The mobile app monetization model you choose will influence its popularity and your profits. A properly selected monetization strategy can increase audience loyalty, attract new users, while an inappropriate one can alienate potential customers. In this article, you'll find out how to make money on a mobile application and which monetization model to choose in 2020 to stay on top.
App monetization models
According to research, by 2022, global mobile app owners' revenue will reach approximately $693 billion. Which monetization model to choose to profit from the application in the future? The most efficient options are in-app purchases, in-app subscriptions, the Freemium model, and ads.
Within this model, the application acts as a sales channel or online showcase. It is possible to sell virtual and real products or services, even access to content or new functions within the application. Since Apple introduced the in-app purchase model in 2009, more and more companies have adopted the approach - this monetization model accounted for more than 50% of mobile revenues in 2018-2019.
Example of in-app purchase in Candy Crush app
However, accessing the products is not enough if you want to reach your audience. The shopping process should be comfortable. The application must consider the user experience and give customers good impressions from interacting with the application interface which other similar solutions and online stores cannot provide.
When choosing this monetization strategy?
- If you are creating an e-shop;
- If in-app purchases are valuable to customers;
- When there are significant user experience and interface.
Consumables vs non-consumables
When considering in-app purchase options, you should mind the difference between consumables and non-consumables. Consumables are temporary and limited purchases, while non-consumables are purchased only once. For example, in-game currency such as gems or coins is consumable, while unlocking a new level is a non-consumable purchase.
In this monetization model, application content is available with a paid subscription. A small part of the content is initially available for free on a trial basis; after some time, the user has to subscribe to use it.
Subscription in Spotify app
This model is great for applications that provide quality content - video, audio, books, articles, etc. Business solutions, such as CRM systems and any other solutions that require the user to return to the application, may also be available by subscription. For example, Netflix, Spotify, and SalesForce use paid subscriptions.
Monetize app with ads
You can make the application free to download, which will totally attract more users. The main thing is that the advertisement takes into account the needs of the potential audience. For example, a sports app aimed at men should not have ads for baby diapers or cosmetics - this reduces loyalty and does not work because you do not get paid per click. The placement of advertising should also be thoroughly considered to not interfere with the application's use.
Examples of ad formats
Mobile ad formats
Now let's consider the most common in-app ad formats:
- Banner is the most widely-used ad format which comes in different types and sizes. Advertisers, ad networks, and services regularly add new formats and types of banners to increase their impact. The most effective ones are expandable banners that need to be tapped or pulled on a corner. They are not annoying, because they are always minimized, but they give a high conversion because they appear to the interested users.
- Interstitial is a type of advertisement that covers the entire screen. They are usually in the form of a banner or video. Banner is a rich interstitial, its standard size - 320x480 and they usually appear just for a few seconds. Such ads cannot be overlooked, but they can be annoying for users.
- Rewarded Video is a type of video ad that encourages users to watch it for a reward. It gives players equipment for heroes, additional bonuses or lives, in-app currency, tips, etc. This format is highly recommended if you need high user engagement.
- Native advertising is integrated into the design of mobile apps, and looks like the part of the interface or content. There are opinions that such ads are less annoying for users. Conversions for native ads are higher because users often don't even realize that they see an ad.
This is the most recommended monetization model. The name Freemium comes from the merger of two words - Free and Premium. Therefore, this monetization model provides opportunities for users of different versions of the application - from Free to Premium. Downloading and using the basic functionality of the application due to the Freemium model is free. If the user wants to get additional features, content, and subscription, they will have to pay.
Unlike paid download, Freemium is much more profitable - it allows users to try the product before buying. According to a recent Clutch's report, over 61% of app developers recommend implementing Freemium. This model is already successfully used by Evernote, Dropbox, MailChimp, and many others.
To ensure you are getting the most revenue without spoiling the user experience, you need to create an overall strategy and try multiple techniques mentioned above. For example, you can try running ads while offering users the option to pay for an ad-free experience.
And while you are building your perfect monetization strategy, our team can take care of the mobile app development issues. Contact us if you have any questions or need development assistance!