After putting in the time and effort to develop a mobile app, it’s natural to want to generate money from it. However, charging users upfront to download an app has fallen vastly out of favor. Consider this: Google Play has more than 3 million apps available for download, and the App Store has more than 2.2 million – but only 8 percent are paid apps. Indeed, given the choice, most people will happily download an app for free before blindly paying for it.
Luckily, you don’t have to charge users for your app upfront to make money from it. There are many ways to monetize an app to generate consistent income from it, and we explore the most popular ones below.
What is Mobile App Monetization?
Put simply, mobile app monetization refers to generating revenue from a mobile app without charging money upfront for it. As noted above, the vast majority of apps are offered for free now – but developers are still raking in plenty of money. They do so through the clever use of various mobile app monetization strategies. What works for one type of app may not work for another, however, so it’s important to educate yourself about the available options and how they work.
Benefits of Monetizing a Mobile App
The main reason that developers monetize their mobile apps is obvious: to make money. Although apps can provide value in other ways, such as by raising brand awareness or promoting brand loyalty, the bottom line is that developers have a bottom line of their own to worry about. Some of the top benefits of monetizing a mobile app rather than charging upfront for it – or offering it completely for free – include:
- Get reimbursed for your time and effort – Developing a useful app takes a lot of time and effort. You’re more likely to develop a quality product when you know that you will eventually derive some income from it.
- Unlock the potential for generating significant revenue – Without monetizing your app, you miss out on the opportunity for potentially generating a considerable revenue stream for yourself and your business. There is often no telling what will work and what won’t, so it’s generally worth a try.
- Invest revenue back into the app – Another great reason to monetize an app is so that you can take the revenue and use it to improve and expand upon it.
- It’s worth a shot – Finally, unlike with offering a paid app, which will alienate most users and keep them from trying it at all, monetizing an app involves no real risk. The app can still be downloaded for free initially, and it is then up to users whether to pay for extras.
The Top Four Strategies for Monetizing a Mobile App
In the world of mobile app development, few topics are as popular as that of app monetization. Not surprisingly, there are many different ways to generate income from an app these days; the question, of course, is which one is right for you? Here’s a quick rundown of the four most popular ways to monetize a mobile app:
- In-App Purchases – In-app purchases, or IAPs, lead the pack when it comes to earning money from an app. In 2017, they accounted for nearly 50 percent of all of the income generated by mobile app developers. Put simply, IAPs involve the in-app sale of special, additional content or services. Most popularly used and effective in mobile games, in-app purchases also make sense for many other types of apps. In-app purchases can be consumable, which means that they are paid for once, used once and must be bought again. They can also be non-consumable, which means that they are paid for once but can be used again and again; for example, a non-consumable in-app purchase might involve unlocking a new level or the full version of a game.
- Subscription Model – Not long ago, Apple and Google dropped platform fees for in-app subscriptions that are maintained for at least one year to just 15 percent. This triggered an explosion in the use of the subscription model in mobile app development. Suitable for apps across many verticals, the subscription model can be offered early on in the user experience. They are auto-renewable, so users must cancel them to stop paying. This provides developers with financial predictability while providing ongoing value to users. It also encourages users to interact with the app more often, which helps to enhance retention rates. For example, if you have a real estate app, you can implement a subscription for real estate agents to gain access to your app.
- Advertising – If you want to start generating revenue quickly while keeping your app free, displaying ads within the app may be the way to go. Although some users find in-app ads to be spammy, intrusive and distracting, many are willing to put up with them to avoid paying to use them. Getting started with mobile app ads is easy enough. You must select an ad network first; Google’s AdMob is among the most popular. Next, you must decide which in-app ad format to use. Options range from relatively unobtrusive banner ads to video ads to interstitial ads that appear at transition points. Finally, you’ll have to choose a pricing model. There are many, but cost per mille, or CPM – in which advertisers pay for every 1,000 times their ads are shown – is by far the most popular.
- Freemium Model – As the name implies, the freemium model of mobile app monetization involves offer a free app that can be upgraded in various ways to a premium version. This style is by far the most dominant on the app market today. Such apps are free to initially download but only offer basic functionality. The idea is to get users used to and dependent upon the app while offering them premium upgrades that make the app more useful. Freemium apps may be based on features, such as offering additional access for a price; based on time, which involves providing full access for a limited time to allow users to test-drive the app before requiring payment; or based on number of uses, which means that users can only access certain features so many times before being prompted to upgrade.
Now that you understand the basics of mobile app monetization, you may be ready to select a strategy and to start generating revenue from your app. Still, the market is highly competitive, and it pays to have the right guidance.
Prem Khatri joined Chetu, Inc. in 2008 as Technical Project Manager. He moved up to become the Vice President of Operations in 2016. His primary responsibilities are to lead, track and manage technical teams that create custom software solutions. His background includes software development using C++, Java and Microsoft technologies. He obtained his MBA with a major in Systems & Marketing from Pune University in India. Prem is a certified Project Management Professional (PMP).