Author: Steffen Meyer, Mobile Marketing Content Specialist
In 2022, free is standard. Only a fraction of apps require upfront payment, most of them don’t make users spend anything – at least when it comes to downloading. After installing however, there are various ways app publishers generate revenue.
When monetizing your own app, you should know these common strategies and understand what to look out for in the future. So here’s an overview to get you started.
1. Freemium
This is the most practiced monetization strategy by far: After a free download, users can access basic functions but have to pay to unlock premium features. This allows users to test the application before spending any money.
So when you want to follow this popular strategy, you have to engage and hook new users with the free version and build enough trust, so that they want to spend money for a more increased experience.
2. Subscription
With this strategy, users have to make payments on a regular basis to use all features of your app. You can offer various subscription levels that provide access to different sets of features.
Subscribing encourages users to interact with the app and provides you with a constant stream of revenue. For this strategy to succeed you have to keep user churn low by engaging them with a good mobile retention strategy.
3. In-app advertising
Instead of making users spend money, you may as well generate revenue by showing advertisements in your app. When employing this strategy, you should know if you want to broadcast advertising campaigns that only want to improve brand visibility – so only the ad views matter – or performance marketing campaigns that aim at results like app installs.
Whatever your choice, keep in mind that mobile users may be accustomed to ads but your emphasis should still be on user experience, not on displaying as many ads as possible and thus probably alienating your users. Ad mediation platforms such as AddApptr or AppLovin’s Max can help you optimise ad revenue and solve some of the problems of scaling your ad monetization.
4. Sponsorship
With this approach, you collaborate with one brand exclusively. This means for example that users receive rewards from the sponsor – such as vouchers – after certain actions inside your app are completed. When they redeem these rewards, you will get part of the revenue.
Another way of sponsorship lets you earn money more directly. For example, you bring users to sign up for a newsletter by your sponsor and he will pay you a fixed amount for each new subscription. If this sparks your interest, check out Apponsor for a start.
5. Data monetization
Selling data can be a viable option for developers that have a large amount of daily active users. When your app collects enough data points on a regular basis, other businesses may pay for this information to gain valuable insights into consumers and their behavior.
We recommend these articles by The Tool or Hackernoon to learn more about data monetization, how to gather it correctly while also being trustworthy to your app users.
6. Indirect Sales
Another option is to use your app as a marketing tool to sell goods in the real world. Typical examples are car apps, magazine apps and large brands such as McDonald’s and Starbucks. Also, coupon applications like Groupon often use this business model.
7. Pay per download
With this approach, users have to pay upfront before downloading and using the app. The big advantage is that you receive money directly and user retention or lifetime value doesn’t carry such a big weight.
But since the majority of apps are available for free, it will be hard to convince users to pay for an app they haven’t tried out yet. While this strategy used to be the predominant monetization approach, now it is basically just here for the sake of completeness.
Future developments
There is a lot of discussion going on about what trends to look out for when it comes to app monetization. From all theories, these three main insights seem to have the most substance:
- Subscription strategy is further on the rise: Due to the success of subscription-based apps like Netflix and Disney+, developers are more and more considering employing this payment model for their own apps.
- New privacy rules will change the ad world: When betting on advertising models to generate revenue, you should pay attention to the ongoing shift in the attribution tracking world. Have a look at this blogpost for an overview.
- 5G could usher in a new era of creative advertising: According to some forecasts, up to three billion users will have access to the next generation of high-speed mobile internet in 2025. This may make high-definition videos and augmented reality (AR) much more common than it is now, thus opening up new possibilities for marketers and monetization.
Whatever the future may hold, we at Customlytics are happy to help you with monetizing your app. Have a look at our eBook for a deep dive on the topic or just drop us a line.
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