Without access to significant amounts of outside finance, it can be difficult for app developers to keep their apps relevant. The Apple App Store had about 4.8 million apps available for download as of March 2022. At the beginning of 2022, there were around 2.6 million apps available on the Google Play Store.
Because of the intense competition, app publishers and developers must keep up with the most recent techniques for monetizing mobile apps in order to remain viable.
What is Mobile App Monetization?
If you exclude the downloading fee of an app, then the revenue that a mobile app helps a business create can be termed mobile app monetization. Now, there’s a lot of competition in the market, and most apps across the digital ecosystem are provided to users for free as people are reluctant to pay for any application.
This has made it even more important for developers to figure out other monetization strategies to generate revenue through a mobile application.
There are a lot of monetization methods such as in-app advertising, in-app purchasing, freemium model, and more, that one can use to generate revenue from the user base of a mobile application. We’re going to discuss the top 12 strategies in this article.
However, it’s important that you understand each monetization method in detail and understand which one would be most effective for your mobile app.
Why Is Monetization of Mobile Apps Important?
Mobile app monetization is becoming a crucial issue for app owners all over the world owing to the exponential rise in free apps made available through app stores over the past 15 years.
About 10% of apps in the iOS App Store today demand payment at download, down from 77% in 2009. At the Google Play Store, paid apps to make up about 31% of all mobile apps, which is a little more than in other app stores.
Due to the shift towards free apps, app developers have to completely rethink how they make money from their apps.
App developers can utilize one of the following app monetization models to make sure an app’s revenue keeps increasing while maintaining an excellent user experience. And if it suits the needs of your business, then you can also create a hybrid of these monetization strategies i.e., using a combination of more than one strategy.
12 Best Mobile App Monetization Strategies in 2023
1. In-App Marketing May Increase Revenue
Following the opening of the Apple App Store in 2008, the development of mobile sales began to accelerate at a time when digital advertising as a monetization strategy was already well-established online. The early adoption of app banner ads by app developers necessitated that ads be scaled down to fit the constrained screen space of mobile devices.
Since then, banner advertisements have developed to offer a variety of possibilities tailored exclusively for the mobile environment, including text, video, and native ads.
One of the most common methods for monetizing apps, this income model is still in high demand. According to forecasts, in-app ad revenues will nearly triple by 2025 and reach $226 billion.
Advantages of In-App Advertising:
- Promotes Greater Outcomes
Many individuals equate online banner advertisements with in-app advertising. Despite similarities, they take a distinct approach. Moreover, in-app advertising outperforms banner ads.
- More Specific Market
With in-app adverts, your marketing is more successful if your viewer decides to download the app and if you promote relevant apps to a specific target population. The apps that appeal to them are displayed to them.
Disadvantages of In-App Advertising:
- Reduced Engagement
Despite the captive audience, there might not be many clicks. These advertisements are not likely to generate a lot of engagement, as banners have an average CTR of 0.1%.
- Promotions by Competitor
If one of your rivals appears in the in-app advertisement, viewers may click the link and download the app.
2. Interstitial advertising can increase eCPM.
As developers have access to more advanced statistics, app publishers now have unmatched knowledge of user behavior. In order to overcome banner blindness and reduce user apathy, app developers have started to veer away from traditional in-app advertisements like banner adverts.
Interstitial advertising is among the best in-app ad replacements. Interstitial advertising, which takes up the entire mobile screen and appears at natural transition points in the user flow, differs from banner ads in that they have size constraints and are persistent and invasive.
When best practices are followed and advertising is implemented at the end of a flow, for example in a gaming app, they should display at the end of a level, this mobile app monetization technique performs well.
Interstitial advertising is experiencing rapid eCPM growth, with a 34% increase in US Android smartphones alone between 2020 and 2021.
Advantages of Interstitial Ads:
- Efficacious User Engagement
Banner advertisements fall short of interstitial app ads in terms of viewability. A full-screen advertisement is effective because it is difficult to ignore. User engagement has increased as a result.
- High rates of CTR and CPM
Due to interstitial advertising’ complete coverage, a user cannot overlook them. Hence there is a significant likelihood that users will interact with the advertisement. Because of this, advertisers are willing to pay extra for these advertisements. A high CTR increases conversions, which increases revenue for publishers.
Disadvantages of Interstitials Ads:
- Penalty for Inappropriate Application
Publishers must consider how the interstitial ad will be used. Publishers that don’t exercise extreme caution and take into account all of Google’s guidelines and suggestions run the danger of being penalized by the search engine or receiving poor rankings.
- Loaded Time Delay
There is a potential that the user will become irritated by the delay if the webpage takes a long time to load as a result of interstitial adverts. So, the website and advertisement both need to load rapidly.
3. Employ Native Advertising to Increase CTR
Within the app monetization paradigm, native advertisements are an ad format that is becoming more and more popular. Native advertisements work best on news websites and social media because they are made to blend in smoothly with their host app, appearing as another post in the feed.
When used properly, these advertisements cause little disturbance to the user experience. The click-through rate (CTR) for native ads has been found to be 8.8 times higher than that of standard display ads, according to an eMarketer report from 2018. They have also been demonstrated to have one of the highest engagement rates.
Advantages of Native Ads:
- Drive Improved Campaign Results
When compared to many other ad formats, native advertisements perform better overall, assisting marketers in increasing conversions and revenue.
- Establish Credibility with Your Clients
Initial brand trust is a challenge for consumers, and here is where native advertising is crucial. Without any pop-ups or invasive messages, they support brands in developing trust with their followers and sharing good information.
Disadvantages of Native Ads:
- Management of Complicated Performance
There is speculation in the industry concerning the analytics and metrics that should be applied to evaluate the success of native ads due to their distinctive structure. Publishers must therefore make sure they have the proper equipment and are thoroughly reviewing all pertinent data. Your campaign objectives and user behaviors will determine the best mix of native ad metrics.
- Consumer Targeting Seems Complex
Publishers may need to reconsider their approach to customer targeting given that native ads assist marketers in reaching their most suitable audiences. Advertisers must gather more consumer data, create distinctive audience groups, and ensure that their material is tailored to the preferences and actions of each demographic before launching hyper-targeted ads.
4. Freemium Memberships May Increase Conversions
“Freemium” is a mobile app monetization strategy with a number of benefits. It falls under the broader category of subscription apps. Following the free app download, customers are presented with in-app purchases that grant them access to premium features, extra material, or digital products.
One of the best instances of a freemium app subscription strategy is probably Spotify. As an alternative to iTunes’ pay-per-song business model and the widespread illicit downloading of music at the time, Sweden’s Spotify music app was created in 2006.
Many of Spotify’s premium app features are available to free users; however, users can unlock premium features, including an ad-free version, for a monthly membership charge.
When it comes to conversion, Spotify is unquestionably the king of the freemium app model. According to studies, Spotify converts 24% of users who first use the free version into paying members, compared to the typical conversion rate for freemium apps of 2-5%.
So why is it so effective, and how can other developers make use of this app business model to profit from it?
Spotify has been able to develop a “dynamically changing user-interface, behavioral prediction algorithms, and an ever-expanding archive of music” by continuously experimenting, AB testing, and concentrating on their consumers.
Advantages of Freemium Subscriptions:
- The Scalable Freemium Model
One of the biggest benefits of this monetization strategy is that it enables startups to grow and build a user base without the high costs associated with conventional marketing and sales campaigns.
- Try before buying
With freemium subscriptions, consumers may test out your app before choosing to buy it.
- a larger user base
You can get money from users who might otherwise not be willing to pay for your app by offering freemium subscriptions.
Disadvantages of Freemium Subscriptions:
- Insufficient interest in upselling
If consumers choose not to purchase the paid version of the app, revenue may decline.
- Influences the user experience
Also, if users experience a constant barrage of advertisements or upsell, they may grow annoyed with the app.
- needs to be implemented carefully
Users may occasionally find freemium subscriptions confusing, which may cause them to cancel their subscriptions or stop using the service altogether.
5. Utilize premium subscriptions to generate consistent income
Although they operate on subscription models, premium mobile applications demand users to sign up for a set fee as soon as they are downloaded.
This implies that the quantity of downloads has a direct impact on revenue. It has been demonstrated that paid apps have higher user engagement and customer acquisition rates.
Advantages of Premium Subscriptions:
- Consistent Income Stream
For app creators, app subscriptions provide a steady and predictable revenue stream.
- Expand Growth Possibilities
Premium subscriptions can assist in financing the creation and continuing upkeep of an app.
- Guarantees Longevity
Premium subscriptions can aid in ensuring that an app’s users continue to find it useful and accessible over time.
Disadvantages of Premium Subscriptions:
- Inflexible
Users may not be able to benefit from exclusive deals or discounts due to the rigidity of premium memberships.
- Expensive
Users may find premium subscriptions to be too expensive, especially if they don’t frequently use the app, which will result in a drop in user base.
- Can turn off users
Before using the app frequently, users could find it difficult to determine value, which might be unsettling. However, some expensive subscriptions might be challenging to cancel, leaving consumers feeling stranded or trapped.
6. Use in-app purchases to generate recurring revenue
Another monetization strategy that is gaining popularity in the digital ecosystem, notably in the gaming industry, is in-app purchases. For a number of reasons, offering in-app purchases is a terrific option for gaming apps.
Users can use real money to buy features or products in mobile games through in-app purchases. This could be anything from extra lives or gold or the chance to access levels that were previously locked, depending on the sort of game.
While the ability to make an in-app purchase can be added at any time while playing the game, the wisest approach to do so is to strategically place in-app buy options where customers are most likely to need them.
It’s also quite easy to set up payment for in-app purchases. Users have the option to add a credit card when they create an account on the Google Play store or the iOS App Store to pay for any in-app purchases or other app-related expenses.
If a customer chooses to make an in-app purchase, the transaction is simply charged to their credit card, and app shops take a commission (currently 30% unless your mobile app is popular enough to negotiate a different commission structure).
In-app purchases, however, are not a one-size-fits-all solution. The four basic types of in-app purchases that are offered to app developers each have their own features and strategies. Understanding the various in-app purchase types and which is best for their particular type of mobile games is crucial for app producers wishing to implement this monetization approach.
Types of In-App Purchases:
- Consumable
Consumables, the most popular category of in-app purchases in mobile games, include things like in-game money, extra health, and power-ups.
As the name implies, these in-app purchases vanish after use but are always available for purchase again. Consumables are an excellent choice for players who don’t like the trouble of waiting to earn these goods and are willing to pay to save time, even though most games offer a set quantity of these consumables for free.
- Non-Consumable
Users that make non-consumable in-app purchases gain access to them permanently, in contrast to consumables. Unlocking bonus characters, hidden levels, or cosmetic goods are a few examples.
- Auto-Renewing Subscriptions
Regular payments customers make to access premium content are referred to as in-app subscriptions (somewhat akin to the freemium model mentioned above).
Subscriptions in mobile gaming can be set up to endure for various amounts of time and unlock everything from premium game versions to exclusive gameplay stuff.
- Non-Renewing Subscriptions
The only difference between non-renewable and renewable subscriptions is that mobile users have to manually renew their subscriptions.
Advantages of In-App Purchases:
- Convenience
Users appreciate in-app purchases because they allow them to make purchases without leaving the app.
- Flexibility
With the help of in-app purchases, developers may offer a variety of features and content to consumers, giving them a flexible monetization plan.
- Effectiveness
Both games and non-game applications now rely heavily on in-app purchases for revenue. In fact, according to a poll, in-app purchases are considered by developers to be the second most successful monetization approach, after rewarded videos.
Disadvantages of In-App Purchases
- May Disavow Users
If users are prompted to make purchases on a regular basis, they could feel that they are being “nickel and dimed.” Also, the game can be labelled as a “pay-to-win” app if the creator is not careful with the types of transactions on offer.
- Might hurt the brand
There is always a chance that customers will make in-app purchases and subsequently be unsatisfied with the results, which could result in bad reviews and fewer downloads.
7. Affiliate Marketing Provides Options
There are affiliate programs available to app developers from a number of large technological corporations, such as Google, Apple, and Microsoft.
Throughout your app, these affiliate schemes will advertise other mobile applications. The fact that app developers can choose which apps to advertise, even though the commissions paid in this app monetization approach are typically not high, can entice consumers to associate their app with similar companies.
Advantages of Affiliate Marketing:
- Cheap for the User
An app can make money through affiliate marketing without needing to charge for downloads or in-app purchases.
- Create connections with brands
Within an app, affiliate marketing can be utilized to advertise and sell goods and services.
Disadvantages of Affiliate Marketing:
- A lot of opposition
As businesses compete for affiliates who can effectively promote their apps, affiliate marketing can be highly competitive.
- Brand Trust Hazards
Affiliate promotion can be dangerous since it might not accurately reflect the value or user experience of the app.
- It takes time.
Since affiliates must be continuously found and handled, affiliate marketing can be time-consuming.
8. SMS Advertising May Increase Client Retention
While SMS marketing may seem a little dated in 2023, it can still be a useful tool for connecting with people and providing them with discounts on in-app purchases or premium subscriptions when done well.
It is crucial to confirm that the individuals you are contacting have given their explicit agreement for you to use their data. Nobody wants to read a novel about your app at dinnertime, so be mindful of the message’s length and the time you are delivering it.
Advantages of SMS Marketing:
- Very Simple to Use
Implementing SMS marketing is simple. Mobile marketing automation can be used to send messages and collect data through in-app prompts.
- Successful in Keeping Users
According to a recent study, sending an SMS to users who haven’t previously used an app can result in a click-through rate (CTR) of up to 36%.
Disadvantages of SMS Marketing:
- Spammy
When people are not prepared for it, SMS marketing can be disruptive and obtrusive.
- Less User Data
As consumers occasionally delete messages without reading them, it can be challenging to gauge the success of SMS marketing initiatives.
- Not Suitable for All Brands
Not all companies or goods may be a good fit for SMS marketing, particularly if the target population is unlikely to be receptive to text messages.
9. Boost Engagement with Email Marketing
Email marketing can be a useful tool for engaging current downloaders and converting them into paying customers, even though it may not seem like email marketing makes sense for mobile app advertising.
75% of millennials now contact businesses via email as a result of the oversaturation of social media channels with users. Once more, it is crucial that the people on your email list have given you clear permission to use their information. App developers should carefully consider how they will use this channel as an app monetization approach.
You should generally start over if you can’t clearly explain the how, why, and when of your email marketing campaign.
Advantages of Email Marketing:
- Emails hasten the purchasing process
Email marketing is up to 40 times more effective than social network marketing, according to studies, and it speeds up the purchasing process by three times.
- Simple to Implement
Implementing email marketing is comparatively simple and affordable. User email addresses can be accessed by a straightforward in-app subscription and used to send a range of marketing mailings.
Disadvantages of Email Marketing:
- Could Undermine the Brand
If done incorrectly, email marketing could be viewed as spam.
- Perhaps Less Successful Than Other Approaches
Email marketing may not be as profitable as other app revenue strategies like in-app purchases or advertising.
10. Big Audiences Can Be Attracted by Sponsorship Advertising
A sponsorship relationship is one more underutilized yet very advantageous app monetization strategy that is available to publishers. This strategy can be suitable if your mobile app has a sizable user base and high user interaction.
Finding a single business to invest in or sponsor your app and grant them exclusive access to advertise to your user base is the essence of the process.
This can be accomplished by having your sponsor’s logo take up a larger percentage of the app’s interface, by having a splash screen that is visible to app users, or by using push notifications.
Developers should carefully analyze their user base and which goods and services would be the greatest fits for their brand to increase user acquisition before contemplating sponsorship as a means to monetize apps.
Advantages of Sponsorship Ads:
- Audience Specification
Sponsorship advertisements can be tailored to a particular audience, which may increase conversion rates.
- brand fidelity
Users may develop a sense of brand loyalty as a result of sponsorship commercials.
- Possibilities for Cross-Promotion
Cross-promotion of other goods or services through sponsorship advertisements has the potential to boost user acquisition and income.
Disadvantages of Sponsorship Ads:
- Unable to Get Sponsors
In order for this strategy to succeed, developers must not only locate a sponsor ready to collaborate with them, but also a brand with a similar user base.
- It may interfere with user experience
As with other in-app ad campaigns, it’s crucial to pick suitable ad formats and employ them in accordance with best practices to make sure they don’t have a detrimental influence on the user experience.
11. Use licensing to generate more steady income streams
Consider licensing this data as a monetization strategy if your app belongs to one of the app categories that by definition gathers user-generated data (think geo-locations).
Once more, it is essential that the users who will be using the data you gather and license have given their explicit consent.
As licensing allows users to access the app for free while the app is being paid for by the licensing, it can be a terrific way to monetize apps.
The popular traffic and navigation software Waze serves as an illustration of this app revenue strategy by licensing its user-generated data to companies looking to run location-based advertisements.
Advantages of Licensing:
- Consistent
It might offer a steady and regular stream of income.
- Data Management
It can aid in ensuring that data is utilized in a manner compatible with the reputation and core principles of the business.
Disadvantages of Licensing:
- Cost
For app developers, licensing data can be expensive, particularly if they are small or independent developers.
- Time
Finding and negotiating with data suppliers can take a lot of effort for app developers that want to license data.
- Other App Monetization Techniques Are Limited
Data licensing may restrict how app developers may utilize and profit from their data.
12. Crowdfunding Has the Power to Generate Money and Create Communities
Crowdfunding is a good approach to raising money for a project, especially early on in the creation of a free app. Kickstarter, IndieGoGo, GoFundMe, and Patreon are a few examples of crowdfunding websites that can give app creators more ways to monetize their apps.
This is how many popular applications got their start; in 2019, the language-learning app Fluent Forever raised more than $500,000 from 4,000 platform members.
Advantages of Crowdfunding:
- Access to a Wide Audience is Offered
Developers may reach a much larger audience of potential app users and backers through crowdfunding than they might be able to do it on their own.
- Influx of cash
A quick infusion of funds from crowdfunding can help you launch your app development project.
- Community Development
A built-in community of users and supporters who can offer helpful comments and support the promotion of your app can be created through crowdfunding.
Disadvantages of Crowdfunding:
- Competitive Industry
A strong brand voice and the means to cut through the surrounding “digital noise” are crucial given the number of apps vying for donors’ attention. It could be tough to launch a crowdfunding campaign without a clear vision.
Mobile App Monetization Best Practices
It is crucial that app monetization does not take precedence over the value of the user experience, regardless of the well-liked app monetization approach a developer chooses to apply.
A successful app monetization strategy can be achieved in one of two ways. Protecting the user experience is the main priority. For instance, if in-app advertisements are a part of the plan, the appropriate ad type should be selected, such as video commercials or interstitials, to ensure that the user experience of the app is not adversely affected. Although ad money is excellent, paid users should not be sacrificed.
Furthermore, when considering how to increase revenue for their mobile apps, developers should take into account the following:
- Invest in User Acquisition
Developers should continuously invest in user acquisition in order to scale monetization. New users are essential for any mobile app’s ability to not only survive but also prosper in the present market because user churn will always occur.
- Hybrid Monetization
With 1 in 4 developers claiming that hybrid monetization is the best method to maximize ROI, implementing multiple app monetization techniques can be quite beneficial.
- Analytics and Data
Analytics is one of the best strategies to maximize an app’s capacity for producing income. Developers should make sure they are receiving thorough analytics, such as revenue, user behavior, and geography if they partner with an app monetization platform. Next, you may use this data effectively or sell it to marketers to generate recurring revenue.
What Monetization Model is Best for Your App?
There are a number of factors to take into account when choosing which of the several app monetization tactics an app owner should implement for their app, as there are with anything in digital marketing. App developers frequently choose to use a combination of the aforementioned strategies to make money from their apps.
Yet, in-app advertising is unquestionably still one of the most successful and lucrative app monetization strategies, with marketers investing more than $600 billion in digital advertising in 2022.
The following factors should be taken into account by app developers before choosing a monetization strategy:
- What Does the App Do?
Priorities come first. App owners should carefully assess the role and goal of their app—what issue does it address, and how?
Not every app has the same potential for increasing money. Gaming apps are better suited to in-app advertising than news and entertainment apps, which benefit from subscription arrangements.
- Who Is the Competition?
Competitor analysis is crucial to knowing how an app fits in the market, as it is with all product development.
Developers can learn which monetization techniques will be most effective by looking into similar apps in the market.
- Who Is the Target Audience?
Finally, app developers must be aware of their target market. Who are they? What are they seeking? Most importantly, what are they prepared to spend money on?
Developers might attempt to construct a strategy—or a variety of strategies—to guarantee continued success by defining the aforementioned criteria.
Conclusion
There are a lot of things one must consider when it comes to the issue of monetizing an app. Here are a few questions you can while starting out. How is your app unique and different from others? If you were to pay for your app, would you be willing to do that? How do you define your current business priority? Is it to gain revenue or increase app revenue?
Here at ESL, we have a team of experts that can help you with all your mobile application and monetization needs.
