Simply put, App monetization means making money from a mobile app. But it doesn’t mean that charging for an app download makes it possible to earn money from it. Actually, most of the apps on the Google Play Store are free. And, according to The Verge, free apps are the source of 98% of Google Revenue.
The app economy in 2017 was at around $70 billion. According to Venture Beat, this number will rise to $101 billion by 2020.
This data is good news for any business owner. But, the truth is that app monetization is not easy. According to Clearbridge Mobile, 19% of mobile apps do not generate any revenue, while 51% of apps make less than $500 annually.
The main reason businesses fail in mobile app monetization is poor monetization strategy. That’s why we are going to give you valuable insight on choosing the right app monetization strategy, and simply remind you about things you should consider and implement.
Table of Contents
How to choose the best app monetization strategy
Selecting an app monetization strategy that will work for your business is dependent on several factors. The approach that works for one company might not work for another company, but if you’re not an expert in app development the best thing to do would be to discuss this choice with an app development company. For your app monetization strategy to be successful, it should start before the launch of the app. To choose the best app monetization strategy, consider the following factors:
The app itself
Ask yourself what your app does, what it does and how it solves the problem, and its purpose. When you answer these questions, you will be able to deduce which app monetization strategies will work and which will not work. For instance, subscription models work best with apps that provide music, news, and other forms of entertainment. On the other hand, in-app purchases work best with games.
Your target users
Research your target users. Know who they are, what they want, and most importantly, what they are willing to pay for. Convincing a user to pay for an app, you need to show that it is valuable. For a user to upgrade to the premium version of an app, their experience with the free version has to be perfect.
Your competitors probably already have mobile apps. Giving importance to competitor research and doing it the right way gives you great insight into the territory you are to step about, and helps you take secure steps. Research how they are monetizing their app and whether their strategies are working. Look for gaps that present monetization opportunities for you. Ask yourself if you can do things more effectively to fast track revenue generation.
App monetization strategies
Pay per Download
When publishing an app on Play Store or the App Store, you set a price that a user will have to pay to download your app. The minimum price is $0.99. The biggest challenge with this strategy is the fact that most users are reluctant to pay for an app before using it.
The good news is that paid app users are loyal. The generation of revenue depends on the number of downloads. To make money, you have to attract a lot of users. This strategy works best when you have a strong marketing/PR presence.
In this app monetization model, you offer the app for free and earn revenue by displaying ads. For this strategy to work, you have to balance the number of advertisement, where they appear, when they appear, and how the users interact with them.
If the ads are too many in number or if they are intrusive, the user might ditch your app. Also, the ads should be relevant. It does not make sense to have cosmetic ads in a sports game app that attracts men. This strategy can be the sole source of revenue, but it is often combined with other monetization strategies. This monetization model works best when:
- Your app is designed to attract a large audience
- Your app collects demographic and behavioral data
- Your app offers content users are not willing to pay for
Most businesses using this model, provide the apps for free. They make revenue by selling items within the apps. The items could be physical, as is the case with retail store apps, or virtual, like extra lives in a game. This app monetization strategy accounts for about 50% of mobile app revenue. This works best when you have a gaming app, offer services, or own a retail shop.
The purchase provides real value to users and your app encourages repeat usage.
Freemium comes from the combination of the words free and premium. Businesses that use the freemium model offer the app for free, but with premium features that have to be paid for. This model gives the user an opportunity to try the app for free before deciding if it provides enough value to pay for. The challenge is finding the right number of features to offer for free.
Apps like Evernote, MailChimp, and Dropbox have used this strategy successfully. It works best when:
- The premium features provide good value
- The free version is good enough to prompt purchase of the premium version
- Your app will attract a large and active audience
The subscription model resembles the freemium strategy. The difference is that while the freemium models lock specific features, the subscription model gates content from the free users. Users download the app for free and can access the content for a limited amount of time for free. This strategy works best when:
- Your app provides content such as news, music, and videos.
- Your app is designed for frequent and repeated use
Mobile app monetization tips
The following tips will help improve the revenue you generate from your app monetization strategy.
Focus on user experience – always make sure your app provides value to your users. Make sure your monetization strategy does not hurt the user experience. For instance, too many ads will ruin the user experience. It helps to increase user engagement regularly. The more time the user spends on the app, the higher the revenue.
Attract more users – app monetization strategies rely on the number of repeat users and new users your app attracts. Invest time and money in seeking more users.
Combine monetization strategies – use different monetization strategies to generate more revenue. You can combine ads with in-app purchases. As you find ways to combine monetization models, note that users don’t expect ads on paid apps, including the premium versions of free apps.
Analytics – measure the success of your monetization strategy. You can assess the progress of your monetization strategy by looking at the revenue generated over a period, the number of users, the frequency of use by existing users, and location of the users.
An app can be a good source of revenue for any business. The trick is coming up with the best monetization strategy. The choice of monetization approach is highly dependent on your type of business, what you want the app to offer, your target users, etc. In the sections above you will learn how to choose a good strategy, different types of app monetization strategies, and tips on how to increase mobile app revenue.