Launching an app that users fall in love with is just one part of creating a successful app. The next critical step is making money with the right app monetization strategy. App monetization is how a user base can be leveraged into a way to earn money from the app. The strategies for accomplishing this are varied, as there are paid apps, in-app purchases, advertising, and other options.
Whether you are trying to monetize your app for the first time or looking to optimize the revenues of an already successful app, this guide will provide you with insights into the latest app monetization strategies. This guide is everything you need to know about app monetization. You’ll learn how to optimize and generate impressive revenue from your app.
In one sentence – App monetization is the process of converting your app users into revenue.
There is five basic monetization Strategy you can use to earn money from your app:
- Pay-to-Download Apps
- In-app advertising
- Data monetization
- In-App Purchases
- Paid/Premium Apps
Strategy #1: Pay-to-download apps
While paid downloads used to be the best way to monetize an app, these days most people are not willing to pay in order to download an app, which has led to very few apps choosing paid download as their monetization method of choice (according to Statista, less than 6% of apps are paid download). That said, paying for an app is still a viable method of making money for apps that provide a unique, differentiated benefit such as games or photo & video apps.
In the early days of the iOS App Store, paid apps were in the majority. Back in 2008, there wasn’t yet a sophisticated structure to monetize apps through advertisements or in-app purchases. Now, user expectations have shifted. Today only a small percentage of apps are paid. Users are accustomed to freeing apps that are monetized through ads or in-app purchases, so charging an upfront price can be a barrier to growth.
Strategy #2: In-app advertising
Out of all the ways to monetize an app, in-app advertising is the most popular. Why is that exactly? It comes down to a few key reasons.
- In-app advertising is versatile. The wide variety of ad formats allow apps to accommodate the user experience in a way that isn’t disruptive.
- Ads ensure that apps can remain free, so it becomes easier to scale an audience when there’s no cost to download.
- In-app advertising offers advanced targeting options to advertisers, which means they are willing to pay to reach the most desirable audiences.
- The app publishers retain control. You can blacklist certain types of advertisers, choose a set floor price, and more.
Strategy #3: Data Monetization
Data Monetization is one of the non-obvious ways of effective mobile app monetization. The quality of the users’ data is able to reveal hidden insights about consumers. For both online and offline companies, these insights are the key to the betterment of businesses that may turn into flows of revenue.
Mobile app monetization with data means collecting, segmenting, and transferring the non-personal identifiable information about users to the data collectors. Data monetization has nothing in common with personal information. Though with data monetization all your users stay anonymous.
Among the basic non-personal information that data collectors usually gather are:
- Device type
- Device version
- Screen size
- Mobile operator
- Network Type
With data monetization, the story is as simple as this: the more daily active users you have, the higher your revenue will be.
Strategy #4: In-app Purchases
Most apps these days opt for a freemium or in-app purchase model, whereby users can download the app for free, but then must pay to unlock features or in-app content.
In-app purchases have become increasingly popular, as freemium apps are the new standard in app stores. Users like the idea of a free game, for example, with the option to spend more if they find themselves hooked on the gameplay. The numbers show that in-app purchases have been on the rise. The projected revenue for in-app purchases is expected to hit $71 billion in 2020, which is double what it was in 2018.
Many apps such as WeatherBug include a “remove ads” in-app purchase or market a paid download app that is ad-free.
Strategy #5: Paid/Premium Apps
Many apps are now looking at subscription models as a way to generate app revenue. It’s becoming more popular amongst developers for a variety of reasons. Again, we have the fact that users are more used to not paying to download apps as the reason for this.
Some people are willing to try out new apps, especially if the products promise to solve a recurring issue that the customer has encountered with all free products out there. However, you have to make sure that your user base will continue to use the app after one month, and won’t end up paying for yet another service they don’t use.
The way you delight your customers through your services builds a strong community around your product, one that will work as potential brand ambassadors for your app.