your industry or target market, charging for app downloads can still make a good revenue-generating strategy.
How it Works
Simple. Users pay a once-off fee to access the app.
The problem with this revenue model is that you have to first figure out how you’re going to convince prospective app users to pay for it upfront.
That explains why it’s the least popular app monetization strategy nowadays. Users simply don’t want to pay to download an app, especially when there are so many other free alternatives out there.
The Pros and Cons of the Premium App Monetization Model
| || |
When to Use this Revenue Model
- When you have a strong online presence and PR
- When your app offers added value compared to free alternatives with similar offers
- When the value offered is commensurate with the price
- When you want your revenue to directly tie with the number of downloads
App stores take 30% of app purchase fees. So, be sure to include this into your app download amount. Consider how much you’re going to charge for the app download.
Monetization Tips for those Using Pay Per Download Income Model
- Make Sure the App Fills a Gap in Your Industry
Users don’t mind paying to download an app. However, the product has to be highly innovative to solve a common problem they have. A good example of such as App is Facetune.
Facetune is a successful paid selfie editing app that performs miracles on your photos. It can edit appearances, reshare your face, and even erase your flaws.
It has really cool editing features that are far better than those offered by free apps.
In other words, it has revolutionized the way people edit their images. It’s a prime example of how your app product should be if you’re planning to disrupt the market.
- Build a Relationship with Your Target Audience
Don’t rush to sell your app without first building a relationship with your target audience.
Figure out how you’re going to prove your product value to them. For instance, you could create a self-explanatory landing page that clearly describes your app features and benefits.
Be sure to launch a marketing campaign immediately after your app goes live. Focus on raising awareness and making your app visible.
- Set a Competitive Price
The last thing you want is to overcharge your users.
If you want your app to be successful you better check with other similar paid apps in your category and build a pricing strategy based on what they’re charging.
It turns out, the average price for paid apps on the Google Play store (as of March 2020) is $1-2.
The point is to make sure your app fits your market’s pricing expectations.
2# Premium Paid Accounts (Freemium Model)
The second revenue model is where you allow users to download your app for free, but with an option to subscribe for a premium account, which comes with added features.
This revenue model is commonly referred to as Freemium. You simply allow everyone to download your app for free but offer advanced features to those who opt for your paid plan.
Freemium = Free + Premium
It’s an app with gated features, a combination of free and premium.
The model thrives on its ability to attract free users. It will then entice them until they’re willing to pay for their premium features.
Two types of the Freemium App Pricing Model
The freemium app pricing model occurs in two different flavours:
- In-app purchases: This is where you offer basic functionalities for free, but the user has to pay for additional virtual features and functionalities.
The user pays a once-off fee to unlock these features. Meaning, they will never be charged for them again.
- In-app subscriptions: Again, the basic functionalities are offered for free, but the user has to pay a monthly or annual fee to unlock premium features and functionalities.
The user has to buy another subscription after the current one expires to continue enjoying the premium features.
Both in-app purchases and subscriptions are usually combined with an ad monetization strategy, giving users the option to pay to get rid of the ads.
The Pros and Cons of the Freemium Model
| || |
Monetization Tips for those Using Freemium Revenue Model
- Create a Personalized Campaign for each User Segment: Don’t lump up all your premium features and sell them as a package to users. Instead, try to understand the specific needs of each segment and structure your marketing message accordingly.
- Create a Balance Between Free and Premium Features: You have to find that perfect sweet spot between your free and premium features. Don’t give your users too many free features that they’ll have no reason to opt for your premium plan.
At the same time, offer them enough value in your free plan that they’ll be motivated to try out your paid plan.
- Run Campaigns in Your App: You can run a marketing campaign directly in your app rather than depending on external sources. Send them in-app messages asking them to subscribe to your premium version. Offer them discounts or free trials if possible.
It’s a great way to make your marketing message more relevant and timelier.
Example of a Freemium App
Spotify is a prime example of a freemium app. Users can listen to music for free on Spotify, but unless they opt for a premium account, they have to sit through intrusive ads in between songs.
Paying their monthly fee allows you to listen to music ad-free, with an added advantage of custom-made playlists, music recommendations, and more.
When to Use a Freemium Revenue Model
- When you want to combine different revenues. Say, you want to run ads and get some of your users to pay for your app.
- When premium features add notable value to your app users.
- When a free version of your app is enticing enough to get users to download the app. It should also encourage users to want to download the premium version of the app for extra features
- When you have a large user base and long app sessions
3# In-App Purchases
In-app purchase is where you sell physical or virtual products within your app.
Your app gets to act as a virtual store or sales channel.
You have to offer the app for free, as you essentially have another way of generating revenue.
Examples of In-app Purchases
In-app purchases are pretty common in the gaming world.
A prime example is Pokemon Go. Users can buy cons and other items with real money.
They do this when they want the game to last longer or when looking for added features.
Pokemon reports that they made over $2 billion from in-app purchases two years after launching the app.
When to Use in-app Purchases
- When you have a retail store or planning on opening a service or gaming app
- You’ll still profit despite App store fees and other costs
- In-app purchases add value to users
- User experience encourages repeat use
In-app monetization is the main revenue model utilized by top-grossing apps, especially in gaming.
It, however, requires well-thought-out incentives to purchase without interfering with user experience. In other words, your app must entice users enough to want to spend more.
4# In-App Advertising
In-app advertising involves generating revenue by running display ads.
It eliminates the cost barrier, thus giving your users a chance to access more premium features for free.
It’s often used along with other monetization strategies.
There are three different types of ad revenue.
The 3 Types of In-app Ad Revenue
- Cost Per Thousand Impressions (CPM): A thousand in roman is M, hence the abbreviation CPM.
It’s the rate charged for 1000 people who see an ad. For an app developer accepting ads, it’s the amount you earn for every 1000 views ads get on your app.
- Cost Per Click (CPC): You’re paid every time your app users click or tap on an ad via your app.
- Cost Per Action (CPA): It’s not enough for a user to just view an app or click on it. With CPA, you’re only paid when a user clicks on your ad and complete the intended action (like downloads another app or completes a provided form).
These are the three types of in-app ad revenue you can earn. It’s upon you to decide which one you want to run, depending on your ad and the type of users you attract.
Types of Ads
Not all in-app ads are the same. There are 4 different types of in-app ads to be displayed on your app.
- Banner Ads: Banner ads are the most popular type of app ads. They can be found at the bottom or top of many apps.
They’re usually animated, and, therefore, distracting to users.
- Interstitial Ads: Interstitial ads are disruptive. They cover the entire screen and strategically appear between transitions, as you wait for a new page to load, a new level in a game, or in between Instagram stories.
- Videos Ads: Video ads are served as interstitial ads, in between transitions.
If you have a gaming app, then perhaps you should consider rewarded videos. That way, users will be rewarded every time they watch a video. Users enjoy the rewards and you get to earn revenue – a win-win situation for both you and the user.
- Native Ads: Native ads are less annoying. That’s because they try to blend with your app content.
They’re also more organic and less distracting to the user.
Not only that, native in-stream ads have been found to drive 63.2% of mobile display advertising.
Monetization Tips for App Ads
- Offer Wall Ads: You can come up with a page within your application that suggests offers and incentives to your users. Users can visit this page to check out what kind of offers or incentives do you have.
Wall ads tend to have a high CTR, and that’s because the user gets to decide to only engage with the offers that they like.
- Combine it with Other Monetization Models: Don’t bank all your hopes on app ads. Instead, try combining it with other income models, especially Freemium and make the most out of your monetization strategy.
- Don’t Interrupt User Experience: Your ads shouldn’t interfere with your app’s user experience. Take a creative route.
Take the Crossy Road game for example. They generated over $3 million in revenue just by placing ads in their game.
But there’s a secret to their success. They didn’t just accept ads. Instead, they had an in-app currency that their players could use to buy characters and power.
One way that players could buy this currency was by watching random video ads.
This was and continues to be, one of the best ways to motivate apps users to watch in-app ads without disrupting their gaming experience.
- Choose the Right Ad Network: The ad network you choose can either make or break your business.
For the clueless, an ad network serves to connect publishers with advertisers.
Since you don’t contact advertisers directly, there has to be a platform that brings the two parties together.
In your case, try to choose an ad network that serves relevant, high-quality ads.
Here are a few advertising networks that are worth checking out:
- Google’s Ad’s Mobs – is one of the most popular ad networks, used by millions of advertisers. The good thing with Ad Mob is that you can use it to manage different types of ads.
- OpenX – an ad marketplace that provides advertisers and publishers with a range of advanced solutions for monetization, advertising, header bidding, and analysis.
- IQzone – an in-app monetization platform that takes the hassle of advertising online. It supports both Android and iOS ads.
- RhythmOne– a multiscreen advertising platform. It gives both publishers and advertisers access to a multiscreen supply of ads and advanced app monetization offerings.
- Sonobi – an ad technology developer that acts as a reliable marketplace for connecting publishers and advertisers.
- Rubicon – automates the buying and selling of in-app ads.
- Tapjoy – connects advertisers with targeted audiences in mobile games and apps.
5# Subscription Revenue Model
This is another clever mobile app monetization strategy that’s fast picking up steam.
In this model, users can still download your app for free. They then get to choose a subscription plan.
Each subscription plan offers a different range of services. You can start with a free plan, where you just offer them the basics.
The more the user pays, the more features they access.
Examples of App Using the Subscription Revenue Model
A common example of an app that uses a subscription revenue model is Netflix.
Turns out, Netflix has been making more than $25 billion manually with this income model. All they do is charge their user a low monthly fee to continue using their app.
Users are also allowed to pay more to access more screens, Ultra HD, and other enhanced features.
In this way, they have been able to increase the revenue they generate from families and users that want to share subscription costs.
When to Choose a Subscription Model
- When you have a content-driven app (music, videos, news, etc.)
- When your app encourages repeat or frequent use
When you choose a subscription revenue model, you want to begin by breaking down the packages that you’ll be offering.
For instance, you may choose to offer a free, standard, and premium package.
Another option would be to tailor your packages for different user groups. For example, personal, business, and corporate.
The good thing with a subscription model is that it can be used alongside an
The good thing with a subscription model is that it can be used alongside in-app advertising, especially if you’re offering a free package. This is a great way to ensure your app can still generate revenue from every user who downloads your app.
6# Sponsorships and Partnerships
Where you can’t figure out how to develop a revenue stream for your app, just focus on growing your user base.
Once your audience grows and your app becomes established, see if you can connect with brands for a strategic partnership.
Sponsorship is how you connect your audience with relevant brands. It’s a great way to build brand integrity by making strategic partnerships.
You can sell partnership through your app by creating a splush screen. This content will be triggered whenever a user opens up your app, filling the entire screen with relevant ads. This way, the sponsor gains maximum exposure and visibility.
Future Predictions for Mobile App Monetization
It’s an easy guess that the global app market will continue to grow. And if the current trend is anything to go by, then we expect it to grow to over $400 billion by 2026.
That being said, here are 3 mobile app monetization trends to watch in 2021 and beyond:
Targeted Advertising: One of the biggest mobile app trends to ever occur in recent years is personalization. Users have no quibble with ads, as long as it’s relevant to them.
Relevant ads have also been to drive the highest engagement. That explains why mobile apps are now using AI algorithms and services to serve more relevant ads to their users.
Subscription is the New Normal: Netflix, Spotify, and gaming apps have shown us how successful the subscription model can be. They’re the leading example of where the trend is headed.
Virtual Merchandise: Expect to see more app allowing in-app purchases of advanced packages and upgrades, especially in mobile games.