When you’re developing your mobile app, turning your app idea into reality is only the first step of a long journey.
There are numerous steps to complete throughout the journey and one of those steps include app monetization involving planning on how to make money out of your app.
The app monetization methods can be applied to brand new and already existing mobile apps and they will have the same effect on both.
There are many ways how you can generate money via the app and you need to figure out the best method which matches your app idea.
What is Mobile App Monetization?
Mobile app monetization is a way to make money through your mobile app – for every investment there should be a return on investment or ROI.
A study showed that 51% of people check their mobile apps on their phones 1-10 times a day plus if we calculate the average time a user spends on a mobile app it ends up with more than 2 hours and counting.
Mobile apps dominate over tablets and web due to their ease of use and access.
If you plan to develop or release a mobile app, check the following monetization models and techniques that will help you to benefit on each penny you may have invested in your own mobile app.
How to do it?
Prior to deciding on any monetization method, you should get to know your target audience to understand their behaviour and the way they may use the app. If you understand your users and the way they use your mobile app, you will learn quickly what can be the best way to monetize it.
Another important factor is whether your mobile app is free or paid, meaning that a free app can be downloaded and installed without any charges while a paid app requires payment for downloading.
Always remember that each mobile app is different so make sure to choose the best strategy that can monetize your app in the best way possible.
Mobile App Monetization Models
The most common types of app monetization models you need to understand prior to implementing any method are:
1. Effective Cost Per Mile (eCPM) Model
Cost per Mile is the preferred model for the publisher due to the fact that no matter the actions taken by the user, it still brings some reward.
The usual formula to use for calculation:
Total earnings represent the revenue generated by the app publisher with a specific ad.
Total impressions stand for the number of clicks registered with an ad throughout the ad campaign duration.
2. Cost Per Click (CPC) Model
As opposed to eCPM, this monetization model is regulated by a mobile user taking an action on an ad. Good thing about this model is that it attracts diverse types of advertisers aiming to deliver better ROI.
CPC model brings risks as it will not be successful unless it generates a high click-through ratio plus it is really difficult to predict the revenue upfront.
CPC can be calculated using the following formula:
Total ad spend stands for the amount spent on the ad campaign while total measured clicks is the number of clicks registered over a specific period of time.
3. Cost Per Action (CPA) Model
The app revenue in CPA model is generated only if a user takes a specific action like downloading the app or uses it, clicking the ad or making in-app purchases and so on.
It can bring a fruitful return on such ads but it is also prone to a variety of fraud hard to detect by the publisher.
The Best Mobile App Monetization Methods
Some of the best ways to monetize your mobile app that can bring you ROI on your app are as follows:
In-app advertising is on the first place as it is one of the most popular ways to monetize your mobile app. Online advertising carries a great potential to grow further where statistics also support this fact. For example, the majority of Google’s revenue (95%) comes from advertising and on the global scale, Internet advertising is expected to exceed $200 billion.
As per statistics, the potential of advertising brings the core value to your revenue model.
The important thing at the start is to plan on how you will display the ads.
Be careful as no one wants to be bothered by a series of ads popping up when browsing your mobile app. Figure out a way to educate your users without affecting the user experience.
Some ways to include online advertising can be:
- Displaying ads on mobile or company website
- More specific ad networks like Facebook, Google, Linkedin or Twitter
- Marketing strategies similar to marketplaces like eBay or Amazon
There are many types of in-app advertising within this model and the following can be considered as the best:
- Video ads – the publisher gets paid if the user watches the in-app ad video
- Offer Walls – the user is rewarded with virtual content or additional in-game features for completing an action and it is preferred with a cost per mille model.
- Banners – banners are constantly displayed when the app is used and they are put on an app screen however, it does not generate much traffic.
- Notification Ads – notifications pop up within notification bar to make the user aware of the ad
- Playable Ads – a new type of in-app advertising allowing users to experience the app prior to downloading it decreasing non essential downloads.
In-App purchasing (IAP) is an excellent way to monetize your mobile app including a simple strategy with the apps that come for ‘free to play’ but with a ‘pay to win’ model.
Although in-app purchases aren’t much guaranteed revenue generator, it can be applied to both free or paid apps to increase the revenue.
If not done properly, it can lead to bad reviews and frustrated users so consider these potential drawbacks prior to choosing this method. The process itself must be smooth and convenient in order to drive sales.
The best advice is to place your mobile app for free, add more or additional features and functionalities and only then ask your users to pay for it.
If your mobile app is used on a regular basis, you have the chance to monetize your mobile app by offering the subscription as it works the best for apps that deliver content.
You can create a strategy on providing the content for a subscription fee where users will need to pay a subscription fee. However, you must take care that your content is recent and original as users won’t see the purpose of subscription unless the content is updated regularly.
This way you will attract users to visit your app more frequently and encourage them to spend more time with your app.
Subscriptions can be a steady revenue generator but only if your content follows the rule of being brand-new and relevant.
The Freemium Model
The Freemium or Free-to-PLay model is usually followed by web-based services.
It firstly offers the app for free for users to be able to ‘experience’ the value – users can download the app but cannot access the ‘FULL’ sets of features without upgrading.
Only when the users try out your app, then you can ask the users to pay for unlocking the additional features or an upgraded version.
The users who are satisfied or impressed by the app’s features will surely pay a little more for it.
The downside is that it takes more time to generate revenue, although freemium apps usually generate more money than the paid apps. The common situation is that users decide to keep only the free app version but don’t worry – you can still earn some profit by offering upgrades or premium content.
If you implement the freemium model properly, you can easily make money through your mobile app.
Affiliate Marketing involves earning a commission when users buy a product or a service by following the link on your website or within your mobile application.
Affiliate marketing can bring you some advantages like a referral for praising others’ services/products or a new sales medium for your company.
There are many affiliate programs that you can try out – check the commission rates and decide which one can be the best for you.
Another benefit affiliate marketing can bring is additional traffic for your app through hosting ads on the website as this can help you to generate leads for your app.
Check out the total affiliate marketing spend in the following graph.
If you had no success with the ads, you can try getting sponsors for your app – it can be done in partnership with advertisers as well.
This model offers relevant rewards to customers when they complete any designated action within your app where revenue is shared among marketers and advertisers.
Sponsorship can offer personalization for users and can enrich user engagement as well as monetize the mobile app. Some examples of sponsorship model are:
- Sponsor banner – highly visible, bringing to the app visibility.
- Sponsor tweets – tweets are a great medium for advertisers.
- Sponsored pools – brings traffic directly to the website.
Although referred to as the ‘LAST’ resort, the expected crowdfunding revenue is about to reach $300 billion by 2025 as per startups.com. The study reveals that crowdfunding success rate with campaigns is about 50% and even the higher percentage for the campaigns that exceeded the goal.
Crowdfunding is a process where a project is funded publicly over the Internet. This method can be a bit tricky because you can never be sure of the amount the public will fund for your project.
Some of the best-known crowdfunding platforms that can generate funds for your app are:
Considering that the crowdfunding method is unpredictable, it is better to use it as an additional channel to bring extra income rather than the main channel for your mobile app monetization.
This method is a way to generate revenue by selling your mobile app in the app store and involves users to pay once for downloading the mobile app
If you wish to generate revenue this way, it is crucial to show your mobile app as exceptional with brand-new features and functionalities. If you provide value to your users that other apps fail to provide, only then you will get high visibility.
This method can be challenging as it can be rather difficult to convince users to pay for your mobile app they haven’t used yet when there are a plethora of other available apps free of charge.
When trying with paid downloads, think about some downfalls – a price on the app creates a barrier for the people to download, it is not suitable for every app, the app may fail to meet users’ expectation resulting in reduced download number plus App Stores take 30% of the price from the app publisher.
Those can be the reasons not to choose this method, but if your app offers value over other apps or if you want to tie your revenue directly to the downloads, then this might be your perfect match.
Email is still a very popular marketing channel although many would not agree.
Email can help you to generate revenue through your mobile app as people don’t change their email addresses frequently giving you a chance to run some targeted campaigns.
App promotional emails are an excellent way to make people aware of your app as everyone communicates through email nowadays. Chances will eventually be on your side as it is highly likely that the email will be read at some time.
In marketing, there is a lifespan of posts on various mediums and email is definitely on the top with a lifespan of 12 days as opposed to Facebook posts which ‘live’ only for a few hours.
You can also try to gather email addresses by enclosing your app subscription form within the email.
Email strategy can turn out to be an exceptional method as you can send your users some promotions or enable them to get some benefits if they download your app thus increasing the chances of success.
An old-school method being SMS marketing cannot be overlooked when you want to monetize your mobile app.
SMS marketing does not require any special arrangements to function and as almost everyone has smartphones, SMSs can be sent to users easily. The only thing the app publisher needs to do is to obtain the databases of smartphone users contacts available for such purposes.
Once you have your users database, create an SMS which will be compelling for users to open – text should be simple and polite with an attractive offer and a bit of humour to trigger people’s emotions and make them open the message and read the text.
White labelling is another way to monetize your mobile app – it involves selling a product/service under the brand name of another company. A company produces a product and then sell it to another one for further marketing and for users, the product appears under the brand name it is advertised by.
For example, if a mobile app is developed for providing a highly positive user experience, it can be sold to other companies with an excellent marketing model for final delivery to the users.
This model can save a lot of money as some companies prefer to get ready-to-use applications to advertise them under their own brand name.
This model has proven practical as both sides work on the areas they are experts in – the development company can focus on the product developments while another company will focus on promotion, distribution and marketing.
Every mobile app requires a specific strategy.
I’ve listed several monetization methods but this is just the tip of an iceberg – each method has its own pros and cons and the trick is to choose the best one depending on the type of your mobile app and the business you’re running.