How Do Mobile Apps Make Money- The Beginners Guide to Mobile App Monetization
So, you’ve successfully created an impressive app and now you want to earn from it. Why not? From sketching your app idea to launching your app on app stores, you’ve put a lot of time and effort to make it work. In this post, we are going to talk about app monetization strategies that will help you to make money from your mobile app.
Since the launch of the iPhone in 2008, the app market has grown faster than any other industry in the history, but it is still in its early days and still holds a great potential in developing countries across the world.
Advancements in technology, availability of low-cost mobile data, smartphone proliferation are the critical factors that have been driving the growth of mobile app industry for years. In addition to this, availability of free Android and iOS apps and the increased emphasis on user experience are the other reasons expected to boost mobile app industry over the forecast period.
The increased number of user-friendly social networking sites like Facebook, WhatsApp, LinkedIn, TikTok are also expected to spur mobile industry over the next few years.
With the availability of no-code app builders, building a mobile app is as easy as pie. However, monetizing the same app is quite a chore. You need to research and learn a lot of things about app monetization.
So, let’s get started!
What is App Monetization?
App monetization is the perfect way for developers to generate revenue from the apps they’ve developed. Nowadays, app monetization has become one of the most effective tools for app owners to generate more revenue. However, to do this they must balance the needs of the users with app monetization practices.
There are various types of app monetization, including in-app ads, in-app purchases, one-time payments, and subscriptions, that are discussed in detail below.
Over the last few years, most of the developers have been offering their apps for free. Today, there are fewer apps requiring users to pay before they download. As a result, free apps are getting more downloads than paid apps.
A Bit of Statistics
- The global mobile application market size was valued at $108,440 million in 2016 and is expected to grow at a CAGR of 19.2% to reach $311,249 million by 2023.
- There were nearly 2 million apps on Apple’s App Store as of Q1 2019, according to Statista. This is a ton, especially considering there were only 5,000 apps at the end of 2008.
- As of June 2019, there were nearly 2.9 million apps on the Google Play Store, according to Statista. From 2016 through 2018, there were over 6,000 apps added per day.
- The total number of applications downloaded from Google Play was around 197 billion in 2017, with Business of Apps forecasting 352 billion downloads by 2021.
- Google Play reported 98 percent of app revenue comes from free apps.
What Are the Key App Monetization Models?
Many app owners spend a great deal of time trying to understand how to drive revenue from their apps. There are a variety of app monetization techniques that can help you generate a good chunk of revenue, but you should take care that your app monetization strategy should not only be good for your business but also complement your app’s user experience.
Here is a list of dominant monetization strategies that can help you to make money from your app:
- Advertising: interstitial, video, native, incentives, display ads and banners
- Email Marketing
- In-app Purchases
- Freemium Upsell
- Paid Apps
- An Exclusive Version/Premium
Monetization Model 1 – In-app advertising: Interstitial, Video, Native and Banners
In-app advertising has been one of the most profitable app revenue models for years. Most of the app owners use this monetization model to generate revenue from their apps. This strategy is easy to understand and implement, all you require is to display commercial ads inside your mobile apps and get paid from the ad networks.
When using this monetization model, you need to make sure the advertisements are relevant and targeted to your user base. Irrelevant or poorly designed ads can affect your user engagement.
There are several formats for in-app ads. Let’s take a look at them.
- Interstitial ads: It is a popular form of mobile advertising. In this monetization model, the ads will display on entire mobile screen. Many of the world’s top publishers leverage this model to generate high revenue from their apps.
- Banner ads: This monetization strategy helps you monetize your app without disrupting users’ experience. It occupies only a small area on a mobile screen mobile. These ads must be high on quality and targeted to get noticed.
- Native ads: Native ads are one of the most recognized among all in-app advertising models. All native ads fit into an app’s interface without interfering with the user experience. As these ads don’t affect user experience, they generate more revenue for app providers.
- In-app video ads: It is one of the most effective mobile ad formats available today. The big brands like Google, Facebook, YouTube, and Instagram are leaders in this space. However, the success of this video ads model is dependent on the concept of value the user gets in return for watching. If you incentivize your users after watching your ads they will watch it.
Monetization Model 2 – Email Marketing
It is one of the oldest marketing techniques and still rules the marketing segment across the world. It offers both the best quick returns on investment as well as the best long-term ROI. When it comes to app monetization, this strategy works best when you ask user email during sign-in. That way, you can collect a lot of customer data that later can help you to build successfully marketing campaigns that will actually help you to generate revenue from your mobile app.
Email marketing is underused nowadays and many of digital marketer don’t consider it. They say that it is efficient for industry giants only, not for the smaller players.
Monetization Model 3 – Sponsorship (Incentivized Advertising)
It is newest form of app monetization method that is getting attention from the app owners. Sponsorship model can be a powerful app monetization model if app developers consider it at development stage. This app monetization model entails partnering with advertisers, who provide your users with the rewards for completing certain in-app actions. Revenue earned through redeemed rewards is then divided between you and the advertiser. It takes ad personalization to the next level that can lead to an increase in customer engagement and revenue.
Monetization Model 4 – Subscriptions (Paywalls)
Similar to the freemium model, subscriptions model has gained immense with streaming apps like Netflix, HBO NOW, and Pandora. In this, app publishers allow users to download their apps for free for limited period of time. After a certain period of time, they will ask users to buy subscription to continue using app.
This model is used by world renowned business magazine Forbes. Anyone can download Forbes mobile app for free either from Google Play or iTunes but after free trial you have to decide on the subscription plan – a single issue, one month or one year.
Due to its ability to retain users, subscriptions model allows app publishers to create a steady flow of income. However, it works well with certain niches, like entertainment and news apps.
Monetization Model 5 – In-app Purchases
This monetization model is one of the most widely used model of monetizing mobile apps, both for iOS and Android. In this model, app publishers provide their apps for free and make revenue by selling the items within the apps. The items could be physical (especially in the case of retail store apps) or virtual like extra life in a game. Especially useful in free apps, in-app purchases monetization strategy accounts for about 50% of mobile app revenue.
This monetization model works particularly well for eCommerce/mCommerce companies across the world. This model can help business owners make comfortable profits with the lowest amount of risk.
While implementing in-app purchases strategy within your app, you should make sure it is implemented perfectly. If implemented poorly, this monetization technique can lead to bad customer reviews, frustrated users, and customer service nightmares. So, before implementing this strategy, you should make sure that everything is implemented and tested for the good.
Monetization Model 6 – Freemium Upsell
It is also one of the most popular ways of mobile app monetization. The word itself reveals that it is a combination of “free” and “premium”. It includes two versions of the same application – free supporting the basic functionality and premium including additional features that are not provided with the free version.
The notion behind this app monetization model is that users downloading the free version can enjoy it as much as they want, but when they access premium feature they have to upgrade. This app monetization model can attract free users, and allure them enough to pay for premium services.
In this app monetization model, users have the chance to try the app before they pay for anything. This model works best when you want to generate mix revenue from ads and users and your premium features add undeniable value.
A known example of on this strategy is Angry Birds. The owner of this app released a free version of his app and keeps certain features hidden such as you won’t be able to juice up your bird, advance level, etc. until you upgrade to their premium version.
Monetization Model 7 – Paid Apps
In this monetization model, app publishers can assign a fixed price to every single app download. Primarily, when mobile app stores were launched, it was the only model which app developers can use to make money through their apps. With the unprecedented growth in technology, many feel it’s unfair to pay to download an app. However, it still works when your app is functional and offers some unique features over your competitors.
There are several app categories for which this monetization works than other models available. Some of them are productivity, photo & video, navigation and utilities. In this app model, app owners get paid every time their apps are downloaded from the app stores.
Monetization Model 8 – An Exclusive Version/Premium
Similar to in-app purchase, an exclusive version is a great way of doubling up revenue through app. You can create different versions of your app like, a free and basic one and other advanced version with a nominal payment. Users can decide whether they need advanced version or not. Through this strategy, app owners can be rest assured of generating income every time when any user downloads their exclusive version.
The downside of premium version app is that, even with thousands of positive reviews, users don’t want to purchase an app that they can’t try before buying. Your app will only get download when it is unique in its category.
How to Choose the Right Monetization Strategy for Your Mobile App?
Nowadays, app monetization is in flourishing state, helping app owners to achieve a long-term financial success. With millions competitive apps, earning money from apps has become quite tough. As per the best available reports, 20 percent of mobile apps do not generate any revenue.
The main reason app owners fail to make money from their mobile apps is poor monetization strategy. There are range of app monetization strategies, but it doesn’t mean you can randomly pick any one of them. Each app monetization model has its own pros and cons. What works for one app may not work for another one.
Choosing an app monetization strategy that will work for your business depends on a range of factors. It’s true one approach doesn’t work for all, but if you’re an expert in app development, you can find the right way easily. To make your app monetization strategy to be successful, you should consider it before the launch of your app. To choose the best app monetization strategy, you must keep in mind the following factors:
- Understand your target audience
- Establish your business objectives
- Deliver content strategically
- Focus on user experience
- Establish your business objectives
- Analyze your competitors
- What you want from users
In fact, being clear about the monetization model from day one will help you to generate great revenue from your app. If you launch your app using any one of the above described monetization models, you have a greater chance at making more revenue than considering monetization after launching it.
There are several ways to monetize your mobile app, but only a well-researched and planned strategy will help you to achieve your app revenue goal. To create a successful app monetization strategy, you need to keep an eye on the newest trends and tools in the app monetization industry. You also need to make sure that ads will not disrupt user experience. Just remember to always put yourself in your users’ mindset and think from their perspective.