Creating a mobile app for your business is crucial if you want to interact more with your customers. More business-to-customer interaction means more data being pulled from the app, which can help you come up with new ways to market your brand.
But your mobile app can do more than just help you interact with your customers. With mobile app monetization, you can earn a considerable amount of revenue for your business.
And even if you’re not looking to make money with your app, you might want to monetize your mobile app to pay the bills and for its future upkeep.
Note that app monetization isn’t a straightforward process. It involves implementing essential app monetization strategies such as in-app advertising, SMS marketing, and many more.
To ease the learning curve, we gathered the best tips and methods for mobile app monetization for any type of business. This guide has everything you need to know about app monetization. Moreover, this guide is relevant to all app developers and app owners alike.
Whether you have a paid app or a free app, you may be experts in hybrid app monetization or beginners who are in the early stages of the app journey — this guide is for everyone looking to generate revenue from their mobile apps.
App Monetization: An Overview of Opportunities for Mobile Apps
With Android OS and iOS combined, there are roughly more than 5.5 million mobile apps installed on every smartphone and other mobile device today. Starting with just several thousand back in 2008, the app industry has seen a monumental rise of mobile apps fueled by software and hardware innovations in smartphones, tablets, and other mobile devices.
In 2016, there were already around 12 million mobile app developers. The figure was estimated to reach 14 million by 2020. And the majority of these people in the mobile app industry are here to make money.
So how can you monetize an app with competition this tense?
This guide will lay out several mobile app monetization strategies and models that will generate revenue from different mobile platforms and various app categories. Even if the competition is quite big, it’s still possible to monetize mobile apps because the demand is high.
A Statista survey shows that mobile devices constitute 51.53% of the total web traffic. And mobile app usage accounts for 90% of the total usage time for mobile devices, which means you’ll likely generate a decent app revenue with a good mobile app.
A Growing Demand for Mobile Apps
Back in 2012, mobile users spent an average of 1.5 hours a day with their smartphones and tablets accessing the internet. Today, mobile users spend way more time with their smartphones and other mobile devices, which allows app developers to monetize mobile apps.
How Much Money Can an App Make?
Now we’ve established the growing demand for mobile apps, let’s examine how much money is there to be made within the app industry.
In 2016, the combined sales of mobile apps and in-app advertising reached a generated revenue of $88 billion. Back then, it was estimated to increase by 200% ($188 billion) in 2020. This clearly shows that app developers can claim a big part of the monetization landscape in the app industry.
A Majority of Mobile App Revenue Comes from In-app Purchases
A ZDNET research reveals that mobile apps generated as much as $380 billion in mobile app revenue from in-app purchases alone.
Currently, the Apple App Store is the largest source of app revenue. It generated revenue that is almost twice what Google Play Store generated in 2020, which was $15 billion and $8.3 billion, respectively.
Which Popular Mobile App Makes More Money?
You may be wondering how app monetization statistics affect the potential of your mobile app in the revenue generation department. While we can not precisely predict how much money a mobile app makes, generating revenue depends on the app category a lot.
In 2020, Calorie Counter was the most profitable fitness mobile app, raking in $1.5 million in September alone.
Holding the top spots are retail apps. In 2019, Alibaba’s apps raked in a whopping $35 billion in just 24 hours. Following closely behind are dating, entertainment, and video apps such as:
- Tinder
- Netflix and
- YouTube.
Free Apps VS Paid Apps
According to a Statista report, the number of free applications available on Google’s Play Store was significantly higher than those of paid apps. Consequently, the percentage of paid apps available on this app store is slowly decreasing at a steady pace.
Therefore, app developers should focus their monetization strategies more on free applications.
Free apps and paid apps are 2 different app monetization methods. Mobile users can download a free app from any mobile platform and access it without having to pay. On the other hand, a paid app comes with a price right from the very beginning.
Free apps generally get more downloads than paid ones. When integrated with in-app monetization strategies, free apps can have excellent long-term revenue generation possibilities.
Further, as mobile users return to the free apps more often, those mobile ads, gated content, or subscriptions can generate more revenue than those initial, one-off fees from paid apps.
What is App Monetization?
Simply put, mobile app monetization is a method to generate revenue from a mobile app.
And there’s a good reason why you might want to monetize your app.
A ComScore whitepaper revealed that smartphone apps represent the most consumed media than any other type used. You’ll be amazed at the amount of time many people spend using their smartphone apps.
Mobile users spend an average of 2.3 hours per day engaging with media in their smartphone apps.
This information alone drives news publishers to create their news apps and monetize them. You surely don’t want to miss the chance to reach a massive amount of consumers and make money in the process.
App monetization involves implementing many different types of strategies that help generate app revenue. Note that certain app categories are more suited to specific app monetization models than others. While some apps incorporate multiple aspects, other apps focus on a single area of app monetization.
Why is app monetization important?
App monetization is essential since finding apps that are free at the point of install is becoming more common. And so, the app business model must be adjusted to account for this.
Developers need to shift their app business model to generate cash after download. So, this is where your app monetization strategy comes in.
It is crucial to ensure that:
- Your app generates revenue that continues to grow.
- User experience for your app users is relatively intact.
Many people often forget about the second point. But it is just as vital to examine how mobile app monetization affects user experience as it is to boost revenue.
Why is user experience important?
An excellent app experience is essential to the success of your monetization strategy since revenue generation requires happy app users.
More often than not, monetization can harm the app user experience. While you can reduce this negative effect, you can not get rid of it entirely.
Typically, app monetization revenue is calculated based on the number of your mobile app’s active users. And since user experience directly affects the number of active users, it is something app developers must consider when deciding on an app monetization strategy.
How to Prepare for Mobile App Monetization
The first thing to keep in mind with app monetization is that there is no “one for all” strategy. If you want to achieve the best results, you must realize that different mobile apps require different app monetization strategies.
You must also understand that each app monetization strategy has its advantages and disadvantages. After all, the best monetization strategy for you depends on various internal and external factors.
Preparing for app monetization
The first thing you need to do is to pay close attention to your mobile app. Next, you must decide how you expect people to use the app.
Also, you must consider the app monetization strategies best suited to your team’s strengths. You must also consider your target audience’s behavior.
Here are more tips on app monetization:
- Determine how your target users interact with your mobile app.
- Find out how your competitors monetize their apps.
- Think about your mobile platform.
- Find the revenue model best suited for your app’s category.
How app stores affect your mobile app monetization strategy
Note that there’s a big difference when making money between the 2 major app stores. Interestingly, mobile app users tend to spend more on the Apple App Store.
About 46% of iOS app users are willing to spend more for an ad-free experience. And on the other hand, only 38% of app users will spend their money on paid Android apps.
There’s an even bigger difference when it comes to premium apps.
According to a statistic report on app download and usage, 45% of iOS app users buy premium apps while Android users who buy premium apps are only 19%.
App Monetization Models to Measure App Monetization Success
Before we discuss more on the various mobile advertisement formats and app monetization methods, we need to discuss the app monetization models first. CPA, CPC, and eCPM are the 3 app monetization models for mobile ads.
Cost Per Action (CPA) model
The CPA is an app monetization model available for mobile app publishers to monetize an app or app inventory. With this model, publishers can only make money when mobile users take specific actions after seeing a mobile ad.
These specific actions can be:
- Clicking on the mobile advertisement
- Downloading and launching an app for the first time
- Making an in-app purchase or
- Subscribing to a service
An advertiser can generate high revenue with the CPA model. And thus, an app publisher can expect a higher payout, too. That said, the risk for mobile app developers taking part in mobile ad fraud is alarmingly high.
Cost Per Click (CPC) model
The CPC model is based on a certain action taken by a mobile user. For instance, clicking on a mobile advertisement.
CPC is the result of the total ad spend divided by the total measured clicks. The total ad spend is the sum of all the money spent on a mobile ad.
The CPC model has the potential to attract diverse pools of advertisers. The various types of advertisers are what this app monetization model caters to. Surprisingly, this model also has the potential to deliver a better and measurable ROI.
One downside of the CPC model is the difficulty it brings to the app developer when it comes to predicting revenue. Conclusively, the app publisher won’t profit from the CPC model if a certain mobile ad doesn’t provide a high click-through ratio.
Effective Cost Per Mile (eCPM) model
From an app publisher’s point of view, this app monetization model is the most lucrative. The eCPM model rewards the app publisher regardless of whether app users actually took any action with a mobile advertisement.
The effective Cost Per Mile is the sum of the total earnings divided by the total impressions. The total earnings represent the revenue generated by a specific mobile ad. The total number of impressions is the total number of advertisement views within the duration of the ad campaign.
Popular App Monetization Strategies
App monetization allows you to leverage your user base in such a way that you can generate revenue. While there are several monetization methods at your disposal, some methods work better than others. There are a variety of options that work better for paid apps and other options that work better for free apps.
You need to look for an app monetization method that works for your business. You can pick one that you think will work for your app but you can also combine two or more of these strategies for the best results.
Here are some of the best app monetization strategies you can use to generate revenue for your business.
Paid Apps
When mobile platforms were launched “paid apps” was the only monetization model around, which was straightforward and old school. Mobile users have no other option to try an app. You can only download and use the app once you have paid a one-time fee.
Later on, the number of publishers on the Google Play Store who used the paid apps model began to shrink significantly. Currently, there are only less than 5% of them according to a Statista report.
Navigation, Photo & Video, Utilities, and Productivity are some of the app categories that are still using the paid apps model. And Ubisoft, EA Sport, and Mojang are just some of the established software companies benefiting from this monetization model.
The App Bundle of the iOS app store is based on this paid apps model. The concept is to allow users to buy and download a few related apps from the same app developer at once.
To thrive with this monetization model, you must position your mobile app as a premium product. You can do this by employing a higher pricing strategy. Otherwise, people may perceive your product as low-quality and erode its value.
The paid app business strategy is excellent at growing your user base of quality users. With it, you immediately earn a profit for each download.
However, acquiring first-time users can be a bit difficult. And besides, paying users can be quite critical of the app.
In-App Advertising
Digital advertising became a hot topic more than a decade ago. Since then, more and more marketers are using digital platforms to engage and network with customers better.
According to eMarketer, mobile apps get 75% out of the total digital advertising budget. In 2018, more than $70 billion went to mobile advertising. With their sensational success, budgets for mobile advertising continue to soar.
Unfortunately, many mobile users simply don’t want to spend money on the apps they frequently use.
So, what’s the best way to get around this and still monetize your app?
Well, you need to make your mobile app free, and then apply in-app advertising.
Here are some of the most popular types of mobile adverts you can run to monetize your mobile app:
1.Banner ads
Banner ads are animated or just static images within a page of an app that does not obstruct page content. We often see them at the top or bottom of the screen. This type of mobile ad has gotten a bad rap in the past years.
App banner ads belong to a mobile ad format that is equivalent to the banner ads we see on desktop PCs and laptops. However, banner ads have their own limitations. They can be ineffective as they can be more distracting than other ad formats.
That said, banner ads remain a highly effective monetization method for app publishers.
2.Interstitial ads
What irks mobile users the most about banner ads are their size and intrusiveness. And so, app developers went on looking for alternatives for this type of bad in-app advertising.
App developers addressed this issue by taking the same advertisements and presenting them as full ads. These ads are only presented or shown between separate user flows.
In other words, interstitial ads are the ones that show up when you’re moving between menus, between pages, social media stories, etc. They require app users to watch full-screen ads for a couple of seconds.
And since interstitial ads are placed at natural points, they are less likely to interrupt the user experience. They are also more likely to generate clicks.
3.Native ads
Native ads provide a better user experience since they blend well into your app content.
These ads integrate seamlessly into the mobile app. This ad format often involves a feed of some sort, in which the advertisement may look like a post in another timeline.
Most likely a favorite among app developers, native ads have little to no effect on user experience when implemented correctly. And because native ads blend well with the app features, they often have higher engagement rates.
4.Video ads
One of the most effective mobile ad formats today is video ads. And the leading companies in the video ads space are Vungle, Facebook, and Google.
Thus, if your mobile app contains videos of some sort, you might want to consider placing adverts within them.
Mobile video ads are short, 15-second videos that introduce an app and often come with a link that takes you to a download page. In terms of CPM rate, the cost may range between $0.50 to $5.00.
5.Rewarded video ads
To date, rewarded video ads are the most effective type of mobile ad format. It is a mobile app advertising method where app publishers encourage app users to watch in exchange for rewards.
As a publisher, you want to make the video advertisements optional and offer clear incentives for active users that watch them. One good example is giving extra game credit to app users who watched the video advertisements. This way, you’ll avoid a lot of user rejections.
In-app Purchases
A majority of app downloads are free. In-app purchases allow publishers to make money through the free app.
There are 4 types of in-app purchases on the iOS platform. These are the:
- Consumable
- Non-Consumable
- Auto-Renewable and
- Non-Renewing subscriptions
Consumable subscriptions involve in-app purchases of a variety of consumable items. Quite common in mobile games, users have an option to make in-app purchases to replenish certain items while playing.
Non-consumable options are one-time in-app purchases related to expanding a set of features offered by the app.
With the auto-renewable option, users pay for specific services offered by the app or pay for an app content’s periodic updates. The non-renewing option implies a one-time subscription fee to access specific app content for a fixed period.
One particular app monetization strategy relevant to mobile games is in-app currency. A good example is offering mobile users a set of virtual coins that can only be obtained through in-app purchases.
Freemium Apps
The freemium model is an app monetization strategy that is becoming more and more popular among app developers. The concept of this strategy is to offer a set of different features of an app’s free and premium versions.
The freemium model offers a free download of an app but with a limited set of features. To access the premium features, obtain digital goods or additional content — users will have to pay through in-app purchases.
Most free versions contain in-app ads. And buying the premium version of that app allows users to avoid the ads and enjoy the premium features. Popular brands that have been doing great with the freemium model for a while now are Spotify, Grammarly, and Slack.
One advantage for users is that they can enjoy the basic features and continue using the app for free. For publishers, the free version allows them to make money off the in-app ads.
The free version also helps them secure a larger user base. And different pricing plans ensure that each user pays for only what he or she needs.
The drawback of the freemium app model is that it can be costly to support non-paying users. And it can be a bit difficult to convert free users to paying ones.
Email Marketing
Arguably, email marketing has been in use since the early 2000s and is considered one of the oldest online marketing channels. It became less widely used among marketers when social media came along.
But email marketing has since bounced back as it has remained a major force in the advertising space. It is even found to be 40x more effective than social media marketing.
Email marketing is an excellent method of getting more engagements with your customers. Many people don’t change email addresses too often. And for this reason, an email marketing campaign will make it easy for your customers to engage with your content.
Additionally, emails regularly sent to your users will keep your brand at the forefront of their minds. This makes them more likely to make purchases from your business.
Email marketing tips
An email subscription form on your app is an excellent tool to gather your users’ email addresses. Enticing your users to enter their email addresses gives your app a real boost, especially if you offer some great benefits exclusive to email subscribers.
You can make variations to your email marketing as well. If you have deals or promotions, you can send emails with access codes that users can enter inside the app.
Does your website have a blog component? Do you write newsletters regularly?
You can promote them to your users through email. And you can remind users that they can consume your content on their mobile devices.
SMS Marketing
Today’s marketers often overlook SMS marketing as an effective monetization strategy. Probably because it’s an old form of online marketing similar to email marketing.
You can use SMS marketing to advertise in the same way as you would with email marketing. Also, you can use in-app prompts to collect your user’s mobile phone contacts. After gathering the contacts, you can send them reminders about:
- Updates
- Coupon codes from partners
- Giveaway contests, etc.
One advantage of SMS marketing over email marketing is that the former’s SMS messages open rate is 98%. This makes SMS marketing a lot useful in reaching out to users and keeping them as regular customers.
That being said, some users are not open to the idea of SMS marketing.
Service Fee Model (Transactional Apps)
The service fee model is great for publishers who own an invoicing or transactional app. The main concept here is to charge a transaction or service fee to monetize your app.
Digital marketplaces continue to expand, and so do the service fee model and its applications.
This monetization strategy has been proven useful in banking and eCommerce apps. Interestingly, publishers can choose to charge the consumer or the vendor, or even both.
Popular apps that use this monetization model include travel apps, hotel booking apps, retail & wholesale marketplaces, e-Learning marketplaces, etc.
Sponsorships
A sponsorship is a type of advertising that is not too obvious to publishers. Mobile apps that will benefit from sponsorships are those that have a large user base. And also if they have a high level of user engagement.
When choosing a sponsor or company that will offer their products or services to your mobile app users, make sure that the company will benefit from the sponsorship. Also, consider how the sponsorship will benefit your users.
Generally, you need a single sponsor or advertiser in your app that will handle all your ad revenue generation potential.
On the technical side, you’ll need an icon to represent that sponsor and also a logo that will cover a large portion of your app’s interface. The logo should be presented in a splash screen where it’s visible to your users through Push Notifications or right after its launch.
Partnerships
When you want to partner with another brand, make sure to choose the one with a similar user base to yours. This is to ensure a better user experience.
Partnerships between brands can benefit businesses and customers alike. This is especially true when you create integrated experiences. A perfect example is when Localytics partnered with Optimizely to bring mobile analytics as a combined service.
Affiliate Marketing
Affiliate marketing and lead generation are time-proven monetization strategies that app developers can use in generating app revenue.
For instance, a publisher can monetize an app with affiliate marketing by receiving a commission fee as a reward when a user takes a specific action, or if the user downloads another app through the link placed inside his or her app.
To make this app monetization strategy work, you must carefully pick what other apps you want to promote inside your app. Make sure you choose specific apps that will complement your app to improve user experience.
Subscriptions
According to Apple, the auto-renewable subscription model provides users access to content, premium features, and services in the app on an ongoing basis. When the subscription duration ends, the subscription renews automatically unless the user chooses to cancel it.
One big advantage of the subscription model is financial predictability. Also, app publishers can offer multiple subscription plans with options to upgrade or downgrade. There is also the crossgrade option in which users can switch from one subscription plan to another.
But the best part of this subscription model that also appeals to users is the long subscription period that comes with a discount.
Data-Driven Strategies
Data analysis is the best method to maximize your app’s ability to generate app revenue. It’s always an excellent strategy to collect the behaviors of your user base and then put what you’ve learned into good use.
With this strategy, you’ll discover which users are spending the most time and money on your app. You can then prioritize those users rather than spending all your time on new user acquisition.
Top Mobile Ad Networks: What are the Best Mobile Ad Providers?
Mobile advertising networks are another component of your app monetization strategy. There is a myriad of mobile ad network options to choose from. So make sure to find the one that’s compatible with your app.
Some mobile ad networks are optimized for generating revenue, while others focus on user acquisition. Here are the top mobile ad providers around:
Facebook Audience Network
This is a Facebook Business tool intended for:
- Publishers looking for an effective method to inject ads into their apps.
- Advertisers who want to benefit from Facebook’s wider reach across many different platforms.
To get started you need to create Monetization Manager and Business Manager accounts. And then submit your mobile app to Facebook for an assessment. The process might be a bit robust, but it makes sense.
What you need to keep in mind is to practice proper ad placements since advertisers trust Facebook with their content. You must ensure you don’t compromise the Facebook advertisers’ investments.
Google AdMob
AdMob is Google’s in-house solution to app revenue generation. Currently, there are over a million apps on this ad platform. AdMob has paid publishers over $3.5 billion since 2012.
To get started you need to have a Google account. But if you already have AdWords and AdSense accounts, that’s even better. The Google ecosystem ensures all accounts and platforms are synced for better-streamlined ad management.
Other notable ad providers are:
- Google Ad Manager
- Twitter’s MoPub
- Instagram Ads
- Unity Ads for gaming apps
- Applovin
Let Us Help You Make an App Set for Mobile App Monetization
App monetization should be on every mobile app owner’s mind. Ultimately, all your hard work should pay off at the end of the day. Whether you’re running a professional business or a passion project — there are different app monetization strategies at your disposal.
Still don’t know which revenue generation strategy will work best for your app? Schedule a consultation with one of our top strategists today.