There are more than 4 million apps available for download in the Google Play and Apple app stores. Having an app idea is great, but with millions of competitors, you won’t be successful without a winning strategy.
Mobile app monetization is just another way of saying ‘making money from an app.’ Monetization is the cornerstone of capitalism. It gives entrepreneurs the ability to succeed from just an idea.
Your mobile app monetization strategy can bring huge rewards if executed properly. Check out this quick guide to the best app revenue models and strategies.
What is Monetization?
Your app isn’t truly an asset until it begins to produce value. The concept of monetization is very important to understand when thinking of your app in the long term.
The minute you want to earn revenue from your app it’s considered a business. Think of monetization as a business plan that details how you plan to grow the company. It isn’t a one-time activity where you make a lump sum of cash and move on.
There are very, very rare situations where a monetization strategy finds you, but don’t plan on it. Even if a million users download your app and sponsors contact you, to make the arrangement successful you have to know what you want from the deal.
Every successful app starts with a concept or idea then evolves into a system of revenue potential. Consider how top mobile app companies can now employ thousands of people. They understand what they are selling and how to sell more of it.
Here’s a list of some of the common ways to monetize an app:
The most straightforward way to make money from a mobile app is to charge a fee per download. The pricing for your app depends on what competitors in the same category charge for a similar app. Free apps with in-app purchases should also be considered competition.
The common pricing range for mobile apps is $0.99 cents to $9.99. With so many free apps available, users expect premium features with higher cost apps.
There are many apps where it would be damaging for the brand to not charge a fee. Consider well-known computer software and games that charge hefty fees for licenses. Offering a free mobile app version of its software undermines the brand.
In these cases, charging a larger premium for an alternate version of the software makes sense. New brands and apps with limited functionality should avoid charging high fees.
Overpriced apps can lead to negative reviews and poor ranking in the app stores. Many developers opt against charging a flat fee at all. Research shows that a flat fee is the least viable way to earn revenue on a mobile app.
This is, by far, one of the best mobile app monetization strategies. Freemium means you offer users a trial or lite version of a mobile app. The lite version has limited features that aim to get the user interested in encouraging him to purchase the full version.
The real challenge with this strategy is knowing how far to allow users to go before limiting their access. You want them to fall in love with the app or game, but not have the chance to follow through. This means leading with a few of your most attractive features and leaving the rest behind a paywall.
If conversion rates are low, you can test the market by changing the features you offer for free to see whether downloads increase. This can be costly if you have to pay developers for the additional time, but it’s worth understanding what changes make your app successful.
In the gaming world, in-app purchases are a dominant strategy to monetize an app. Users are charged a fee to access certain features that enhance their gaming or are cut off from gameplay after a certain number of minutes unless they pay a fee for more access.
This strategy works well for a variety of other non-gaming apps for enhanced features like storing a certain number of files within the app. Your ability to monetize your app using in-app purchases depends on the complexity of your app.
Paid features should offer a compelling incentive to buy like saving time or offering remote access to critical data. Not every app features a structure where in-app purchases make sense.
Consider testing your in-app purchases with a focus group to determine whether the cost of the features seem reasonable. There is no limit to the number of in-app purchases you can add to your app once you’ve determined what users want.
In-app purchases in successful apps are a huge revenue generator. Keep in mind that some app stores may charge a commission for each in-app purchase which can affect your profitability.
Mobile app developers sometimes choose to in-app advertising as a method of monetization. Connection to an ad platform is a must to begin generating revenue.
A mobile ad network is a broker between an ad publisher and an advertiser. Mobile apps are publishers because they display served ads. Ad networks help brands connect to popular apps and tally the number of ads served so that mobile app developers can get paid.
Owned by Google, AdMob is one of the most popular advertising platforms available. The best ad platforms give you freedom over the types of ads served in your mobile app. You want only relevant ads so that users are more likely to click the banners.
Some ad revenue models increase your earnings with each user click. Another reason to select categories of ads that play within your mobile app is to reduce the appearance of spam.
In-app advertising might be a revenue generator for you but at the cost of invading the experience of your users. Too many ads can turn off an app user completely. Be strategic in how ads are served within your app and that your advertisers offer quality products and services.
The health and wellness mobile app category contains a variety of apps with sponsored partnerships. Some apps that track monthly menstruation, for example, have sponsored news content from birth control providers.
Sponsored app content means a company or brand pay to be connected with the mobile app. The connection could be in the form of articles featuring the sponsor, rewards or contests or logos within the ad.
Who fulfills the rewards process depends on the terms of your sponsorship agreement. The process, however, always begins within the app. Sponsors pay fees directly to app developers for a fixed contract term.
A fitness app called RunKeeper is one good example of replacing in-app advertising with paid sponsorship in a way that makes the app more valuable to users. Users get incentives for participation and sponsors get the recognition they require to continue the sponsorship.
The subscription revenue model is one of the most familiar, but less common forms of mobile app monetization strategy. From magazines to music streaming, subscription-based apps offer developers the chance at ongoing revenue.
Users are likely to pay for subscriptions only in certain app categories. New subscription categories, like education, are beginning to emerge but if the content exists for free elsewhere it’s difficult to justify the recurring fee.
Financial predictability is one of the top benefits of this revenue model. The biggest challenge is your ability to deliver ongoing value. Consider pricing tiers to accommodate a variety of users.
Avoid asking users to sign contracts or making cancellation difficult. Allow upgrades and downgrades as needed to give users complete control over their experience. Longer subscription periods should always offer savings especially if users pay for the time period up front.
A similar strategy to the Freemium business model is Hybrid. This is a blend between a subscription-based monetization strategy and Freemium. For example, a user can download your mobile app for free, but an additional month of using premium features costs a flat fee of $20.
Users can then opt to extend month-to-month or purchase access to features forever for a flat fee of $100 per year. This is a great example of how blending one-time and subscription pricing can merge to bring ongoing revenue to a mobile app.
Launching Your Mobile App Monetization Strategy
A persistent marketing campaign is necessary to launch your mobile app monetization strategy. Whether you sign up as an advertiser on a mobile ad platform or use social media to promote your brand, the goal is to generate as much awareness as possible.
There is nothing to monetize without user downloads. The good news is that there are billions of smartphone users on the planet. Attracting just a small percentage of that population grants you access to ongoing revenue to fuel your business.
Choose a monetization strategy that won’t outpace your ability to deliver. For example, if your sponsorship requires a certain amount of news content but you plan to upgrade to a less verbose interface, don’t sign the agreement.
Think five and ten years in the future with your long term relationships so that you can predict how your business will fare in the future. For more information on mobile app development, please visit our website.