Being able to create a mobile application that is fast, beautiful, and easy-to-use is indeed a huge achievement. But taking it beyond a mere piece of software, turning it into a sustainable business that generates income requires a carefully thought-out monetization strategy. And, according to the North American mobile market conditions, the customers there are very selective about how and where to spend their money. An intrusive, over-priced, poorly implemented monetization mechanism will immediately turn your app into an app store uninstall target for users.
To generate income from a mobile application means engaging users and creating a balance of value in your product. The top monetized applications are those that have embedded revenue-generation mechanisms in the user journey. They work seamlessly and help users get more from the application. No matter whether you’ve built an entertaining game, a utility tool, or enterprise software, selecting a right monetization strategy and revenue streams is crucial.
1. Freemium and Subscription Model for High Income Generation
The subscription model is the current king when it comes to generating consistent income through mobile apps. Unlike other approaches that require charging an upfront payment before a user uses any application’s functionality, the freemium business model allows anyone to use your software freely, making the transition to the premium tier via subscription.
To launch a successful freemium business, feature gating is essential. The free version of your application must contain features valuable enough to keep the user actively using the software. If your free version offers zero value to the user, they simply will not use it. As for premium features, the user experience must be so good as to justify the subscription. For entertainment applications like games, the premium tier may include exclusive missions, special characters, or unique power-ups. Utility apps may use features like cloud storage, detailed analytics, automation functions, or complete removal of ads.
2. Effective In-App Purchases and Virtual Economy
In-app purchases can provide you with substantial incomes, especially when used within entertainment software such as games or social networking applications. These revenue streams come from sales of digital products or currencies directly from within your application to engaged customers.
When planning a purchase system in an application, it is vital to provide a friction-free and native checkout experience. On the iOS platform, that means supporting the Apple Pay payment gateway that offers an instant transaction authorization using facial recognition technology called Face ID or fingerprint scanning known as Touch ID. The same applies to Android mobiles and Google Pay. Regarding utility software, you might think of selling extra features like an additional pack of professional photo filters or some additional cloud storage capacity.
3. Implement Native In-App Advertising (IAA)
For software that depends on high numbers of users for its income rather than offering unique premium features, IAA can be a profitable monetization channel. But if you decide to introduce banner-style ads in your application, make sure not to ruin the user experience. The best modern solutions involve programmatic and highly contextual native advertising, i.e., advertising that fits the current screen of the user.
4. The Pay-Per-Download Model Is the Way to Go
A paid app is an application that requires upfront payment to be downloaded and used. It can cost as much as $4.99 or as little as $0.99 and is typically bought directly in the Apple Store or Google Play Store. Although this monetization strategy was quite popular in the early days of smartphones, today it is mostly reserved for niche applications that have unique value.
A paid mobile application is most successful if it has some special utility, a pre-existing brand image, or strong guarantees of privacy to its users. For the customers to pay the upfront fee, the application page in an online store must be highly optimized. Thus, the product description should include excellent graphics, high-quality promotional videos, awards received, media mentions, and user testimonials.
Additionally, paid applications usually have no in-app ads. Users who have paid upfront must receive the best experience, meaning that they should get an ad-free environment to enjoy their application.
5. Creating a Robust Hybrid Monetization System
One of the most resilient and effective monetization strategies involves a hybrid approach where two or three revenue-generating mechanisms operate simultaneously, enabling the software owner to monetize different parts of the user base.
The typical hybrid monetization solution is in-app ads, subscription-based model, and IAP. For example, a fitness tracker application may have a basic version with in-app ads. Then, to remove these ads, the user can subscribe to the premium version which also unlocks personalized training and coaching. At the same time, you may introduce a marketplace within the application where the users, both paying and not, can purchase branded goods or expensive nutrition products.
6. Corporate Sponsorship and Partnerships
The alternative to advertising that involves negotiations with external companies whose target audience perfectly matches yours. This monetization solution can be considered when your application targets a highly niche audience or is only relevant to certain geographic areas.
Imagine you have created a marathon runner training application, and then find a sponsor among the major sports shoe brands. Thus, you can offer your users to train by routes branded by the partner company, offer discounts via in-app messaging, and even organize training led by professional athletes who wear shoes from that company.
Corporate partnerships allow the mobile application owner to earn significantly thanks to the ability to avoid the middleman, thus getting more income for less investment.
7. Data Monetization
This monetization approach entails selling anonymous statistics and analytical results obtained from users’ interaction with your application. Such data is highly valued by marketers, finance analysts, and academics, but the implementation of the method should comply with all legislative requirements. So, you can earn by selling anonymized market trend statistics, demographic analysis results, or whatever else that your application collects.
For the USA, the CCPA law must be taken into consideration while introducing such a monetization method. Therefore, you must obtain permission from your users explicitly stating the scope of data collection and processing. Also, any data you transmit outside your app must be completely anonymized to protect the identities of users.
Frequently Asked Questions (FAQ)
What is the most profitable monetization model for mobile apps?
Currently, the hybrid approach works best. It involves using subscriptions as the primary monetization strategy and offering IAP or in-app ads for those users who cannot afford paying. Such a business model enables the app owner to generate money from different segments of the user base.
How to choose between the subscription model and IAP?
If you want the user to continue to get some benefits from your application constantly and regularly, then opt for the subscription model. If the benefit is static or used once, consider one-time in-app purchases.
Putting ads in my app will surely drive users away.
Not necessarily. The trick here is in the quality and intrusiveness of ad types. So, if we talk about intrusive interstitial ads or full-screen popups, they will annoy users. But in-app banners or video ads that the user can opt-in will definitely not cause a drop in retention rates.
Is it possible to change the monetization model?
Certainly, yes. But be ready to face negative reactions from your current userbase. If you switch from free to paid application, try to grandfather existing users, keeping the old monetization approach for those who have not subscribed yet.
What is eCPM and why is it important for app monetization?
Effective Cost Per Mille (or thousand) means that number of revenues the developer gets per one-thousandth ad impression on average. Thus, it enables the mobile application owner to track the effectiveness of ads and optimize them accordingly.
