App monetization is the path to converting your app users into revenue. It’s what turns a mobile app into a business model. If you’re wondering how to monetize a mobile app, you’ve come to the right place!
When it comes to mobile app monetization, there are many options to choose from, and a few routes you can take. Usually the monetization model depends on what kind of app you’re building and the user experience. In this blog, we’ll unpack a few popular app monetization approaches, so you can choose the one that works best for you!
Make Your App a Paid App
According to a recent report, 92% of all apps available on the Apple App Store are free, and on Google Play Store, that number jumps to 96%. This means that only a handful of apps require a potential user to pay to use it upfront. This monetization strategy is most common among productivity apps
Apps like these usually offer some unique value that’s very hard to find elsewhere. If you choose this monetization route, make sure that the apps you create, provide enough value or unique functionality that meets your target users’ needs (it doesn’t need to be a very large user base!)
Free with In-App Purchases
To use this approach, you can restrict certain features in the free version of the app with a goal to "encourage" the free app users to upgrade to the paid version. This in-app purchases model is one of the most popular app monetization strategies.
Usually the basic features of the app are free, but certain features can be purchased. Among apps of this monetization model, gaming apps are perhaps the most common. For example, you can advance through the game faster or get extra lives, abilities, or benefits by paying for them.
Recent stats show that nearly 47% of non-gaming mobile apps use in-app purchases for generating revenue. That number is 79% for gaming apps, which tells you how games like Candy Crush and others developed a super successful monetization model. Fun fact – In 2020, mobile games accounted for 66% of the Apple App Store’s revenue share.
This strategy is great because it provides a free option for users to experience the basic functionality of the app at no cost. Once you have a higher user base, the potential to monetize through upgrades and in-app purchases is higher.
These paid features are also called gated features, you can think of it like a teaser. The only downside is that you’ll need to tread carefully so that you aren’t giving away too many options for free, or on the other hand, offering too few features.
Free With a Subscription Model
Similar to the previous model, you can create a free app, with a paid subscription model. With this strategy, the app is made free to download with limited access to gated content or services. For premium services or content, you will need to purchase a subscription plan. This strategy is more commonly used for service-oriented apps (many calendar apps, fitness apps, and meditation apps follow this model.)
The advantage here is that your app can be easily discovered in the app stores as a free app! This model is becoming more common among developers, especially since people aren’t used to paying for an app upfront, but may be more open to it once they’ve started using it.
Apart from gated content, a subscription model can also mean that an app user can access all the content for free, but only for a limited trial period. Once this period is over, they will need to pay a recurring fee to keep using the app.
An example is Medium, a blogging app available on both Android and iPhones, which lets members read paid article content with a small membership fee. Paid articles are gated to non-members, and they can use the free version of Medium to read other articles and headlines. When they click on a paid article, Medium sends out a call to action (CTA) to receive 30-days free, then the membership fee will be billed for automatically.
This is the model that many eCommerce or service-linked apps choose. Usually, they charge a small fee on each transaction made on the app marketplace. Apps like Uber, AirBnb, etc. usually charge a commission on each transaction made, but the goal is to provide maximum value to both the buyer and seller on the platform.
As the name suggests, these are advertisements that people pay the developer for so they can be displayed on an app. But if you’ve ever used an app that had regular ads popping up, you wouldn’t be too thrilled.
In fact, a big roadblock to hitting success with in-app ads is the fact that although 90% of consumers are influenced by advertising, many users consider in-app ads spammy, distracting, and intrusive. The work-around is simple – pick the type of in-app ad you think your users would be most comfortable with. Here are a few options.
The OG app advertisements!
These were more common when apps had a free and paid version. A quick way to generate revenue was to have an ad-free version of the app because people seemed to be willing to pay anything just to not have to see ads in the banner section of an app.
But that’s the point, these ads typically affected the UX a lot more than people realized, and rather than driving people towards purchasing, it drove them to uninstall.
A good workaround for banner ads was interstitial ads, which is a big word for a simple meaning: an ad that shows up occasionally, in full screen. This would usually be delivered at the end of a certain task flow, like editing a picture, completing a game level, or while something was loading – that way it didn’t interfere with completing a task, making it somewhat less annoying.
These are the ads that you’re most familiar with. Native ads integrate seamlessly into the look, feel, and experience of the app they’re in. Think of Instagram or a Twitter feed, where an ad shows up somewhere on the feed or timeline.
As far as ads go, these were a step in the right direction because they didn’t interfere with the user experience too much, and showed a higher engagement rate. What’s essential is to make the native ad look and feel ‘native’, but also let users know that they’re watching an ad – whether it’s by mentioning ‘Sponsored’ or some other mechanism.
Affiliate advertising is a monetization model that generates commission from other products and services by advertising them through your app. You can monetize your app by partnering with companies to sell their products. Many companies have affiliate programs that allow you to insert special links or codes in your content or ads.
This way, if someone clicks on those links and makes a purchase, you get a cut of the sale amount. The affiliate ads model works well if your app users trust your app, and therefore will trust your referrals too.
App reward ads are popular for games, particularly if users spend a lot of time in the app. For example, you may be offered extra coins if you watch a 10-second advertisement. To get this right, you have to make the reward worth the effort someone will take to watch an add. It helps to know your market well, particularly the ads that may interest them, this way you’ll make the most of your ad marketing efforts.
The other good thing about reward ads is that, if executed right, they benefit everyone. You (the app owner) benefits from the advertising revenue. The advertiser reaches a wider audience through your app users. And finally, the game player gets free tokens or benefits by watching an ad, making the experience more rewarding.
New app monetization models, trends, and methods show up all the time, so as an app developer, it helps to carefully select and customize these options to suit your monetization goals.