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Advantages and Disadvantages of App Monetization

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What is App Monetization?

App monetization is a way of making money from a mobile app without charging for it. To every investment, there should be a return and it is the same for mobile apps. The most common way of monetizing through apps is by collecting user data and selling it to third parties. Mobile apps make money through in-app advertising by partnering with brands paying for advertising space. The advertisement could be a native or banner ad, video, or pop up. In this blog we will talk about the pros and cons of app monetization. Let’s take a look at what kinds of monetization methods are currently available for mobile apps.

The following are the ways to monetize your app:

• Paid Downloads
• In-App Purchases
• In-App Subscriptions
• In-App Advertising

Paid Apps are also known as premium apps. Paid apps cost users a one-time fee to download from the Play Store or App Store. Hybrid app monetization model, which are called freemium apps are free to download and allow users to enjoy the basic functionality of the app. However, if users want the premium version or other premium features, they need to purchase them.

Why is App Monetization Important?

App monetization is crucial because it has become more common to find that apps are free at the point of install. Paid marketing is becoming a very important factor for mobile app success. With a large number of apps to compete with on App Store, paid marketing is the only way to scale distribution of a mobile app. Nowadays app developers are more aggressive in their marketing. The competition in this market is aggressive. According to studies there are more free apps. About 94 percent of Android apps and 90 percent of iOS apps are free. If you look at Google’s list of top grossing Android apps you will see that at least the first 40 apps are all free, it doesn’t mean that Android users have stopped buying apps.

Advantages of Paid Apps

Listed below are the advantages of app monetization:

• Your app generates growing revenue.
• You keep your users and his experience relatively intact.
• There is a good chance to obtain high profit from a low-risk monetization method, especially when it comes to digital currency and goods. This model can also support partnership and affiliate programs.
• If you charge, you earn more from paid downloads. You start making money as soon as your app is downloaded.
• You can make profits as in-app purchases are digital upgrades and don’t require storage or maintenance.
• When users are paying for an app, they are more loyal and engaged because of the upfront investment.
• User engagement can be high in the long run since the content is relevant and/or valuable.
• Many apps are free, so if your app is paid you will have fewer competitors in your niche.
• Paying customers are more active, loyal and will convert better in the long run leading to engagement.
• Paid apps generate money constantly, either through fixed fees or monthly subscriptions.
• Paid apps are perceived as better quality.

Disadvantages of Paid Apps

Listed below are the disadvantages of app monetization:

• Many people will stay away from paid apps, even if the price is low; you will automatically lose potential clients who just don’t want to pay.
• You will always have to remain on your toes to make sure your app works flawlessly and offers the full set of features – after all, clients are paying for it.
• Design costs and development for paid apps are quite high.
• With paid apps, you get limited monetization options; also creating additional monetizing options may annoy your customers.

Advantages of Free Apps

Listed below are advantages of freemium model:

• Many mobile users respond well to the freemium model because most of the users like the idea of trying something before actually buying it. This model is particularly great for games or other apps designed for users to advance levels.
• Free apps are downloaded more than paid apps and can help you grow your user base at a quicker rate. Users may like incentivized video ads that give them the opportunity to earn virtual currency or other rewards.
• In-App Subscriptions (referred to as freemium content) is similar to in-app purchases, in that spending of money opens users up to new parts of the app experience.
• Monetization model does not work well for niche apps like a taxi app that are designed to help users perform important functions.
• Try before you buy has proven to be a good business model so free apps work best.
• Free apps obviously attract more users and you’ll get more clients, more downloads, more visibility.
• People usually appreciate free stuff and you will end up getting better reviews.
• Free apps can be less expensive because they are simple and not as complex as paid ones.
• Free apps have multiple monetization options in the future

Disadvantages of Free Apps

Listed below are disadvantages of Freemium model:

• As people don’t pay for the app, they may not actually use it, thus lower user loyalty will exist.
• There is no customization with most free apps.
• With free mobile application your software security is limited.

Differences between iOS App Monetization and Android App Monetization

Before getting into app monetization, it helps to know the major differences between the market and customer base of the competing mobile devices. The android app monetization strategies are different from iOS app monetization strategies.  Since apps allow intimate and all-inclusive experience in comparison to any mobile website, it is important for the developer to know the major differences between the two operating systems, their users’ lifestyles and digital habits to most effectively monetize their business. New app providers should note the primary distinguishing factors between the two in order to strategically map out resources and development. You must know the key differences between the market and customer base of the competing mobile devices. This will help you to most effectively monetize your business.

Conclusion

Whether you decide to charge for your App or keep it free, make sure you have weighed each side of the argument and taken all points into consideration. Both premium and freemium model done in the right manner can lead to profits. The foremost point is that you need to understand how to utilize free and paid monetization models effectively for the success of your business.

Did you know you can launch Appy Jump, a performance advertising network, which lets Appy Pie users’ monetize their apps through ads and boost downloads? Jump apps platform offers campaign formats that increase traffic.