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An Ultimate Guide to Mobile App Monetization Model

Chandrapal Singh By Chandrapal Singh | June 5, 2019

In 2008, when Google Play store was launched, there were only a handful of apps available for the users. However, with time, this demographic has changed. Now there are more than 15 million apps, including the one following different mobile app monetization models, which are available on the Android and iOS platforms.

The app industry has grown at a monumental rate with a number of devices added to it such as Tablets, Smartphones, Wearables, Smartwatches, etc. To give you a better insight into the increase of mobile apps, here are the numbers as of the first quarter of 2020. 

number of apps on leading store

However, with the increase in the number of apps in the market, business owners and mobile app developers are now including the mobile app monetization model to generate some revenue. With this thought comes a struggle of choosing the best strategy to move forward with.

It is essential for businesses to go for the best monetization model that can hook the loyal users, keep the product afloat, communicate with the customers, and so on. So, what can be the best way to choose one of the best mobile app revenue models?

However, before understanding what app revenue models are, let us get an insight into what is app monetization and its essential strategies on which the model is implemented. 

What is App Monetization?

Before understanding the mobile app monetization model or top strategies, it is essential to know what app monetization actually is.

App monetization is a way to generate revenue via the mobile app converted from the users. However, it includes a number of models that can be easily integrated into the apps.

But some of these models depend upon the categories of the app whereas others work on the particular area of monetization. Hence, it is essential for mobile app developers to be aware of the ways to generate revenue.

However, with the changing mobile app economy, developers are facing an issue to keep their app afloat. Well, if you are not just planning to interact with customers, then it is best to know all about the mobile app monetization, its importance, and the user experience. Since your user experience can help you to gain the trust of customers and as a result, can help you generate revenue. 

Read More – Impact of COVID19 on Mobile App Economy

But before going forward, we need to understand what type of apps are available in the market and how we can take advantage of it to earn money.

First thing first, there are mainly two types of apps in the market that include monetization methods in different ways. 

  • Paid Apps – In order to use these apps, the users need to pay to download. However, there is no guarantee that the app will worth the risk of paying before trying the app. This might help you earn the money at the initial level but for the long-run, you might end up losing loyal users. 
  • Free Apps – These are entirely different apps that are free to download for the users but include different monetization methods for the developers to generate some revenue. Different monetization methods will be discussed later in this blog.

Now, since you know what is app monetization, this is the time to cover up its essential aspects. The developers need to ensure that the users are installing the app that in turn can generate revenue. It is crucial to focus on:

  • Intact user experience and users.
  • Growing revenue with app

The fact about the whole mobile app monetization model is developers just focus on generating revenue and avoid the user experience (many-a-times). This ends up losing some potential users that can help in the long-run.

It is essential for mobile app developers to understand that a happy user means more revenue. When the app monetization strategy is implemented, it affects the user experience as well. It can be reduced or mitigated but it is going to affect the user experience that can even turn them off and switch to an alternative.

average customer spent on mobile apps

This is essential since the revenue is generally calculated as per the total number of active users. Hence, developers need to keep the users in mind while adding app monetization models.

Mobile App Monetization Strategies

Mobile apps are a great way for the developers, designers to facilitate functions, and essential services. There are different types of apps that are in the store. In addition to this, these apps can help developers and designers to generate revenue with the right monetization techniques.

The fact is that there are a number of the top mobile apps on iOS and Android platforms that are generating a good amount of revenue. 

top apps generating revenue

Here is the major mobile app monetization strategy that one must be aware of to pick up as per the app category. 

#1 Pay to Download (Paid Download)

paid apps

The fact is that there are mobile apps that one can easily use by paying the upfront fees. The paid downloads apps are a great way to generate revenue. However, it is essential to keep the price as per the users to ensure that they can purchase it.

Pros of Pay to Download AppsCons of Pay to Download Apps
Earn money when users purchase the appCompetition with free apps
Due to upfront investment, the users are more engaged and loyal for the appNo other opportunity to include monetization method
Exact monetary value os usersGive sizable profit to Google and Apple app store
No other monetization methodAttract users with paid download option and ignoring user experience

#2 Free Apps

Next comes the free apps that follow a number of app monetization strategies since it increases the chance of getting the app downloaded by the users. Users don’t have to pay upfront money but it includes subscription, per feature fee, advertisement, and so on options available to generate revenue.

This gives more options to the developers and business owners to generate more money as compared to the paid apps. Here are the free mobile app monetization strategies that one must be aware of.

I In-App Advertisement

Advertisement or In-app Ads are one of the major mobile app monetization strategies that are used by mobile app developers. In this, the users get the ads while they are using the app. It can be the pop-up, video, or even the banner at the top or bottom of the screen.

However, if you are aware that the same size doesn’t fit all, then you need to know that it is true for the ads as well. The different ads work differently for the mobile app category.

However, in order to select the app ads, it is essential to be aware of:

  • Concerns – generate significant figures for the large audience and can affect the experience of the user
  • Benefits – simple strategy for app monetization and quick to implement

Almost all the apps in the market work on the ads due to its popularity and minimal effect on user experience. Here are different types of mobile app ads that users can select from. 

types of in app advertising
Pros of In-App AdsCons of In-App Ads
Easy to implementInterrupt user experience
Passive income sourceFrustrate the users that can make it difficult to retain them
Effective with different types of adsNot ideal for the apps that offer important functions

II Freemium & Subscription 

freemium apps

These are the mobile app monetization strategies that work on a specific model to earn money by developing a mobile app. Users can subscribe to services such as Candy Crush Saga while they download the app. It allows users to install the app without any initial payment where they can access some of the features but they need to subscribe for the constant streaming. 

  • Concerns – seamless experience and a lot of investment on the product
  • Benefits – drive engagement and reliable, steady income

III Data Monetization

It is one of the most famous monetization strategies for mobile apps that keep the user engaged to ensure that the developers can keep generating revenue. However, it is not that easy without the proper data. The user on the interaction with ads generates the data that is then used by the developers to quantify the ads.

Consider it as the big data for the users to ensure that they can get the most appropriate services as per their choice. The motive is to generate revenue without interrupting the user experience.

IV Transaction Fees

It is a major type of app monetization strategy that allows developers to get some commission when the users make some transactions. This works best for the invoicing, payment, and wallet apps. The more the user engagement is, the more will be the commission earned. 

V In-app purchases

in app purchases

These are the types of mobile app monetization strategy that includes the selling of physical and selling virtual goods to generate money. It can be the virtual currency for the game, product, services, etc. that is purchased by the users and the developers get the amount. However, some percent of it goes to the App store.

It is similar to the subscription strategy but the users don’t have to subscribe to it for regular streaming. 

These are the major factors of how free apps make money, let us move to the models now to get a better understanding of how the amount is calculated.

What are Mobile App Monetization Models?

If we talk in a bit detailed manner for the mobile app monetization model, then it is essential to be aware of the major models that include on which the strategies are implemented.

  • eCPM
  • CPA
  • CPC

eCPM – effective Cost Per Mile Model

If we talk about the mobile app developer then it is an essential lucrative form of the models that one must be aware of. These are mainly dependent on the advertisement monetization strategy. If the users take an action then it can easily use the formula to calculate the eCPM.

effective cost per mile

This formula gives an insight into the earning with the total earning denoting the revenue value that a specific ad has generated and total impressions are the action over the campaign period. 

CPA – Cost Per Action Model

In this model, when users take a specific action(s), only then the developer can earn revenue on the mobile ad. They can easily click on it to check the app or even install it, subscribe to a service, make an in-app purchase, and so on.

This mobile app monetization model works on the potential of the app that the user can take action on. It is to generate high revenue and a higher payout for the publishers. However, this model is not ideal due to the mobile ad fraud that can put the developers at risk. 

CPC – Cost Per Click Model

This model is mixed with CPA and eCPM models since it also counts the action of users on the mobile ad. 

cost per click

Here Total Ad Spend is the amount invested by the developers on the ads integrated into the mobile app and the number of clicks is the actions taken by the users. It attracts a number of users to click on the ads and deliver a better ROI. In addition to this, developers can easily analyze the behavior of users.

As for the cons, this mobile app monetization model doesn’t offer a better click-through ration if the specific ad is not best for the app. It will generate no profit for the developers and hence they won’t be able to build a financial pipeline or predict the revenue. 

Pre-Mobile App Monetization Checklist

Don’t jump directly on the dollars when you have a number of things to take care of. This includes ensuring that the app is worth investing the money in. This includes a proper checklist that can ensure that developers can avoid any pitfalls in the development process.

Here is a small checklist that you need to keep mind before diving into the best mobile app monetization strategies.

#1 Understand your Audience

The major part about the mobile app monetization strategy is that one must be aware of the user demands. User research is extremely important to get an understanding of the mobile app user persona, their demand, and if they will be willing to invest in an app.

#2 Grow your User Base

In order to get a top-quality mobile app, it is essential to increase the user base and work on the mobile app monetization strategies. The impression of the app on users determines how much they can invest in the app. It is essential to have a customer acquisition strategy for the marketing channels to increase the user base.

#3 Unique Apps

Apps must be unique otherwise the user will have no reason to be at the platform. There is a reason why people love to spend time on Candy Crush Saga so much that it also supports social media integration. The app must be different to hook the users and make them pay some bucks in the app. 

#4 Analyze the Competitors

Competitors are another major factor that you must be aware of when it comes to the mobile app and its monetization models. The researchers or developers must include the potential of mobile monetization during the analyzes that can be added. Hence, know what your competitors are doing, how they are including the monetization in their apps, what are their opportunities, and how to generate revenue.

#5 App Store Optimization 

In order to understand it, the best thing is to go through the mobile app store optimization. It is a major part of the mobile app that will determine the working of the app and its marketing. The App Store works on the major optimization strategies to ensure that the app is easily visible to the audience. The right keywords, description, screenshots, etc. holds a lot of importance when uploading an app. s

#6 Launch the Monetization Method with the App

The major part that you need to remember is that mobile app revenue models must not be left for the later part. If you need to generate revenue with mobile apps then make sure to implement the models during the launch of the app. However, make sure to choose the best mobile app monetization strategies to ensure that it is right for your app. 

Opt-in Services & Privacy 

As a matter of fact, if the users are going to use the app then it is essential to include the features to maintain security and privacy. The users must be aware that the app is free then the developer or publisher is going to earn some bucks in some different ways.

Hence, it is best to keep them updated about the monetization method beforehand. Make sure to include it in the description so that the users know what they are signing up to. The users must be aware of the type of mobile app monetization strategies that are used to earn money to build trust. If the app is of top-notch quality then they will surely stick with it without worrying about the ads or small purchases.

Mobile App Monetization Trends

This is another of the vital parts that must be added to the app monetization for the users. Here are the major aspects that one must keep in mind while including the monetization model to the app.

#1 User Experience is the Priority

This is something that is mentioned again and again through the monetization model and strategy that makes it one of the important app monetization trends. This includes in-app ads that can not be a great addition for users.

We are a part of the user-oriented market and hence it is essential to make sure that user experience is best. The app monetization success is a pivotal point for the developers without affecting the user experience. 

#2 Dissatisfied Users that invest more money to purchase features

The users are not that happy if in a free app they have to purchase each and every feature. This is an essential part of the mobile app monetization strategy that can turn the users down. Imagine if the users have to purchase the feature of sending messages, earning coins, going to the next stage, and so on. 

#3 Steer Clear of Paid Apps

The subscription and freemium apps are here as long as we can predict since it allows users to only make the purchase if they want too. They can decide after using the apps whether they want to include the features in their app or are they fine with the limited features.

Hence, there is no need to go for paid apps that make users make the purchase in order to install it without giving them much choice. Hence, we can say that subscription and freemium models are here to stay whereas paid apps might not be a thing in the future.

#4 SaaS Products & App Subscriptions

As mentioned above the subscription model is a most famous mobile app monetization strategy that is here to stay for a long time. However, the users are more comfortable with it since they can use it before making the final purchase.

This works as the SaaS model that has a different pricing model as per the feature sets. The users can upgrade the model if they want to in the future. 

#5 White Label Services

The very first practice that is gaining huge momentum in the mobile market is the White label app monetization. It is empowering businesses to share their app code with other developers to reuse their elements and redesign their application and get some revenue in return.

#6 Buying Merchandise

Another method of app monetization that is ruling the marketplace is purchasing merchandise. This implies, by selling customized products in relation to your app functionalities and features.

For example, Angry Birds sold plush toys of their characters to promote their application and drive higher revenue.

#8 Integration of AR/VR

In 2019 and the coming years, AR and VR mobile app monetization trends will also become prominent. App developers and marketers will use these technologies to promote their businesses using customized/virtual ads. They will use real-time user data to understand the perfect time, place, and avatar, and make a profitable move.

#9 Involvement of Artificial Intelligence

Machine Learning and AI are also contributing as significant mobile app monetization trends to consider in the year 2019 and beyond. The technology will assist the mobile application development team to gain comprehensive knowledge about their target audience and determine how much revenue can be generated from every individual. This will eventually help them to build more profitable In-App Advertising and In-App Purchase strategies.

#10 Focus on App Usage, Not Downloads

Last but not least, app developers and businesses will focus more on how to increase app user engagement and retention over the ways to improve user acquisition numbers. This is because an existing customer makes more purchases and spends more per visit when compared to new customers.

Conclusion

The mobile app monetization model, strategy, and trends include a number of things that make the mobile app an enhanced version to grow. Remember the paid apps and free apps are just the above part of the mobile app.

There are a number of things that are added to the mobile app monetization options that are different for the app categories. Just don’t be overwhelmed with several monetization models and trends that have different pricing for each.

The more users download the app, the more will be the revenue for the publishers. Just plan and be prepared for it to get the best results. 

FAQ

Q- #1 What are a few mobile ad providers that mobile app developers must be aware of?

There are a number of ad providers that can help a lot with mobile app monetization. To name a few:
Google AdMob
Facebook Audience Network
MoPub
Google Ad Manager

Q- #2 How much can my app make?

The sum of money earned by the developers or owners depends upon the number of users on the app. Along with this, the type of mobile app revenue models and strategies also
determine the total revenue that an app can generate.

Q- #3 How do I monetize my app?

It is easy to monetize your app. The best thing to do is to go for the free app with the in-app purchase or advertisement models. Through this, the users can easily see what the app stores for them. However, apart from this, you can opt for paid apps,
data monetization, and other mobile app monetization strategies.

Q- #4 Why are free apps better than paid apps in terms of user experience?

When it comes to paid apps, the users have to purchase it in order to download, install, and use it. Due to this, there are a number of times when the app is not up to the market of the amount paid by the users and can compromise user experience. To overcome this, free apps are developers that
allow users to see what the app stores for them and generate revenue with ads and freemium models. This can compromise the user experience but users prefer a few
hitches if the app is able to suffice their demand.

Q- #5 How to develop revenue-generating mobile apps?

While developing a mobile app, the user must be aware of the
changes that they want to go through with including the mobile app monetization model.
The developers must include the model during the launch only instead of adding it later on when the app is thriving in the market. Monetization model from day one gives stability in the market.

Chandrapal Singh
Chandrapal Singh

A technocrat and an entrepreneur who is the Co-Founder and Chief Delivery Head at Appventurez. Skilled in object-oriented programming (OOP), iOS Development, Design Principles, Data Structures, and Swift, he has served different organizations as Tech Lead.

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