A beginner’s guide to mobile app monetization strategies
Choosing an app monetization model is critical to the success of your mobile app. Whether you have developed a paid or free-to-install app, developing an appropriate app monetization strategy that satisfies your users while ensuring your company is profitable is key.
What is mobile app monetization?
Mobile app monetization is the process of generating revenue to support your app. There are a number of app monetization models to choose from — many of which can be combined to diversify your revenue streams. The best fit for your app will depend on your app’s vertical and target audience.
Before you even think about user acquisition (UA), a monetization model should be chosen as it will influence your UA strategy. When analyzing the best app monetization models to employ, it’s important to consider your user journey and how this overall experience will be affected.
Ultimately, this means avoiding monetizing in ways that frustrate users. This will lead to poor brand reputation and an increase in churned users. Discovering which mobile app monetization strategy is best suited for your mobile app can be a complicated process, but it’s also a critical step in your journey to profitability.
How to monetize your app
As of 2022, 96.8% of Android apps and 94% of iOS apps are free. So although one straight-forward method of monetization is to charge users to download your app, you’ll have steep competition with freemium challengers. For this reason, it is recommended for most developers that your app is free to download and other monetization strategies are introduced after install to generate revenue.
In-app monetization models
In-app purchases (IAPs) offer an unobtrusive monetization method that can even enhance the user experience. Consider ways in which you can build upon the user experience with IAPs.
In-app purchases come in the form of consumables and non-consumables.
Non-consumables only need to be purchased once. Paying to unlock a gaming level, for example, is a non-consumable purchase.
Consumables, on the other hand, are temporary or limited purchases. Take mobile gaming phenomenon Pokemon GO, for example. The app’s in-game shop allows users to purchase Premium Items using PokéCoins. Players can earn up to 50 PokéCoins per day or they can purchase PokéCoins using real money. According to NintendoLife, Pokemon GO has surpassed $6 billion in player spending. In-game currency, such as PokéCoins, is an example of a consumable in-app purchase.
Subscription monetization models
Subscription services are another common method of in-app purchases. Subscriptions enable you to offer a different experience to paying users versus those using the free version of your app.
When setting up a subscription package for your mobile app, you aren’t limited to an all-or-nothing approach. Depending on your app’s offering, it may be smarter to set up multiple subscription packages with different value levels. For example, you may want to offer a free service, a basic subscription, and a premium subscription for different types of users.
This model is used by leading dating app Tinder. Although the app is free to download, Tinder also offers Tinder Plus and Tinder Gold. Here’s how its subscription service works for different users:
- No subscription: These users can download the app for free but also have a limited number of Likes and Super Likes. They are served ads as a trade-off for not having to pay a subscription fee.
- Tinder Plus: These users have unlimited Likes, can rewind their last swipe, can swipe up to 5 Super Likes per day, and have Passport — allowing them to view potential matches outside of their current location. These users can also use Tinder without being exposed to ads.
- Tinder Gold: In addition to the Tinder Plus above, these users have exclusive access to the dating app’s Likes You and Top Picks features.
Each of these subscription levels are available to purchase for 12 month, six month, or one month durations. This model ensures that the app is generating revenue from all users.
Learn more about the future of subscription models as a method of scaling your app.
4 ways to optimize your in-app purchase offerings
- Considering your in-app purchase model during the development stage means you can lay out the development roadmap your app needs to successfully monetize with this model. This will save resources further down the line.
- Use the copy surrounding in-app purchase offerings as a creative branding opportunity. For example, name offerings in ways that are unique to your brand (remember PokéCoins above?). This will make your monetization model more engaging.
- Implement bundle offers for users to purchase multiple in-app items at a cheaper rate. Some users will be willing to spend more for a better deal, so don’t lose out on these opportunities to boost revenue.
- Use automation to encourage users to move down the user funnel and spend money inside your app. This can be done by automating push notifications, emails, and in-app messages.
Advertising monetization models
The most common way to monetize mobile apps is by running in-app ads. In fact, 50% of mobile gamers prefer free ad based games. This method offers a valuable source of revenue for apps that want to remain free in the app store. Providing content and ad formats relevant to your users can create a great user experience.
Here are six ad formats to consider:
- Banner ads: This relatively simple ad format enables advertisers to place static or animated ads across a banner within your app. Quality graphics and an enticing call to action (CTA) are critical for banner ads.
- Interstitial ads: This format displays ads in an expanding, full-screen experience. For this reason, interstitial ads are more likely to avoid “banner blindness” – where users have become so used to banner ads that they aren’t registered by users. Since full screen interstitial can be disruptive, it’s essential that these ads are placed at natural pauses, such as in-between levels of a gaming app.
- Native ads: These are paid ads that are designed to match the content that the mobile app user is experiencing.
- Video ads: Video ads are another popular choice because they can be highly engaging and deliver some of the highest CTRs of all formats. The U.S. mobile ad market is expected to reach $247.68 billion by 2026.
- Rewarded video ads: You can enhance the appeal of video ads by rewarding users for finishing a video. Unity Ads, a monetization platform, found that 62% of mobile gamers regularly view rewarded video ads and 71% find this advertising preferable to other methods.
- Playable ads: These ads are a try-before-you-buy method that exposes users to interactive gameplay. Users gain a limited look at the advertiser’s app before they are served a CTA. This is a great way for advertisers to reduce uninstall rates because users who are choosing to install will have a predetermined interest in the gameplay.
Once you know what ad format you would like to use, there are three types of cost models available to buy campaign inventory.
- Cost per thousand impressions (CPM)
- Cost per click (CPC)
- Cost per action (CPA)
Best monetization for apps
So which of these monetization strategies will work best for your app? At the end of the day, for the best results you’ll need to use multiple monetization methods in conjunction. To ensure you are generating the most revenue possible without disrupting the user experience, you need to develop an overall strategy that includes more than one of the techniques discussed in this article. Running ads while also offering users the option to pay for an ad-free experience is a great example of how two monetization methods can be extremely effective.