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Mobile App Monetization Strategies: Making Money from Your App

Mobile App Monetization Strategies: Making Money from Your App

Mobile app monetization strategies.

The mobile application industry has come a long way in recent years. Since 2008 when mobile apps broke onto the scene with the introduction of the iPhone, the mobile applications market has grown exponentially. The mobile application market size was valued at $206 billion and is expected to rise at a 14% growth rate. The mobile applications initially were a great way to disseminate information and engage the audience providing enhanced user experience. Now, it has also incorporated monetization strategies. In other words, mobile apps have become a tool for developers and companies to earn money deploying various strategies. As the market is expected to evolve further, developers and businesses are seeking ways to turn apps into profitable ventures. In this article, we discuss and dissect the mobile app monetization strategies and the approaches to making money from apps.

Mobile App Monetization: What is it?

The mobile application serves two key purposes for a business: 1) introduce you to the audience and 2) make your business profitable or earn revenue from it. Monetization in a mobile application refers to generating revenue by providing value to users. News, entertainment, social platforms and gaming apps in today’s digital realm all have monetization strategies deployed to earn revenues. The selection of monetization strategy depends on several factors and there is no one-size-fits-all approach for mobile app monetization.

Why Mobile App Monetization?

Mobile applications require funding to run smoothly. Whether raised through crowdfunding or venture capitalism, it can support the app initially. But for ongoing longevity, the mobile apps require a dependable and continuous revenue stream to function properly. This is achieved through mobile app monetization. Developers and businesses want the app to continue if it extracts a major chunk of profit. In the initial days, more than 70% of apps on both Apple Store and Google Play were paid applications. It required users to pay or subscribe for an app. Yet, now with revenue streams diversifying, the number has reduced to less than 30% apps requiring fixed payment downloads. Allowing free downloads means that the revenue is being generated through other sources. Let’s look at those sources.

In-App Advertisements: Common Revenue Stream

The most common revenue stream is the in-app advertisements in the mobile app monetization. In this type, the ads are seamlessly integrated into the app to target the audience. Using banner ads, interactive native ads, text-based, interstitial and video ads, the in-app advertisement is used to attract audiences. Being the most common mobile app monetization category, developers integrate ads to earn revenues through ad impressions. This type of strategy shows no signs of slowing down in the near future. In fact, it will continue to be the dominant strategy in mobile applications globally.

In-App Purchases: Unlock Additional Value

Due to the massive influx of free-to-play apps, the monetization streams were shrinking. Free-to-play apps dominated the industry for quite a time. However, the developers came up with in-app purchases. In-app purchases are additional content of value that users can buy from within the app. Virtual goods, features and subscriptions are included in this category. This type of monetization strategy is particularly common in the mobile app gaming industry. Users can purchase in-game currencies, unlock levels, items and premium exclusive content using real money to enhance their experience. This strategy is often termed as ‘pay-to-win’ in many games even if the games are free to download and play. But, they restrict the user from passing certain levels without grinding. Hence, in-app purchases allow users to access premium content not available to free-to-play users.

However, the gaming industry is not the only one using in-app purchases. Applications such as Gmail, Outlook and other email clients use in-app purchases where you can purchase additional storage and mailing space by paying money. Offering premium features and content through in-app purchases provides the users with additional value. Based on the transactions or purchases made, the developers generate revenue. In-app purchases can be considered the most successful mobile app monetization strategy as the revenue directly goes to developers.

Freemium Growth Model: Free and Premium Combined

Most of the apps are free to download, install and use. But as part of their growth strategy, they go on to choose the freemium model. As the name shows, it strikes a balance between free and premium services. For example, using the app is free but unlocking additional premium features requires a subscription or fee. The premium features are optional to the user but provide valued interactions and enhanced functionality elevating the user’s experience. The freemium model allows the developers to attract a large audience due to the basic feature being available for free. However, it also entices the users to try out the premium features through which, developers generate revenue. Mobile applications around the world use the freemium model to get a steady and stable revenue stream because users who have subscribed are likely to continue using the app.

Popular video streaming platform YouTube and the world’s largest music streaming service Spotify use the freemium model. You can view and use the applications for free but face certain interruptions such as in-app advertisements and surveys. If you want to stream videos and music ad-free or enable downloading within the app, you can subscribe to the premium service for an enhanced and uninterrupted experience. However, the model will not work for all apps and businesses. Depending upon your target audience, the nature of the business, products/services offerings and industry trends, the choice of monetization strategy changes. This strategy is perhaps the second-most effective strategy for mobile app monetization behind in-app purchases.

Subscription Model: Ongoing Revenue and Value

We know that the freemium strategy where users can download and use the app for free with certain limited features. The subscription model is exactly the opposite. Users can download and install the app, but before using it, the user has to pay a fee to register and make a profile/account on the app. The subscription model charges users with a recurring fee weekly, monthly, quarterly, semi-annually or annually depending upon the packages. This continued subscription allows users to access premium content, features and services regularly. Video streaming, news, software, online services, and productivity tools often use this model. With stable and predictable revenue streams, longevity and enhanced development opportunities, the subscription model works well for both developers and users. Yet, these services can be expensive and have a limited customer base.

Video streaming platforms such as Amazon Prime, Netflix and Disney+ use a subscription-based model as they upload premium and exclusive content on their streaming services. Almost all streaming services use the subscription model. Moreover, news outlets such as the NY Times, The Economist and The Wall Street Journal also provide exclusive premium content through subscription. Similarly, SaaS platforms including Adobe, Microsoft and Salesforce also work on subscription model.

Affiliate Marketing: Earn with Partnerships

Affiliate marketing is a growing prospect not only in the marketing world but in mobile app monetization as well. In affiliate marketing, developers earn a commission or ‘cut’ by promoting other products/services through their own applications. This includes third-party promotion services by integrating affiliate links and referrals. When the user clicks the link or downloads the app, the affiliate partners get a revenue share from the app. The cost associated with affiliate marketing is lesser hence, it is an inexpensive method of marketing your app. Though the affiliate partners get a smaller share, the large user base allows the app to attract many users. Affiliate marketing can be extremely profitable but there are a few considerations. Firstly, the monetization channel being used should have a sufficient number of users to target. Secondly, the promotion should be of similar apps to get results.

Most of the tech giants including Google, Amazon, Microsoft and Apple having large customer base work on this model. They tend to promote similar applications or products/services on their apps. Amazon Associates is a prime example of affiliate marketing where business owners can sign up and post their links so users all around the world can access them. When the user buys a product/service through the referral link, Amazon gets a commission.

Data Monetization: First-Hand Data Leveraged Responsibly

In the digital landscape, particularly in the world of mobile apps, data is perhaps the most valuable asset. All mobile apps record personal data on their servers. However, there is a significant catch. The data is collected anonymously and unidentifiable to keep the user’s privacy intact and comply with rules and regulations. Adhering to data protection laws, the data is kept responsibly and with integrity intact. The analytics are used to derive meaningful conclusions from the collected data in the form of graphs, demographics, preferences and user interests. These are termed aggregated insights. The data can act as a monetization channel for app developers. The developers can sell this data to third parties for marketing research or targeted advertising based on the insights aggregated. This helps in generating additional revenue for the developers.

The most common example of data monetization can be seen in social media, telecommunication and retail industries. All of the aforementioned sources collect data based on basic user information, general interests and preferences which are of dire importance to advertisers and marketers. Based on the bought information, marketers target specific ads based on niche and segmentation. Facebook can be a prime example which collecting and selling user data. However, it has been under scrutiny due to the data privacy scandal which accused it of stealing the data of millions of users without their consent and using it for targeted political advertising.

Crowdfunding: User-Community Engagement

Crowdfunding in general terms is the collection of capital from a large number of crowds each contributing a small amount to raise funds. In terms of mobile app monetization, crowdfunding has emerged as a successful strategy. For niche and innovative apps, crowdfunding is used as a source of raising capital and monetizing the app or the app owners. In the early development phases of the mobile application, crowdfunding is used as a source of raising funds to finance the project if it has unreal potential. With crowdfunding, mobile applications can gain exposure to large audiences as part of the crowd. Moreover, it helps in building a community since many people are part of the crowd as they can help promote the app and provide valuable feedback.

Kickstarter, Patreon, and GoFundMe are prime examples of crowdfunding platforms. They allow users to directly support the developers or content creators using their platforms. In exchange, the user gets access to exclusive, premium content, early access, beta versions, and other perks fostering a sense of loyalty among audiences. However, the crowdfunding marketplace is very competitive. With many app developers vying for the crowd’s attention, the application might get lost among the pool of apps if it is not selling a unique proposition. So, it is essential to have a groundbreaking app ready before asking the crowd to pump money into the venture.

What is the Best Strategy?

It isn’t a rule of thumb that what’s best for one business might also check all the boxes for every other business. The selection, planning and execution of mobile application monetization strategy depends upon various internal and external factors. Among tons of factors, the nature of the business, target audience and value proposition are placed at the top. But, there are certain categories for whom a particular strategy often works wonders. For example, in the gaming industry, in-app ads or in-app purchases enable gamers to obtain special items, lives and in-game currencies. These two strategies are commonly used in the mobile gaming industry.

For streaming platforms, the freemium model is a primary choice because it enables audiences to try out the app before investing their hard-earned money. Then, if they are satisfied, they can commit their long-term loyalty to the mobile application. Hence, the freemium model is popular among video, streaming and music services. The subscription service model is also widely used in this industry. Social media platforms for example use the data monetization strategy as they collect loads of data from their users. So, the one-size-fits-all model cannot be considered a universal truth in the context of mobile application monetization. Before selecting the right strategy, proper research and planning is necessary.

Key Takeaways

The rise of mobile applications over the past decade has led to developers paying a lot of attention to mobile application development. Since the user’s attention span is becoming shorter, the developer understands that the app must quickly grab the eyeballs if it wants to retain the user’s interest. However, with that developers need to carefully consider the monetization strategy for their mobile apps as it requires significant resources including personnel and finances to keep the app up and running smoothly. Hence, opting for a monetization strategy is a necessity rather than a choice. But, selecting the right strategy still has a catch. Not every strategy will work for you. You need to research the industry and then look at what works best for you. Take a look at the competitors and then decide what strategy you want to move forward with.

If you are looking to develop a custom mobile application, Design Vikings can help you set up your own app. Plus, our business strategists and skilled developers will help you decide the monetization strategy that works best for you. We are a team of expert business professionals who have come together to help businesses and individuals like you to succeed. Our app design and development services have helped many businesses go from 0 to 100. We treat every challenge as an opportunity and would love to cater for you. Visit our website or contact us to avail our services.