Determining how to monetize a groundbreaking app idea can be challenging. App creators have several options to consider, such as in-app ads, freemium, subscription-based models, or one-time fees. This guide will explore the various app monetization options and help developers, investors, and product owners understand the concept of generating an increasing return on investment. It will also provide a foundation for launching an app.
What is Mobile Application monetization
Mobile app monetization is the way of earning money by using an app’s user base to turn engagement and actions into financial gains. In the upcoming sections, we’ll explain this idea in more detail, providing a comprehensive understanding of what, when, and how to monetize an app.
Why develop a mobile application
A 2017 survey revealed that the consumption of smartphone apps is just as common as all other platforms combined, and that trend has only increased in 2021. Mobile devices, due to their convenience and accessibility, dominate laptops and tablets, and people spend a significant amount of time using smartphone apps. These statistics highlight the importance of developing mobile apps for monetization.
Should I monetize my app
It is essential to have a monetization strategy in place for your app to generate revenue and recoup the cost, time, and resources invested in its development. The app market is vast and worth billions of dollars and it is expected to double its revenue from 2016 to 2020. However, not all apps or features of an app need to be monetized. For example, a workplace app would not require monetization as it is not charged to the employees using it.
App monetization strategies can be divided into two main categories: direct monetization and indirect monetization.
Direct Monetization: The most common method, where revenue is generated directly from the app. This includes income from app downloads on Google Play or Apple Store, or sales made through an e-commerce app.
Indirect Monetization: This strategy involves offering an independent product or service in conjunction with the app. The app acts as a secondary source of revenue, and profits are made regardless of app usage. Indirect monetization can also be used to enhance the user experience by making products more appealing to valuable customers.
Most app monetization strategies fall under the direct monetization category.
Popular App Monetization Models and Strategies
Here is a list of popular app monetization strategies that are commonly used. Each strategy will be explained as to whether it is direct or indirect, the pros and cons, and how it can be used to monetize an app.
Freemium Model: This is a combination of “Free” and “Premium”. In this strategy, the app is offered for free initially, and users can access additional features and capabilities by upgrading to a premium version of the app. For example, some apps offer a premium version to remove ads. This is a direct monetization strategy.
Converting free users to paid ones can be challenging. To be successful with the freemium model, it’s important to make the free version of the app good enough. Additionally, the cost for the premium version should be justified, as users will not be willing to upgrade if the difference between the two versions is minor. One way to implement this model is to offer a free monthly premium version or extend free trials of the premium version. The freemium model is a combination of both direct and indirect monetization.
Paid Downloads: In this strategy, money is generated by charging a fee for downloading the app. However, the download cost should be within a range that users are accustomed to paying. For example, the average download cost on the Apple Store is $4.37, according to a statistics report. A study by Statistica in 2020 using data from the Google App store showed that most paid apps cost less than $1, with an average range below $5.
This model falls under direct monetization strategy. The number of downloads for paid apps may not be as high as free apps because some people do not want to pay for an app. However, if your potential paid customers frequently engage with the app, other monetization models can be applied to generate income.
Subscription: This strategy generates a recurring revenue through monthly and annual subscription fees rather than a one-time app download fee. It falls under the freemium category and is popular for multimedia apps such as Apple Music and Netflix. Different packages are offered based on the content and number of users accessing it.