When you plan to develop an app, you have a lot of goals for it: creating something that users fall in love with, offering an incredible user experiencing, attracting millions of users, and of course, making money.
There are so many ways of monetizing an app, that it might become overwhelming. Hence, the next step is choosing the best mobile app monetization strategies for your app.
Choosing the right app monetization model is critical to the app’s success. This article will cover the basics of each monetization model and its pros and cons.
What is App Monetization?
Mobile app monetization is a method of making money by leveraging the users within the app through a collection of digital marketing and advertising techniques. It is a sustainable method of generating income from an app without the need for external funding.
App monetization has become a crucial part of app publishing as free apps make over 90% of those on the Play Store. Therefore, publishers need to create value for their users while building a sustainable business model.
Choosing the best mobile app monetization strategies
There are many routes you can take to monetize your app. This article will cover the most popular app monetization strategies and their pros and cons.
Many app publishers offering unique services are now looking at the subscription model as their go-to monetization strategy.
A subscription model means that users can download the app for free and use certain features. Although to gain access to all the features, a user has to pay a subscription fee.
It ensures developers a constant and recurring revenue stream if their app is valuable to the user, provided users keep renewing their subscriptions. Depending upon your app’s offering, it may be beneficial to set up multiple subscription packages with different levels of value(Just like Netflix). For example, you may want to offer a free service, a basic subscription, and a premium service for different types of users.
A great example of this model is Spotify and Netflix.
- Pros – Steady and reliable income, little effect on user experience
- Cons – Requires heavy investment to create an app seamless and valuable to the user.
2. In-app purchase(IAP)
As the majority of apps on the market are free to download, in-app purchases are becoming more popular, especially amongst games and content apps. Offering your users opportunities to make an in-app purchase is a great way to monetize your app.
Here the app itself or the basic features of the apps are free. Although to advance in the app faster(let’s say in a game), the user can make an in-app purchase to buy virtual currency and goods(for example, get an extra life). Or unlock a piece of gated content by making in-app purchases.
It could be used to increase user engagement within the app by offering premium features to users for free if they use the app more often.
- Pros – Try before buy model, Increases engagement, highly profitable
- Cons – App Store and Google Play store takes 30% commission on IAP
3. Premium Apps:
Most of the apps in the market today are free to download, although a few apps are only available to paid users. These apps generally provide a unique value proposition that other apps fail to provide. It is the most common practice amongst productivity apps.
These apps often see higher engagement and retention rates as users are more likely to use what they have already paid for. Although, the key to achieving success with this model is by establishing the value of the app right away. Hence, it needs most five-star ratings from your users, compelling description, sleek UI, alongside a comprehensive feature set.
- Pros – Revenue is directly linked to the number of downloads
- Cons – Competitive freemium market, low average lifetime value of the user
4. Data Monetization:
App monetization with data is a process that involves the collection and transferring of users’ data which anonymously gets transferred from apps to data collectors.
Due to its ease of integration, data monetization is gradually becoming a go-to model for monetizing an app. It is mainly due to the reason that user experience is least affected using this model. It is an uninterruptive way to monetize your app.
This method is only useful to app developers having a large user base. To get started, the publisher has to integrate an SDK that lets them take users’ consent and monetize their data. Data monetization is similar to ad mediation to some extent – the more data collectors SDKs you have in your app, the more user data you’ll monetize.
- Pros – No interruption in user experience
- Cons – The revenue generated highly depends upon the user’s geographic location
5. In-app advertising:
The most common way to monetize your mobile app is by running in-app ads or adverts. It offers a valuable source of revenue while letting your app be free on the app store. Removing the barrier to pay upfront(or not to pay at all), attracts a large user base enough to earn great revenue and scale the app quickly.
Most companies with high engagement are using this method to drive great revenues. Apps like Facebook and Instagram are ad-funded and don’t use any other monetization strategy.
Although, before getting started with Ad monetization you should be well aware of the jargon used in the industry.
There are three types of ad revenues for a developer to consider:
- Cost per Thousand Impression (CPM)
- Cost per Click (CPC)
- Cost per Action (CPA)
CPM is often the preferred method amongst the developers as it does not require users to click on the ad.
The advantages of using this approach are:
- Quick implementation
- Revenue is directly proportional to the number of users
- Advanced targeting option over ads
- Control over the ad content shown and the ability to block certain ads/advertisers
Ad monetization has been made simple by open-sourced ad networks available in the market. The most common ad networks are Admob, Facebook Audience Network, and Google AdX.
The process of monetizing your app with in-app advertising has been made even simpler by our AppBroda’s AdX demand. Through this, a publisher has to integrate only AdMob’s SDK, and the entire Ad ops are automated by our team.
- Pros – Free app experience to the user, higher the user higher the revenue, easy integration
- Cons – May interfere with user experience
Choosing the best app monetization strategy
Selecting the right monetization strategy for your app depends on various factors. Thorough user research and competitor research are required before finalizing the strategy. Often, app developers will use several of these strategies to monetize their apps.
However, with increasing ad spending by advertisers every year, in-app advertising is still one of the most effective and profitable app monetization models.
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