App monetization trends: How are apps making money in 2020?
The mobile app market is projected to be worth $407 billion by 2026, and there are now more ways to creatively monetize your app than ever before. Mobile marketers must find ways to optimize and diversify their monetization strategy to compete in a competitive market, so it’s critical for app marketers to stay updated about the most popular monetization methods and what to expect in the future. In this article we cover app monetization trends for 2020, how they work, and forecast expectations for app business models in the near future.
App monetization: Essential trends (and how they work)
1. In-app advertising
In-app advertising is the placement of ads inside your app – and it’s a significant part of the app monetization ecosystem. According to Statista, mobile ad spending amounted to $190 billion in 2019 - and that figure is expected to increase to more than $280 billion by 2022. In-app advertising as a monetization model is relevant for all verticals and offers several ways in which you can get paid for displaying ads to your users. You can find a list of ad formats in our guide to developing your monetization strategy.
In-app advertising trends
Rewarded video: This ad format adds gamification to the experience of being exposed to an ad. Users are incentivized to watch in-app ads because they will receive a reward for their time. For example, a mobile game might reward users with coins or extra lives as a reward for watching a 30-second ad.
An eMarketer report focused on in-game advertising shows that rewarded video advertising is the most prevalent format. Moreover, Unity Ads describes them as the “hottest revenue generator” in in-game advertising.
A significant benefit to displaying rewarded video is that they are often opt-in, meaning users can also avoid these ads entirely if they have no interest in the rewards on offer. According to programmatic advertising technology company OpenX, 77% of users are happy to watch a 30-second ad if they were rewarded with a discount from a retailer, making this a preferable format for many app developers.
Playable ads: When advertising a mobile game, there’s no better way to show off its qualities than allowing users to experience gameplay. This is possible with playable ads, enabling users to play a portion of your mobile game without installing. As playable ads have developed, they have become an increasingly popular choice for advertisers. The playable ad format has an excellent reputation among U.S. professionals, who voted it the most effective in-app ad format available.
Native advertising: Native advertising is an unobtrusive way to generate revenue from advertisers without ruining your app’s user experience. This approach to in-app advertising is designed to replicate the look and feel of your app, creating a more satisfying user experience while still exposing your users to advertising. Native ads for mobile sold programmatically represent 84 percent of all native ad spend, amounting to over $18 billion. Because native ads must match your app’s design and functionality, this can also lead to a more creative approach to advertising.
PubMatic’s APAC In-app Specialist, Lashanne Phang, stated that mobile in-app advertising will soon get a significant boost thanks to 5G. Lashanne states that “5G phones are expected to represent a major performance leap for user experience on mobile, particularly with high-definition media and interactive technologies such as the mobile gaming and mobile video streaming spaces.” This presents advertisers with several opportunities to enhance the quality of their ads.
User-Level Ad Revenue tracking with Adjust
In-app advertising is a critical area where Adjust can help: our User-Level Ad Revenue tracking enables you to accurately measure in-app advertising monetization so you can see how your users respond to different ads. This can be used to track the number of users that account for your revenue and which networks are bringing the most valuable users to your app. User-Level Ad Revenue offers a granular breakdown of ad revenue at any segmentation level – giving you the means to optimize performance and push towards your targets with data-driven insights.
User-Level Ad Revenue also enables you to make more accurate lifetime value (LTV) calculations. This is because you can use Adjust to track the acquisition cost of your users, the revenue contributed in-app and how much revenue has been generated by that user from converting on ads. Having these data points means your LTV can be calculated with greater accuracy. To learn more about User-Level Ad Revenue, read our feature announcement.
2. Freemium / subscription monetization modelling
Many apps offer a freemium service, whereby users can download the app for free and enjoy the functionality with ads. Users are unlikely to purchase an app they’ve never tried, so it’s a popular choice to implement a freemium service so that users can try your app before committing to a subscription. When offering a freemium service, you can show your value to the user and convince them that your product is worth their money. The freemium model is likely to remain popular because it’s much easier to acquire users when your app is free. Moreover, users who do not subscribe to your premium service can still be monetized with in-app ads.
They also have an option to remove ads (and any number of other benefits) via a subscription monetization model. A Sensor Tower report shows that U.S. revenue for the top 100 subscription apps grew by 21% in 2019, increasing from $3.8 billion to over $4.6 billion. Spotify is a well-known example of this model. Anybody can download Spotify and start listening to music with intermittent ads but their premium ad-free service must be paid for monthly. Users can also try the premium service as a free trial for one month – giving users a taste of their superior offering.
How influencer marketing can help
You can also use influencer marketing to advertise your subscription service. Influencer marketing is the practice of working with popular social media personalities and brands, often paying to feature your product on their accounts. Influencer marketing is a smart way to market your brand. This is why 17 percent of companies will spend more than half their marketing budget on influencers. Health & Fitness apps, for example, could partner with variousl fitness influencers to advertise your premium service. You can also go one step further and offer fans of that influencer a discount code, enabling them to support the influencer as well as purchasing your services. This is also a smart way of identifying which users have converted as a result of your influencer marketing.
3. In-app purchases
In-app purchases are essential to many mobile apps: 95 percent of all Google Play Store apps are free, relying on monetization methods such as in-app purchases to generate revenue. Users are spending $380 billion worldwide on in-app purchases, making it a great way to boost your app’s revenue.
For mobile games, in-app purchases can be divided into two categories: consumables and non-consumables. Consumables are temporary, such as in-game currency, while non-consumables only need to be purchased once. An example of a non-consumable in-app purchase would be to unlock a level or character skin.
In-app purchases aren’t limited to mobile games – social media app Reddit successfully created an in-app currency called Reddit Coins. The company’s official website describes this as “a virtual good you can use to award exemplary posts or comments.” Reddit also relies on brand loyalty in order for users to invest in in-app purchasing, stating that Reddit Coins will “encourage your favorite contributors to keep making Reddit better.”
Monetization forecast: What to expect in the not-so-distant future
In addition to following current trends in app monetization, it’s also essential to look ahead at possible trends that will affect the market in the near future. Here are a few app trends and monetization methods that need to be on every marketer’s radar.
Multiple revenue sources will become increasingly important
It’s smart to have several ways in which your app can be monetized. Not only can this act as a safety net, it also allows user preference to dictate how your app is utilized. The problem many apps face is that only a small percentage of their audience contributes monetarily. A report by app testing firm Swrve revealed that 2.2 percent of gamers spend money on an app, while 46 percent of all revenue came from the highest-spending 10 percent of that group. Diversifying your monetization model means you are less reliant on a small group of highly valuable users, increasing app revenue and building a more robust overall monetization strategy.
In-app bidding means more competition for ad inventory
so that all of their advertisers are simultaneously bidding against one another.
In-app biding is a sophisticated way to auction a publisher’s ad inventory. The basic principle is to have advertisers bid simultaneously against each other for that inventory. In the last twelve months, the number of apps using bidding with Facebook Audience Network has grown seven times larger. According to DigiDay, in-app bidding results in between 13 and 27 percent uplift in average revenue per daily active user (ARPDAU). This is pushing mobile games developers such as Game Insight to auction more of their inventory via in-app bidding: the company now runs 95 percent of its inventory on in-app bidding. As this becomes more commonplace, in-app bidding will give every demand source an opportunity to win the impression – allowing publishers to get the best price for their inventory.
The rise of augmented reality
During Apple's first-quarter earnings call for 2020, Apple CEO Tim Cook said, “You rarely have a new technology where business and consumer both see it as key to them. That's the reason I think [augmented reality] is going to pervade your life.” As augmented reality (AR) becomes more commonplace in the mobile app industry, marketers will be looking for ways to monetize apps that utilize AR technology. Niantic’s Pokemon GO is a great example of how augmented reality apps can monetize with in-app purchases: the app’s in-game shop allows users to purchase in-game items using ‘PokéCoins,’ which you can also earn by playing the game.
Another example of successfully generating revenue with AR is IKEA Place. This is a free app from IKEA that allows users to superimpose IKEA products into their household. This gives users a strong indication as to how each item will look, giving users more confidence in their purchases before arrival. IKEA Place was built using Apple’s augmented reality framework ARKit and swiftly became the second-most popular free app built using that framework. For more information about augmented reality for mobile marketing, read our guide here.
For more insights into industry trends and what to expect in the future, read our latest app trends report. You’ll find critical insights such as growth trends from the last year, and performance benchmarks per vertical. You may also be interested in learning why User-Level Ad Revenue is a game-changer for the mobile marketing industry.
It’s also important to integrate social media platforms with your app. This makes it easier for users to share context related to your game, such as a high score, on their social media account. This is free exposure for your app and is another way to build a community for your game. Integrating social media platforms into your app also means you can analyze trends and stay ahead of your competition.
You also need to consider influencer marketing as a part of your overall strategy: 65 percent of influencer marketing budgets are expected to have increased in 2020 and 17 percent of companies are spending over half their marketing budget on influencers. The current increase in DAU on gaming platforms such as Twitch also makes influencer marketing a significant way to advertise your app in 2020.
Using automation tools to streamline marketing performance
68 percent of businesses are using automation in some way and this figure will increase as automation tools become more sophisticated – and marketers learn ways in which they can be useful to their campaign management. Automation tools enable mobile marketers to optimize their tasks by delegating menial tasks and allowing more time for data analysis and strategy.
Adjust's Director of Client Success, Americas, Melissa Coleman, has outlined some of the significant,changes this will have on the mobile marketing industry. Melissa explains that marketers currently “handle dozens of channels, switching between tools while trying to unify disparate sources of data” but notes that “a range of new marketing automation tools, with their abilities to automate a range of repetitive tasks, are expected to change the way marketers work forever.” Automation can save you time and allow you to focus on the creative tasks that will help you reach your targets.