7 Best Ways to Monetize an App

Monetization of mobile apps. Introduction

Companies create applications with different purposes. Someone needs to increase the level of audience loyalty, someone wants to get more clients, while others simply want to make money with apps here and now. Often, mobile applications become an additional marketing channel for the brand, which in many cases begins to work almost immediately after launch.

However, some developers create something unique, because they want to join the market, where some applications (e.g. WhatsApp) are worth billions of dollars. This platform really gives you a way to earn money and we, here in Erminesoft, suggest most popular app monetization models for mobile applications (both iOS & Android). In this article, we will describe few methods to monetize applications that repeatedly proved its effectiveness.

How to choose the right business model for your application?

Below we will describe the seven most productive and profitable ways of monetizing application. And before that, let's answer a few questions that will help determine the choice:

1. What is the problem and how it's solved in your product?

2. Is your application unique, why people should buy it?

3. What are the other positive aspects of your program?

4. How well can the selected monetization method work for this application?

Probably the most important thing is to define the balance between your desire to attract more users with the desire to make revenue. Some monetization methods can make the profit immediately after application release, while other models provide a gradual set of user audience with monetization after a certain period. How much time do you have? Can you refrain some time from the monetization to gain user base?

Remember, that monetization plan should be injected at the application design stage (before development). It is possible (and perhaps even necessary) to combine different methods.

Read more: How to estimate budget for mobile app marketing?

Best ways to monetize your app

1. Ad-supported apps

This is one of the most common ways to generate revenue from your program. It is practical, because there are no restrictions on downloading, and the purpose of the developer - to get as many users as possible. After that, the data on their behavior should be analyzed and provided to advertisers willing to pay for an ad.
This model is a perfect example, Facebook mobile app. Users do not pay a social network, but Facebook collects huge amounts of data about its users and then shows the targeted advertising.

In their case, this model works extremely effective - social network recently announced 151% increase in advertising revenues in the second quarter of 2015.

Result: you will make money by providing advertising space ( eg. app banner ads) in your application.

Pros

• Free mobile app can quickly dial a huge user base.

• The size of the mobile advertising market has exceeded the size of traditional advertising market on the radio, in magazines and newspapers.

• Popular application can quite quickly collect the data on the behavioral patterns of users. This can be useful to many advertisers.

The model is effective in the case of targeted advertising.

Cons

• This is a well-known strategy, many users don't like ads, it can lead to an outflow.

• Mobile advertising is limited to the size of the device screen.

• This method does not work for the monetization of niche programs that are designed to help users perform a limited number of functions (advertising may look unnatural).

Read also: how to make a social media app

2. Freemium

Often freemium-application has a certain (sometimes limited) set of basic features. There is also a set of additional functions, which can be purchased. The premise of the model is attracting people to the application with a basic set of functions. After some time spent in the game, several users want more, and they begin to buy additional features. Intent is to collect a large number of users and get them interested in your application for a long time.

As a great example, we can intense Angry Birds. It's a free and very exciting game, with a variety of levels. In the paid version, you can buy even more levels and hidden features of your birds.

Result: Freemium allows users to try the basic version of the application and after - buy additional features.

Pros

• This method allows you to build a user base in a relatively short time, and many of them will work with the program for months;

• People who will test the features before buying will likely become loyal users;

• It is a flexible solution that can be used in almost all kinds of applications;

• You can combine this technique with the use of the advertising model;

Cons

• If you offer not enough basic functionality, users will leave;

• If there are too many basic functions users will not buy more;

Read also: How do free apps make money?

3. Commercial apps

Another common business model, which involves payments. The cost of an app can vary from $0.99 to $999.99, and developer gets money with every new user. The key to success will be the ability of the developer to submit application features in a favorable light, to interest a buyer from the outset.

An example of a successful application, which uses exactly this business model is the Calendar 5, which price is $4.99. The program is positioned as a smart calendar for corporate tasks and important events. Application authors manage to convince users that the Calendar 5 is better than default Android calendar that comes with the OS.

Result: "pay, then take", use this model if you are sure you will be able to convince users to buy the program.

Pros

• The funds come with every new application download;

• People who have paid for app is likely to use it a lot;

• The paid app usually has no advertising that could annoy users;

• This model motivates developers to pay maximum attention to the advancement and simplifies the calculation ROI;

Cons

• It is hard to sell software because the competition in the app stores is very high;

• 90% of paid programs are downloaded less than 500 times a day;

4. In-app monetization or in-app purchase

Applications published on such scheme, are selling products, virtual or real stuff. These can be clothes, accessories, real things that user needs. But it may be virtual goods, such as game characters, game clothes, and currency.

A good example is MeetMe, a social app with the ability to buy certain goods and services. For example, to increase your profile views, you need to pay a certain amount of money. Developers get a good income thanks to a clear user sales model.

Result: this business model allows you to open an additional sales channel for your products or services. In addition, it can be a way to earn money from games - to sell in-game currency, and all sorts of bonuses.

Pros

• It's a flexible business model that can be successfully used by companies operating in eCommerce- / mCommerce-field;

• In-app purchases are a great way to sell products or services with minimum risk;

• The ability to purchase virtual goods may increase the level of user loyalty;

Cons

• App Stores usually take part of the income from the sale of virtual (but not real) goods purchased within the program;

• Not long ago, the United States and the European Union authorities ordered Google and Apple to specify more details on the products in stores for a better user protection.

5. Subscription

This model is similar to the Freemium. But in this case, it is all about getting access to the content, not to the program. Usually, subscription (paywall in some cases) suggests receiving a certain amount of free content. If the user wants to get more, he has to pay - usually provides full access for a certain time.

Umano - a good example of such a business model. The program provides users with access to news podcasts (they are limited in free version). If you want to get unlimited access to the service - you can buy a subscription.

Result: “Try before buy”.

Pros

• Subscribe delivers a steady flow of funds over a long period of time. And after the end of the subscription period, it usually automatically extended if the user does not have a particular method of payment;

• Subscribe motivates developers to develop more relevant and interesting content;

Cons

• This business model can't be used in a limited number of applications;

• To determine when and where to place a paywall, it can be quite a challenge for the developer.

6. Sponsorship

Among all the business models above, this particular one is the newest. Its essence is that the advertiser rewards users for performing certain actions within the application. Here, brands and agencies are presented as the monetization tools. Software developer receiving a percentage of remuneration provided by the user.

RunKeeper will be an excellent example. It encourages users to perform certain actions (to pass a certain number of steps or drive a certain number of laps is not a bike). Advertisers pay to the user, but a plus for the developer is that the program has no ads, that such annoying subscribers.

Result: the application allows you to attract a large number of users like its functions, and premium bonuses from advertisers (and one part to developer).

Pros

• This is a very flexible business model that can be used in a large number of applications of different types;

• Members who have received the award are very loyal;

• The developer gets the money, the advertiser provides information about itself to the user audience, users receive remuneration and bonuses;

Cons

• Due to the novelty of this business model it is not have been carefully tested by developers and marketers;

• It requires strong sales specialist in the team and sponsors beliefs.

7. Push notifications

Ads appear as alerts in the system tray user device. CTR and conversion rate decrease, because there might not be any user response. Unlike advertising. Advertisers pay for clicks. Unlike traditional mobile ads, notifications are not placed inside the app.

Result: you get a profit, the advertiser - views (and possible orders), user - new products and services.

Pros

• accurate geo-targeted advertising;

• less annoying,

• No need to clean up your mailbox.

Cons

• you need to install the application;

• you need to enable bluetooth.

Conclusion

So, It was our top-7 of how to monetize a mobile app. What do we have in the end? As it turned out, the most widely used business model is in-app advertising and the most profitable way one - subscription.

Now the application ecosystem is becoming increasingly complex and diverse, so we can expect the appearance of new ways of monetization.

Remember: do not repeat other people's actions, try to combine different models of monetization of applications and adapt them for yourself.