Mobile apps are developed for various purposes. For some developers, a mobile app may be a pilot project, others may strive to increase their brand awareness, but most developers pursue a more common goal — to make a profit. It is better to think of possible solutions to this issue before you start the project.
There are many ways to make money using your product, and in this article, I will regard the main ways used to monetize mobile apps. You can use them for your project as well. No ideal income model has ever existed, but there are plenty of options to choose from.
How to Make Money off Your App: 8 Proven Monetization Strategies
Actually, there are dozens of options to make money off your app. However, if you cast aside too specific and not quite legal ones, you may think of 8 most versatile and proven models. Let us take a closer look at them.
1. Pay Per Download
The easiest and classic way to monetize your app is when users pay for downloading it from Google Play and App Store. A great advantage of such a model for developers is that they get income at the very moment when users download their products. 70% of the profit from each purchase is received by the developer, and 30% is the commission fee paid to the app store.
However, the popularity of this approach declines since it has several disadvantages. The first and most obvious one is a decrease in the number of downloads and audience reach because not all users are ready to pay. Moreover, marketing costs increase, especially if your competitors offer an alternative app for free.
It is feasible to use such a monetization model if you sell a product possessing unique or marketable features, you have substantial marketing resources, and no competitors are offering the same features for free.
The Freemium model assumes that users can download your app and use it for free, but product functionality is limited. If desired, users can pay to access advanced functionality or additional premium content. Your app then turns out to be a kind of hybrid marketing model.
The approach has an advantageous possibility to increase its audience reach and the number of downloads, which positively affects the app’s ranking in stores. Users get the opportunity to explore app features for free, and then they can make an informed decision on whether to buy advanced features or not.
Freemium has some potential cons as well:
- if you provide users with too many opportunities, they will not have an incentive to buy additional functionality;
- if, on the contrary, there are too few opportunities, users will be made to pay almost at once, which also reduces the motivation to buy more;
- you have to show a clear value to users and provide them with good experience and drive them to want to pay.
3. In-app Purchases
It is one of the most widely used monetization strategies for mobile app, and it is especially actively used in game development. For instance, players can buy additional decorative accessories for their characters (clothing and weapons) or resource batches (gold in Clash of Clans).
The main task is to find a balance between paid and free resources, to provide users with comfort when they use your app for free, but at the same time, to interest them in making purchases.
4. In-App Advertising
Advertising impressions serve as a major source of income for quite many apps on the market. You can choose among a lot of options to implement such a model in your app, for instance, graphical (banners), text, native, or video formats.
In this case, the app itself becomes free to download, and this approach greatly increases the audience reach. You can connect to multiple ad networks to automatically start showing ads, and Google AdMob is one of them. You can also offer your users to disable ads in your app for an additional fee and combine several monetization options like this.
This model has two main disadvantages: you have to attract a large number of users to get substantial profit, and you have to proceed with caution since aggressive advertising can annoy users, and they will uninstall your app.
5. Paid Subscription/Paywalled Content
The bottom line of this model is that users can use your app for free and consume content with it, but the amount of free content is limited. To gain access to a larger or better material, users will have to pay once for access to a somewhat extended package or pay to get unlimited access for a certain time (month, quarter, or year).
Medium.com is a well-known example of a paywalled content monetization model. Netflix and Spotify are among the services working on a subscription basis.
In recent years, the popularity of subscriptions is growing, and over time, more and more developers will use this business model to monetize their products.
Developers will resort to this income-generating pattern as its main advantage is the stable profit, the volume of which will increase steadily with the growth of the customer base.
6. Own Goods or Services Sales
Another way to monetize your mobile apps is to use them as a sales channel for your own goods or services. For instance, a food delivery company can develop an app in addition to a website to increase the customer database and the flow of orders. Moreover, an online store, which uses this tool, can increase the audience reach due to its entering the growing e-commerce market.
7. Transaction Commissions
Besides selling your own products, you can make good money selling other people’s goods and services, just getting a certain commission fee for your services. Specifically, the well-known startups Uber and AirBnB work utilizing this model. Taxis, reservations, delivery, medical, and other services related to online transactions currently use this business model.
Aggregators and online marketplaces are an interesting type of business based on this monetization model. One of the examples is a food delivery app designed to allow ordering food from local restaurants. This app aggregates an offer from different suppliers and acts as a single window, receiving commission fees from each order.
8. Sponsorship (partnership)
You can consider this option if other brands or companies from a certain niche are interested in contacting your app audience. You, as an app owner, can offer goods or services provided by some other company to its users and receive a fee for ad impressions or leads.
Example: sponsored content in media apps, event announcements or paid job offers.
Which Monetization Model to Choose for Your Mobile App?
This question has always been an urgent challenge for any developer, but I cannot provide an unequivocally correct answer to it. Mobile app monetization models are constantly changing because the mobile app market itself is changing.
The choice in favor of one or another option is influenced by many factors like product theme, target audience peculiarities, developers’ goals, available resources, and so on. Most developers approach this issue creatively, combining several monetization mechanisms in one app at once to reach an audience with different preferences. Others experiment utilizing various strategies to determine the most profitable one.
You have to clearly comprehend that app monetization is one of the main components of the business plan for your future project, and even a successful product can become unprofitable in the end if you do not allocate enough time and effort necessary to think out a mechanism to get profit.
If you are looking for a reliable technology partner who could develop your future product, contact us, and we will be able to offer you the optimal solution.