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When I started my mobile app journey, I was convinced that the only way to make money was with a paid app. It makes sense, right? If you want to be paid for your product, you need people to pay for it.
However, this isn’t always the case.
Nearly 97% of apps on Android and 95% on iOS are free. Does that mean these developers are letting people use them out of the goodness of their hearts? Maybe some of them, but for the most part, people can actually make more money with free apps than paid.
It all comes down to monetization.
Let’s take a look at how some of the top performing apps are able to make money while still popping up in the “free” section of the store.
What is App Monetization
You worked hard on your app, and now it’s time to start making some money! You might think the only way to do this is by making it a paid app, but there are nearly endless ways to start turning a profit in the mobile market.
Both paid and free apps have their pros and cons when it comes to monetization. With paid apps, developers can make a profit immediately after someone downloads their app. However, the number of downloads might be limited as not everyone is willing to pay for an app.
On the other hand, free apps can reach a much larger audience and potentially generate more revenue, but it may take longer to see any returns. That is, unless you are strategic about your monetization model.
Top Monetization Models For Mobile Apps
Your monetization model will likely end up being as unique as your app itself. However, there are a few tried and true models to get you started.
The perfect system might be a mix of the following, as each model has its own benefits and challenges.
This model allows users to make purchases within the app for additional features, virtual goods, or premium content. It’s pretty common, but can have a bad rap for not being transparent.
This doesn’t have to be the case! If you’re clear about the value that these purchases can give your audience, many of them will be more than happy to jump in the in-app purchase lane.
To make a purchase within the app, users typically need to have a payment method linked to their account, such as a credit card or mobile wallet. They can usually find a "Store" or "Shop" section within the app where they can browse and select the items they want to purchase.
Here are a few of the things people could buy in your app.
In some apps, certain features are locked or limited in the free version. Users can choose to purchase these additional features to enhance their app experience. For example, in a photo editing app, users might be able to unlock advanced filters or editing tools by purchasing them.
Other apps offer additional content that can be purchased. This could include new levels in a game, extra episodes of a podcast, or access to premium articles or tutorials in an educational app. Users who are interested in experiencing more of what the app has to offer can purchase this additional content.
You might want to offer a way to buy virtual items or currency that can be used within your app. Some popular purchases include special weapons or power-ups in a game, virtual clothes or accessories for an avatar, or in-app currency to unlock various features or perks.
When an app developer wants to make money from their app through advertising, they can partner with an advertising network. The advertising network is responsible for connecting the app developer with advertisers who are interested in reaching the app's audience.
Once you have advertisers interested in your niche, you have to decide where and how those ads will be displayed. This could be with
- Banner Ads - A small rectangular advertisement that appears at the top or bottom of the screen
- Video Ads - Will often play at set intervals as someone uses your app, most common in gaming apps
- Popup Ads - A somewhat intrusive ad that appears suddenly and can disrupt the user experience. Usually covers the entire screen and is most common when users first open an app
- Native Ads - Seamlessly blends into the user interface and content of your app, mimicking the surrounding design and enhancing the overall user experience
Every time a user interacts with an ad, either by clicking on it or watching it, you’ll earn some cash! Your advertising network will be tracking both the number of impressions (the number of times the ad is shown) or clicks (when a user interacts with the ad) your app generates.
The amount of money that app developers earn from advertising depends on a few things, including:
- Number of active users your app has
- Engagement level of the users
- Types of ads being displayed
Ads that are more engaging or relevant to your audience will likely make you more money.
Instead of paying a one-time fee to download and use your app, a subscription model asks folks to pay a recurring fee every month or year to use your app (or access specific features.)
This provides many benefits including
- Development Funds - You can continually update and improve your app without worrying about generating enough revenue to sustain the development costs
- Steady Income - When there is always money coming in, you can keep supporting and maintaining your app in the long-term
- Flexibility For Users - Users can test out your app and see if it's worth the subscription. This instills confidence in their purchase and makes them more likely to talk about how great your app is
Within your subscription model, you can include several tiers to cater to different needs and budgets. Thai might include a basic subscription with limited features and a lower price, and a premium subscription with all the bells and whistles.
Apps can collect and analyze user data to provide valuable insights to advertisers, or sell anonymized user data to third parties. This can include tons of information, such as
- Email Addresses
- Phone Numbers
- User Preferences
- App Usage Patterns
- Location Information
This data can help you understand your user behavior and preferences, so you can provide personalized advertisements and recommendations. This makes your app more engaging and useful.
But how do you turn this data into money? There are a few different ways.
- Advertising - By analyzing user preferences and behavior, you can make sure your ads are relevant and appealing. This can boost your ad revenue significantly
- Data Licensing - By anonymizing and aggregating your data, you can safely sell it to a third-party company. They’ll use the data for market research, analyzing trends, or creating new products and services
- In-App Purchases - You may be able to offer personalized upgrades, features, or virtual goods based on the data you collect
When it comes to data monetization, it’s extremely important that you are upfront and ethical throughout the process. Your users need to know how their data is being collected, stored, and used.
Choosing the Right Monetization Model
With so many options for monetization, you have to be strategic about which you choose. This decision should not be taken lightly, and needs to take several factors into consideration.
- Target Audience - Understand the demographics, behavior, and preferences of your target audience. This will help you choose a monetization model that aligns with their expectations and willingness to pay
- App Niche - Consider the unique characteristics of your app niche. Different niches may have varying levels of market demand, competition, and user expectations for monetization
- Value Proposition - Understand the value your app delivers to users. A monetization model that complements and enhances this value proposition is more likely to be successful
- User Experience - Strive to provide a positive and engaging user experience. Intrusive, disruptive, or irritating monetization methods can lead to user dissatisfaction and churn
- App Usage Patterns - Study user behavior patterns within your app, such as frequency and duration of usage, in-app activities, and user engagement. This can help identify potential monetization opportunities or models that work best for your app
- App Performance - Ensure that your monetization model does not negatively impact app performance. Heavy ad loads or complex payment processes can slow down your app or lead to crashes
- Revenue Potential - Evaluate the revenue potential of different monetization models. Consider factors such as average revenue per user, customer lifetime value, and potential for scalability and growth
- Competitor Analysis - Analyze how your competitors are monetizing their apps. Understand their strengths, weaknesses, and user feedback on their monetization strategies. This can help you learn from their experiences and make informed decisions for your own app
These factors work together to form the perfect monetization model for your app. Don’t sleep on any of them!
An otherwise out-of-this-world model that sacrifices user experience or doesn’t vibe with your niche is going to leave money on the table, and might alienate users altogether.
The Bottom Line
Every part of your app is innovative and unique, and the way you make money from it should be too. From data monetization to a subscription model, with the right system you can satisfy both your users and your pocketbook.
With a combination of creativity, adaptation, and strategic planning, the possibilities for monetizing your app are endless. Keep exploring and experimenting, and you’re sure to be pulling in cash in no time!
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