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App Monetization: Basic Understanding and Models

Have you ever wondered how those popular apps you’re playing on your phones are thriving as a business even though they are free? And why do those app developers keep publishing their apps competitively even though users pay nothing to install them? 

From here we learn that there is no such thing as freebies and things are not what they seem. This is called the mobile app monetization strategy. Basically, it is the process of converting your app users into revenue. Companies and brands implement this strategy because they have to stay profitable while making sure that users fall in love with and continuously using their apps. 

In this article, we will look at the popular models of app monetization and how it can help you to drive your app growth.

Important to Remember

It is without saying that earning a solid revenue from your app needs effort, time, and budget. Thus, it is essential to develop your carefully curated monetization plan in the very beginning of your creative process. Because however important the design of your app is, you also have to know exactly how you want to build your revenue streams. Afterall, generating zero profit after the hard work of developing an app is not anyone’s wish. 

Moreover, finding the best monetization strategy that is best suited for your mobile app and eventually your end goal can be very complicated. But, the best advice would be to prioritize your user experience over everything. You do not want your chosen monetization model to affect their journey negatively. It is crucial to find the balance between wanting to acquire a gazillion of users and your need to earn revenue. 

Lastly, It is also important to remember that it is better to build a sustainable mobile app business even though a one-hit wonder app seems way more appealing for its fast money. 

(Read: “Asia Pacific, the Land of App-ortunities“)

Models of Mobile App Monetization Strategy

Here are some popular models you can incorporate into your app monetization strategy:

Free App with Paygate

You must be familiar with this one as it is one of the most popular app monetization strategies you often see at the play store. This approach obviously still allows your free apps to be discovered when some users are looking for related contents.

The key to this model is to limit some features on the app. However, app developers have to analyze the features and limitations that will make users want to upgrade from the free app to the paid version. With this strategy, you have the opportunity to grow an initial user base that also has the potential to spend some money to acquire your app’s premium features. 

One of the ways to incorporate free apps with paygate strategy is with a subscription service. This model is especially common with service-oriented apps (dating, meditation, work-out apps) and content-based apps (news related apps). 

One thing to note, it is better if there are several options for the subscription with various levels of value. These options will prevent the all-or-nothing approach and also allow different experiences for your users. 

Mobile App Monetization Strategy

The leading dating app, Tinder, is an example of this mobile app monetization model. You can download the app on the app store and use the basic feature for free. Moreover, it also offers subscriptions for its premium features which are divided into three options; Tinder Gold, Tinder Plus, and Tinder Platinum. They are all offered in different price ranges and have additional benefits the more premium it goes. 

Paid App

This model is usually implemented to those apps that have unique selling points which are hard to find elsewhere. It’s very heavily reliant on strong brand recognition, unique content, and reputable views. This app monetization strategy is very common in productivity apps. 

Fun fact, most of the apps on the app store were paid apps at first. It is mostly because app developers did not have enough data to generate revenue so the user’s upfront commitment to pay was the easiest way out. As currently data is becoming more accessible, 97% of available apps on the app stores are made free to download. 

In-App Purchases

In-app purchases is another popular model in app monetization strategy. The idea is to make users purchase additional features within the app. Even though you can find this model almost everywhere in all app categories, it is often found in gaming apps. For example, in-app purchase happens when a user buys some packs or coins to help them in the game play. 

In-App Purchases

On the other hand, app developers must think thoroughly about improving the app’s user experience and it is needed to find the balance between a great free app and affordable in-app features. 

Consumable vs Non Consumable

In order to choose which in-app purchase model you want to implement in your apps, you have to know that there are two kinds of in-app purchases: consumable and non-consumable. 

To put it simply, the differences lie between the frequency of the  purchase. Consumable is temporary and limited while non-consumable is bought only once. The above example of buying packs and coins is an example of consumable in-app purchase while non-consumable could be when you’re unlocking a new level in the game. 

In-App Ads

Monetizing your apps by running in-app ads is helpful and will generate valuable sources for you when you want your apps to remain free in the app store. Because whether you like it or not, that $0.99 app will always be beaten once the user finds a free alternative. 

On the other hand, there are several kinds of in-app ads. Therefore, you must understand which ads to put on your app that will generate fortunes, not the other way around. You have to think about the content critically as well because putting slow performing ads will ruin the user experience. Moreover, ads which are hardly related to your brand will eventually damage your brand reputation. Think wisely!

Rewarded Ads

I bet you have seen this kind of ads at least once this week if you are playing some games on your phone. For example, when you eventually “die” in your game and the game offers if you want to extend your life by watching an ad. In some cases, the mobile games will give you the chance to unlock a new character by watching an advertisement as well. 

Rewarded Ads
(Credit: https://www.businessofapps.com/ads/rewarded-video/) 

A type of rewarded ads is called offerwall. An offerwall advertising lists various offers in which the users can choose to do in exchange for in-app reward. For example, a user will get extra diamonds if they register a username, upgrade a building, or get to a certain level in the gameplay.

Rewarded Ads
(Credit: https://www.tapjoy.com/resources/the-beginners-guide-to-mobile-offerwalls/)

This model of monetization generally rewards users by watching interactive and engaging video ads. Hence, the name. Moreover, rewarded ads focused more on higher engagement and retention that is good in the ever increasing competition in the mobile app market. 

Hybrid Monetization Strategy

There is no reason that you should only use one monetization model. Hybrid monetization model allows you to have extreme flexibility to generate revenue from various streams. However, bear in mind that it has the tendency to show way too many ads. This has the chance to disturb your user experience, which again, has to be your priority. 

Even though this model is suitable for almost all app categories, it has shown more success in the gaming section. 

Final Thought

Companies and brands can benefit from mobile app monetization once they know the varieties of model in the strategy and of course, knowing how it works. It might seem like a complicated procedure but once you get the hang of it, it will be able to help you grow your app users significantly. 

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