If you’re planning to launch a mobile app to the market, be ready to invest a lot of effort and resources. And, of course, make sure you’ve figured out how your application will bring you profit in the future. How? Choose a suitable mobile app monetization strategy! It’s a lucrative opportunity for your business to stay competitive in today's digital landscape. In this article, we’ll go over the most popular app monetization strategies to help you choose the most relevant and profitable option for your app.
What is an app monetization strategy?App monetization is the approach that app developers use to generate steady revenue after the app has been launched to the market. It's no secret that mobile apps are big business so it’s becoming increasingly important for startup owners to figure out how to make money from them. An effective app monetization strategy is a way to make money while still providing a great experience for users. It involves finding the right balance between offering free content and paid services, as well as deciding which ad networks will be most beneficial to you. By understanding your audience, testing different approaches, and tracking results over time, you'll be able to create a successful plan that will ensure long-term success with your application.
Why is mobile app monetization strategy important?Without an effective app monetization strategy, the success of any app would be limited and its potential profits could not be realized. Here are the reasons why you should consider mobile app monetization models and select the one for your business:
Reliable source of incomeA proper plan for making money from your mobile application increases your chance of success. You need to generate solid revenue if you want users to keep coming back and using your mobile application.
Driver of user loyaltyBy providing value through different pricing models or other incentives, such as discounts or exclusive content, customers will feel more invested in. This encourages them not only to stick around and use your app over time but also to recommend it to others.
Innovation boosterApp monetization strategies can help startup owners encourage their developer and designer teams to come up with new breakthrough ideas on how to optimize their app performance and increase engagement levels.
Scalability optionsAs more people use your mobile application, its costs go up too. As such, additional resources must be allocated towards maintenance and development if you want to grow without compromising quality standards. Smart mobile app monetization allows your company to scale operations without worrying about running out of cash flow anytime soon.
5 mobile app modernization strategies to considerMonetization models provide your business with revenue streams that can be allocated for further development and marketing costs. By the end of this section, you’ll get to know five most frequently used ways to monetize your app, including their pros and cons.
1. In-app advertisingThe global in-app advertising market value reached $139.5 bln in 2022 and is expected to expand further. Placing ads in your app is an effective solution to gain income without charging users directly. Put simply, you obtain a steady cash flow from ad buyers who pay for displaying their ads to your app users.
Currently, in-app advertising is among the most popular mobile app monetization strategies in the United States and globally. Statista confirms that 26% of U.S. apps generate revenue by including ads, while the global average of ad-powered apps is 37%. So if you're looking for creative ways to make money from your app, in-app advertising might be just what you need but remember that it comes with its own set of pros and cons.
- Additional value. By targeting specific ads to audiences based on interests and demographics, you create additional value from using your application, and therefore a higher level of satisfaction and engagement.
- Quick implementation. In-app ads are relatively easy to implement as they require minimal effort from the developer's end.
- Diversity of options. In-app ads come in various formats: banners, rewarding videos, playable or native ads, just to name a few. As such, you have more opportunities to create visually appealing and interactive experiences for your users.
- Annoying interruptions. When placed incorrectly, in-app ads can disrupt the user experience and make people feel like they’re being bombarded with unwanted messages. This could lead to negative reviews or even abandonment of your app.
- Security concerns. You don't always have control over ads that get displayed in your app. This can potentially be detrimental to the user experience if malicious actors take ad slots in your app to display malware, financial scams, and more.
Suitable for app categories: gaming, e-commerce, social media.
2. SubscriptionsSubscriptions are among the most lucrative app monetization strategies, successfully used by well-known global streaming services such as Netflix and Disney+. By charging users to pay regular fees in exchange for access to the app and its features, you can keep your revenue stream consistent. With the right incentives and features, applying subscription-based app monetization is more likely to retain users in the long run.
This monetization strategy is also widely used for meditation and fitness applications. If you have the development of a fitness app on your agenda, read our guide.
- Recurring revenue. Subscriptions provide predictable revenue streams that are often more reliable than pay-per-download models or in-app purchases. This makes them ideal for app businesses looking for long-term stability and growth potential.
- Various payment periods. App subscriptions offer greater flexibility since customers can choose how long they want their subscription period to last. Whether it's weekly, monthly, or yearly – everyone gets what works best for them.
- Customer loyalty. Subscribed users are more committed than those who make separate purchases on a transaction basis since they’re making a longer commitment by signing up for recurring payments over time. This can lead to higher retention rates as well as increased customer loyalty because subscribers feel like part of your community rather than just occasional buyers.
- Constant maintenance. Unlike one-time purchases when the app features remain the same afterward, subscription-based apps and their contents should constantly be updated to ensure continued satisfaction amongst members.
- Lack of flexibility. This type of commitment typically requires users to pay without any flexibility to cancel the subscription mid-term. This may cause criticism from those users who may be dissatisfied with your app, but can’t return the money back.
Suitable for app categories: streaming services, fitness, meditation.
3. FreemiumFreemium is a type of app monetization model that allows you to provide users with access to basic features for free while charging them for more advanced or premium features. It's a great way to attract new customers and increase revenue without having to charge everyone upfront. Plus, it also gives users the chance to try out your product before making any commitment. Spotify and Tinder have made freemium their app monetization strategy long ago, so maybe it is just what your business needs too.
- Low entry barrier. The freemium model offers users the ability to download and leverage an app without having to pay anything right away. Such apps become more accessible than paid-for options which can be great for attracting new customers and expanding your user base.
- Decent conversion rate. As people start using your app on a regular basis, they may decide that they want to access additional features or content offered as part of a premium package. According to TechCrunch, the common conversion rate generated by freemium apps varies from 1% to 10% which is quite encouraging figures.
- Limited revenue potential. Not all users may choose to upgrade their subscriptions once they become familiar with the product.
- Quality control issues. It's difficult to maintain quality standards across both free and premium versions. To do so, you’ll need a well-thought strategy about content updates as well as a solid team to regularly implement those changes to your app.
Suitable for app categories: streaming services, education, lifestyle.
4. In-app purchaseEssentially, implementing in-app purchase is like having a store inside your app, where users can buy virtual goods or services that enhance their experience within your mobile app. In-app purchase is a proven app monetization strategy implemented by 50% of non-game and 79% of game apps. But when considering this option, make sure it corresponds to your goal and intended user experience.
- Freedom of choice. In-app purchases give users the freedom of choice to make decisions on which features they really need. With this, users can think carefully and select only those features that are essential for them without having to pay for unnecessary ones. This can increase user satisfaction as they will feel they aren’t being pushed into unnecessary purchases.
- Instant purchase. In-app purchases allow users to get the needed features without leaving your application. This means that customers won't be sidetracked by ads or other distractions.
- Valuable insights. In-app purchases provide developers with valuable user data such as what people buy and how much they spend on average per item. This information can be used for targeted marketing campaigns down the line.
- Frequent updates. To constantly spark user interest and keep them engaged, developers need to create new content and features on a regular basis. In fact, this is not always feasible depending on time constraints and resources available.
- Unbalanced user experience. Let’s take game apps as an example. In-app purchases can create an unbalanced gaming experience as players with deep pockets are able to buy their way ahead against those playing without spending money on extra items.
Suitable for app categories: gaming, photo/video editors.
5. Data monetizationApp data is the new gold. It's a valuable source of mobile development trends because it helps us unlock hidden opportunities and make informed decisions based on facts rather than assumptions. That’s why data monetization is becoming an increasingly popular way to monetize your app.
A lot of companies are mining user data to find out how to create personalized experiences and target ads more accurately. By anonymously transferring non-personal app data, like insights and analytics, to third parties, you may reap the rewards of increased profits. At the same time, any user information such as name, gender, and income, should be secured.
- No UX/UI interference. Since the data monetization SDK operates in the background of your mobile app, it doesn’t affect the overall user experience and ensures that the app will work smoothly.
- Universal applicability. It doesn’t matter what type of mobile app you launch – data monetization is eligible for any category.
- Privacy concerns. Users may not feel comfortable giving consent to share any information if they don’t know what it will be used for or who will have access to it.
- Maintenance expenses. Leveraging big datasets requires significant investments in technology infrastructure, time for setting up systems, and resources to ensure compliance. Unless done correctly, this mobile app monetization strategy might end up eating away at profits instead of generating revenues.
Suitable for app categories: any.
How to choose a mobile app monetization strategy?Choosing among various mobile app monetization models is part of the discovery phase of app development. We’ve got some tips on how to define the right option that would fit your business perfectly.
Why should you start your project with a discovery phase?Read the article
First of all, think about what type of user experience you want people to have when using your app. Which category does your app belong to? Will you offer advanced features that can make part of a premium package? Do you want users to pay upfront or would they prefer in-app purchases? Consider these questions carefully and decide which option works best with the overall design and purpose of your application before making any decisions about monetization strategies for apps. Next, think of the average revenue each option will generate over time. For this, you may conduct thorough competitor research to figure out which tactics are used for similar apps and how they perform. If you have doubts about how to monetize a mobile app, delegate this task to a trusted provider like SolveIt. We will be happy to help you conduct research for your app and advise the most efficient strategy for your particular case.