Anna Zabudska
Marketer
September 13, 2022
What is a successful application? The one that is in demand by the audience and makes money. To reach the latter, the chosen app monetization models are crucial. There can be several of them applied to one application. In this article, we will analyze different methods and go over their pros and cons. You will also learn how to monetize apps and optimize and generate impressive revenue from your app using various mobile app monetization strategies.
This is a complete guide, so it will take some time to study it. Therefore, we have added a table of contents, with which you can quickly jump to the needed sections.
Your strategy may include only one model or a combination. Let's get down to an overview of available models for making money from free and paid apps.
Among the many success stories of people who earn a decent amount of money per day with a free application, we have identified proven monetization models.
Why is it worth using such monetization? Let's take a look at the statistics.
There are three types of ad income when monetizing an app:
CPM is more common among free app monetization strategies. You can easily calculate this metric with a CPM calculator. Users don’t need to click on banner ads to let developers earn. The income is less as well as the damage to the user experience.
Types of advertising for mobile app monetization
Advantages of in-app advertising monetization:
Flaws:
In-app purchases allow users to buy content, services, and extra features.
Types of In-app Purchases
Consumable (for example, in-game currency such as gold coins, tokens, additional lives, and game boosters).
Non-Consumable (advanced video tutorials on training courses, individual training plans, presets in photo editing applications, sticker packs in messengers, and so on).
In-app purchases should complement the user experience, not degrade it. Therefore, first, focus on the value of the purchase for the user, and then on making money. Find that balance.
Do not forget to indicate in the Apple App Store or Google Play that your app includes in-app purchases despite it’s free.
To succeed, you need a smart strategy that keeps users engaged and encourages them to make in-app purchases. Here are some of our case studies showing how to do that using mob pushes:
Benefits of monetization from in-app purchases:
Flaws:
This popular app monetization strategy implies that the price of the application depends on the functions provided to the user. The basic version is usually available for free and the full version after payment. Thus, users get a chance to take a product before paying for it.
Based on this, you might think that freemium allows users to stay on endless free trials. This is true but app monetization methods have certain pitfalls. Companies realize that the costs of servicing free users should be leveled. That's why the freemium model is often a mix of:
A successful freemium strategy requires fairly easy training and onboarding experience. The product must constantly attract customers so that they can eventually upgrade to the premium version, which often implies a monthly/annual paid subscription. A very striking example of such an approach is Duolingo, an app for language learning.
Users have two options to access all premium features: recommending the app to friends or starting a premium plan after 14 days of the trial.
To persuade people to switch to premium, in-app ads often tell them about useful features. In addition, mobile notifications and emails are extremely useful to return users to the app.
Duolingo is constantly growing. Now there are only a few features that were 2 years ago. And those that remained were significantly improved. Subscription apps allow creators to gradually develop a product according to a monthly budget.
If you appeal to the app subscription model, provide your users with multiple payment options to simplify the buying process. In addition, you should develop different tariff plans to have paying users as many as possible. The diversity of tariffs depends on your business. For example, The Economist allows its target audience to opt for a web-only subscription (access to the app is included), a print-only subscription, or both.
In addition, successful market players recommend developing a subscription service. Its bottom line is to charge money automatically when the user returns after a pause. This approach is beneficial for both app creators and users because they don’t have to remember to renew their subscriptions. It’s a good way to provide your audience with a smooth user experience.
In order to improve the UX, consider adopting data-driven strategies. Analyze the user behavior (actions in your application) to optimize content, interface, and offers. Focus on users who spend the most time and money on your app. Reteno has appropriate tools for such analyses. It will allow you to increase revenue and, at the same time, reduce some costs on marketing. About 20% of new users will never open your app again, so try to make the visits of existing users more frequent.
Duolingo constantly conducts micro-testing of features to see which ones are relevant and attractive and which are not.
Grapevine and referrals allow Duolingo to convert a decent part of free customers into paying users.
Freemium has its pros and cons, which you should consider when choosing a monetization strategy.
Pros:
Cons:
Paid health and fitness apps ask their users to make an advance payment. While numerous mobile apps provide users with a free trial to show their value, there are premium solutions that require payment before downloading.
When implementing a premium app monetization model, publishers must convince users with their branding, features, and impeccable reviews to win their interest and trust before they pay. Catching signs we can find on the Streaks product page are as follows:
In this case, Streaks has already whetted the user's appetite by releasing 9 screensavers, and also became the winner of the Apple Design Award. For most iOS users, it works. Otherwise, why is it in the top 10 health & fitness paid apps?
Pros:
Cons:
Piracy. Paid gaming apps are often stolen. As a result, companies suffer financial losses.
You enter into an agreement with advertisers who provide rewards to your users for performing certain actions in the application. Then, the revenue generated is split between you and the advertiser.
Pros:
Cons:
Many leading companies, such as Apple, Google, and Microsoft, have affiliate programs for app developers. These programs involve promoting other mobile apps within your application. And in return, you get a commission. Аpp developers have a choice of which apps they want to promote. It can encourage users to associate their apps with promoted brands.
Pros:
Cons:
Actually, there are only two options you should consider when choosing the best app monetization strategy: subscription / non-subscription, freemium / non-freemium. Other models are usually combined. For example, freemium is complemented by advertising. And subscription access, of course, can exist through in-app purchases.
We certainly live in a world of winning subscriptions. Even the mobile gaming market is largely switching to a subscription model. But such a mobile app monetization model is suitable for applications that will constantly evolve. If your service is content-based, then the content should be updated regularly. Not to mention the fact that you will need to monitor user reviews from time to time.
The next step is to figure out if it will be a freemium or free trial strategy.
The choice of the freemium model or another one is determined only by your product. Answer yourself a few key questions:
Your business goals will help you identify more appropriate app monetization models.
It is unlikely that you will ever find a monetization option that would be 100% suitable for you. Combine, analyze efficiency, and turn on creativity!
You can create a limited edition add-on or style (for example, Halloween or a superhero), let users set their own fees (yes, it works pretty well), and find out their profession and income with the help of a questionnaire while the onboarding. It will allow you to extend or restrict access to certain functionality.
Of course, do not forget to conduct tests and confirm your hypotheses with specific data to make a profit in accordance with your honed strategy and app monetization plan.
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