App Monetization Strategy – 6 Possible Ways To Make A Profit
The application was created with many purposes: Creating new things, being useful for users/bringing interesting experiences/attracting new users; and of course, making money from it.
There are many ways to monetize an app; however, choosing the right money-making strategy is not easy.
How to make money from the app? Which way of making money best suits your business? Should I charge based on downloads? If not, how do I make money from free apps? And how to get steady revenue without compromising user experience?
This article discusses how to monetize the application, some of the pros and cons of each monetization model, and give examples of the applications that have successfully applied each of those models.
Metrics About Monetization App
There are always lots of money your app can earn, 2019 statistics show that user spending reached 120 billion USD globally; many select applications combine multiple models, offering different payment options for different types of users.
[+] 56% of current apps use the Subscription model
[+] 54% of apps using the Freemium model include In-app Purchases
[+] 47% of apps use some form of in-app advertising (In-app Advertising)
More than 40% of app owners say that making sure the ad content doesn’t disturb users is the biggest challenge in making money from their app, they are concerned that making money will negatively affect user experience and increase app dropout rates.
The playable ad is the most commonly used in-app ad format though. But rewarded video ads are the most engaging ad format.
Model Of Freemium
The Freemium mobile apps will be downloaded for free. So how does it make money? Users can only access basic functions of the application; also, certain features or content are only accessible at checkout.
About 94% of apps adopt this business model, if you plan to develop an application with as many users as possible, then this is an effective strategy. Because free apps have significantly higher downloads, they like to get a free experience before paying anything more.
The key to this Freemium model is to give the user enough experience for them to feel the value of the app, this convinces them to “open a wallet” to access the paid features.
It can be difficult to create a free experience of apps, because if the free version is too good, users will have no reason to upgrade to the paid version, if their experience is not good, then users believe that it is not worth spending money to upgrade.
Example Of The Freemium Model: Spotify
Spotify is the classic case of this Freemium model, whereas the majority of Freemium applications have an average conversion rate of 2-5%, Spotify achieves a 42% conversion of free to paid users.
According to an article in Harvard Business Review, Spotify is well aware of the importance of data. They focus on a lot of testing, like ongoing A / B testing to analyze user data.
This creates the basis for them to have a lot of insights that are important to product improvement, marketing and to steer their app monetization strategy.
Premium Model
When should you think about charging apps? The signs that the Premium model is in the right time to roll out are when you have upfront revenue per download and that revenue tends to increase.
Usually paid apps have a higher engagement rate and user loyalty. Simply put, if people pay for something, they use more, but the reality is the opposite; only 20% of paid apps are downloaded more than 100 times, and only 0.2% are downloaded more than 10,000 times.
To determine if this is the right application business model or not, take a look at your competitors: Is your app outperforming free apps with similar functionality? Why do potential users choose your app over the free one?
The key to success with this model is to demonstrate the value of the application. For example, as many five-star ratings as possible, attractive description, rich user interface, and complete features.
Example Of Premium Model: AdGuard Pro
Is a professional application for those who want to seriously think about ad blocking and online tracking. AdGuard’s app is currently in the top 10 most purchased paid apps, top 4 utility apps on iPhone.
The leading application in ad blocking, it’s not hard to get famous in a time when a lot of users think about protecting their personal information.
In-App Purchases Model
In-app Purchases – allows the user to purchase special content, services, or features. Like an app game bypassing challenges, photo filters, or personalized workout combos in one app. It is the main source of revenue for the app, generating $50.1 billion in just the first half of 2020.
If you are considering integrating In-app Purchases, make sure that the purchasing experience complements the user experience, not disturb the user; each transaction should increase the value of the user experience, it’s not simply how you get more sales.
Also, make a note on the App Store page that while your app is free, it includes in-use purchases.
To be successful with this model, you need a strategy to encourage users to switch to in-app purchases.
Send users personalized notifications of in-app purchases matching their browsing or activity history, discounts, and thanks to users for their purchases; finally, use push notifications for a 16% increase in in-app purchases.
Example Of In-App Purchases Model: VSCO
The successful VSCO image editing app on the app stores is available for free download. It makes money from 30 million monthly active users by offering the ability to purchase in-app photo editing packages (presets). These preset range in price from $0.99 to a few dollars, with their own photo style favored by many.
In-App Advertising Model
Monetizing in-app ads or monetizing apps with no ads, which one is better?
By understanding the psychology of downloading apps with no upfront payment. Apps that have ads inside will attract large numbers of users and gather enough information about them, then the ad is more precisely targeted to the advertiser.
It’s a fast-growing fertile ground for advertisers: U.S. in-app advertising revenue is projected to reach over $7 billion by the end of 2020.
Why is that?
The ads in the app perform 11 times better than normal banner ads, the click-through rate is 152% higher.
As with any mobile app monetization model, user experience is very important when it comes to in-app advertising, in-app advertising doesn’t need to be forced.
When ads are precisely targeted and offer the right offers to the right users, they can add value to both advertisers and users.
Example Of The In-App Advertising Model: Instagram
When social networks shared advertising deployment images since 2013, many users worried that using the app would be disturbed. But with the right targeting to users, not only have they accepted the use of the app with ads, but are also willing to interact with it.
Subscriptions
The Subscriptions model gives users more options than “buy” or “don’t buy”, by offering multiple subscription levels with a combination of different features and prices, persuading users to sign up at the lower tier and pay off each timeline, longer subscriptions offer more predictable revenue benefits for the business. Therefore, businesses will be more confident in their product development and marketing budget.
52% of application developers that have implemented the Subscriptions model say: it has a good impact on their business, increasing both their revenue and the number of users.
Choosing the Subscriptions model focuses not only on converting users into subscribers but also on keeping the current subscriber experience intact.
You should clearly explain the benefits of upgrading to your subscription plan. As well as constantly offering subscribers new features and content to retain them.
Example Of The Subscriptions Model: YouTube
The YouTube app combines the top 2 monetization models: In-app Advertising and Subscriptions; with the free version, users will have to watch ads while watching videos on their platform.
When upgrading to a monthly premium account, YouTube Premium’s basic package service fee is currently $12/month, users can also subscribe to a family plan that costs $18/month and allows them to share access with 5 other members.
In the paid subscription version, you can watch videos without having to watch ads, making the experience seamless. In addition, YouTube also adds features such as listening to YouTube Music, YouTube TV.
Sponsorship And Partners
Sponsorship is a partnership with a number of advertisers, they will reward users for completing certain tasks in certain apps.
This model applies when an app’s user base is large enough (or segmented enough) to attract paying brands for reaching their potential customers.
A partner is to collaborate with another application whose user audience is similar to yours. It is a win-win relationship, helping each side increase the interests of their guests and attract more users.
Examples Of This Model: Nike+ And Headspace
When Headspace developed content groups on meditation, they have worked with top sports psychologists to determine what athletes can gain from meditation.
With the partnership of Nike+ and Headspace, users improve motivation, focus, performance, and resilience, not to mention enjoying their training more.
In addition to training from Nike experts on pace, speed, and endurance; the running tutorials feature advice from Headspace experts to improve the running experience and help users achieve the performance they expected.
For both Nike and Headspace, this partnership increases user engagement from both sides.
Which Monetization Model Is Right For Your Application?
Some questions to consider when deciding on an app monetization model:
What’s unique about your application?
[+] Are people willing to pay for it? How much is worth?
[+] What application business model does the competitor use and is it right for them?
[+] What priorities for your business now: get users or increase sales?
Some apps prioritize making money in the first place, so they opt for slower user acquisition.
Others focus on growing the number of users as quickly as possible and then monetizing. Your business goals will determine which model is most effective.
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