According to Statista, users installed 178.1 billion mobile applications in 2017. One year later, this figure increased to 205.4 billion. By 2022, it is expected to reach 258.2 billion downloads. Obviously, consumer mobile app spending is also growing. In 2018, gross mobile app expenditure by users was $101 billion. Analysts predict that, in 2019, it will increase to $120 billion!
Despite the fact that we see new products on the market every day and some of them are really cool, only a small percentage generates profit. It goes without saying that the competition is very high and rates will be rising. Each category in app stores is full of thousands of similar solutions. Seamless user experience has become the main requirement. Now, it’s impossible to imagine success without thoughtful marketing and the analysis of user behavior.
We know how to build a great mobile app that will attract users and add value to them. But we also know that it isn’t enough to just make a quality product — it should recoup the investment and earn additional income.
This leads to the question of how you can earn money on a mobile application and choose between numerous mobile app monetization strategies. In this article, we’ll consider the best ways to monetize an app for the upcoming years.
There are so many ways to monetize mobile apps that a naive user can get confused. That’s why we identified the most successful strategies and described them below. What’s more, you will learn how to make them work for you and generate profit. Let’s get started!
According to App Annie, in-app advertising spending is predicted to triple and reach $201 billion by 2021. Now, people spend hours a day on their smartphones. It is no wonder that many advertisers are trying to catch their attention in mobile applications.
Advertising is one of the most popular and simple ways to monetize mobile apps. You don’t have to reinvent the wheel and think through a complex strategy if this model suits you. It seems to be quite easy, doesn’t it? But there are some pitfalls that you should keep in mind.
First and foremost, people don’t like ads. Especially if they are annoying ads, videos that last too long (6-10 seconds is too long), and banners that are too big. In addition, they get irritated when they see advertisements for a completely different audience. Imagine, a young woman seeing an obsessive ad about a cure for impotence when she is playing a game. This kind of user experience can be horrible, don’t you think?
Users are willing to put up with ads and forgive the product founders for the possibility to use it for free. But if they see something that totally ruins their experience, they will just stop using your app and delete it.
Some recommendations for integrating ads:
Despite some implementation challenges, this mobile app monetization strategy has remained one of the most popular for years. The integration is pretty simple, people don’t have to pay for using the app or some of its content or features, and you can use A/B testing for defining the best ways for placing advertisements. Therefore, when choosing this model, think twice about how to integrate it without harming customer loyalty.
In-app purchases are one of the best methods for app monetization. A user doesn’t pay for downloading your product but can buy real and virtual items, e.g. virtual currency, points, stickers, superweapon, or extra lives in a gaming application.
Currently, only 5% of users make in-app purchases worldwide. Although their percentage is rather small, the revenue is impressive and higher than businesses earn from other users: in 2018, Apple announced that iOS engineers had generated $86 billion — mostly due to in-app purchases.
In-app purchases app monetization model will suit you if:
When integrating this mobile app monetization strategy, you should solve the main challenge — finding a balance between paid and free items. Don’t provide a lot of cool things for free and remember that things that users buy should add real value so that they will be willing to spend their money and be happy with their purchase.
“Freemium” is a combination of the words “Free” and “Premium”. It combines the possibility to download the app for free and optionally upgrade it to the premium version with additional features.
Some recommendations for using the Freemium way to monetize your app:
Many famous mobile applications use this monetization model, including Spotify Music, Angry Birds, Evernote, DropBox, MailChimp, and Tinder. As of June 2019, Tinder generated about $21.37 million on Google Play by offering its Plus and Gold versions.
For now, pay per download is the easiest mobile app monetization strategy. But it has some obstacles for product owners. Since users have to make a payment to install an application without the possibility of trying it for free, their willingness to spend money often equals zero. As a consequence, 90% of all installs total fewer than 500 times a day.
When this way to monetize an application will fit you:
Let’s see how to earn money with mobile apps using pay per download:
As you can see, the pay per download monetization model can be a perfect solution when done right. By the way, in 2017, mobile app owners earned $29 billion with their paid applications.
Subscription offers both free and paid content. This is the most popular application monetization strategy for drop-in audio chats and streaming services. Fitness apps, news portals, cloud services, image and resume creation services such as Canva, and world-famous online magazines like Wall Street Journal, Telegraph, and The NY Times also use this model.
You should use a subscription to monetize your app when:
How to achieve success using the subscription mobile app monetization strategy:
In speaking of applications in categories, such as news, media, and dating, user spending on them is expected to grow and reach $34 billion in 2021, according to App Annie Market Forecast.
Sponsorship is one of the newest ways to monetize a mobile solution. To integrate this model, you partner with a company that pays you for having their content in the product. This monetization strategy works best if you have a large user base. The key challenge here is to find a company whose user base aligns with yours and who will be ready to pay you.
This monetization strategy is perfect for popular event applications. Businesses and brands — event partners or sponsors — pay for integrating their content (link to the website, product lists, etc.) into your application.
Fitness apps can also take advantage of using this model. Say you have a fitness application. In this case, it will be reasonable to partner with the people (e.g. bloggers) and businesses associated with sports, a healthy lifestyle, or healthy nutrition.
This strategy is a good way to drive user attention and earn money. The main advantage of this strategy is that people are generally loyal to seeing relevant/valuable content.
When choosing between multiple app monetization models, you should do several important things. First and foremost, take a look at your competitors. How do they earn money from their applications? How do they promote them? What marketing channels do they use? Find startup/product success stories and see what helped them attract users and generate profit.
Keep in mind that a certain monetization strategy suits certain kinds of apps. A subscription or freemium model is more preferable for audio and video streaming solutions. At the same time, pay per download won’t be okay for them as the market is full of similar products that are free of charge.
When you’re building a mobile app, integrate user analytics tools like Flurry, Localytics, Mixpanel, or Tenjin into your MVP (minimum viable product). The earlier you will get the ability to analyze user behavior the better. It will allow you to understand the audience’s needs and expectations and make changes in your application accordingly.
Conduct A/B testing to test various options and define the best way to monetize your product. For instance, you can show the price of $2 for upgrading to the premium version for one group of users and $3 for the other. If the number of purchases will be equal, set a price of $3. The plus here is that there are many A/B testing tools that you can use for free.
These steps will help you monetize your app right and earn income. As there is no universal way that will definitely and immediately bring success, be ready for testing various things. Remember that a large and loyal user base is crucial.
For today, Tinder is the most popular dating application worldwide. It is noteworthy that it reached a tremendous success within five years. Every day, it generates millions of dollars in revenue mostly due to its app monetization strategy.
Tinder Plus is a subscription model that expands some free features and provides users with access to the premium functionality. It costs $10 per month for people under 30 years old and $20 per month for users over 30.
In return for this amount of money, people receive an unlimited number of swipes, five super likes per day, the ability to undo a past action, change a geographical location, boost their profile in the search, and many other cool things. This service brings Tinder’s owners the majority of the entire income.
As you can see, there are many different alternatives to earn money with iOS and Android applications. A challenge is to choose the right monetization strategy for your product.
Before implementing it and even before software development, conduct competitor analysis, define the project main tasks and features, and think through how it will add value to users. When your app is ready, you should integrate user analytics and hold A/B testing to understand your audience’s needs and preferences.
If you have questions about ways to monetize apps or have an idea for building your own product, feel free to contact us. With our extensive expertise in delivering quality mobile applications and keeping pace with the app monetization trends, we will be happy to help you!
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