Do you have a great mobile app idea in mind, but the concern of monetizing it keeps you awake all night? You’re not alone.
In this era of technology, almost every startup has a mobile app idea. But coming up with an idea and developing the app is just half the work done. If it’s your startup idea, you would want it to become your primary source of revenue. Hence, you’ll need an app monetization revenue model.
By the end of this post, you’ll learn about the best strategies to monetize your app in 2021 that you can use to bring consistent and sustainable revenue from your mobile app.
Table of Contents
Mobile app monetization: an overview
Mobile app monetization refers to the deployment of methods and techniques to generate revenue from a mobile app. Several app monetization strategies are available, ranging from in-app purchases to display advertisements.
Mobile app monetization statistics show that there were 200 billion app downloads in 2019. While the Google Play Store dominated the number of app downloads, the App Store won the revenue game. The total global app revenue in 2018 was $71.4 billion – a 22.7% year-on-year increase, according to Sensor Tower.
Source: SensorTower
Of the $71.4 billion spent on mobile apps, $46.6 billion were spent on the App Store and $24.8 billion on the Play Store. This difference is substantial, considering the fact that the Play Store has almost a million extra apps than the Play Store.
Segment analysis of mobile app revenue showed that mobile games bring the largest portion of mobile app revenue. But the non-gaming mobile app industry has also witnessed a massive surge. The non-gaming mobile app revenue, which oscillated around $3-4 billion in 2013, had increased to about $20 billion in 2018.
Types of mobile app monetization
Broadly speaking, the mobile app monetization model falls into one of the two categories: direct monetization or indirect monetization. Direct monetization is more prevalent, as consumers can access the paid content or services directly from the app.
Let’s take a quick look into the two monetization techniques.
1. Direct monetization
In direct monetization, the revenue comes directly from the app. This is pretty self-explanatory. Let’s say; you offer a premium app priced at $10 on the Play Store or App Store. If someone purchases the app, the money comes directly from the app. This is an example of direct monetization.
Another example is in-app purchases. If a consumer purchases anything from inside your app, the revenue that you’ll earn will come straight from the app.
2. Indirect monetization
In indirect monetization, the revenue you earn may not come directly from the app. A common example of indirect monetization is advertisements. If you place Google Ads on your mobile app, Google will pay you. In this case, your app is not generating revenue.
Five best app monetization strategies
Mobile applications offer several monetization opportunities. As the following graphic by App Annie suggests, ‘in-app purchase’ is the most common monetization technique, followed by advertising and paid downloads. But that’s not all. There are other lucrative ways to generate revenue from your app.
Source: App Annie
Let’s talk about some best mobile app monetization strategies you can implement to turn your mobile app into a money-making machine.
1. Paid downloads
In-app purchases or paid downloads are arguably the most common monetization strategy. If you don’t want to offer your app for free, you can put a small price tag on it. Since the number of downloads for popular apps can spike to hundreds of millions, providing your app for just $1 can help you generate a significant amount of revenue.
In fact, a majority of mobile apps cost less than $1, and most of the apps available on the Play Store and App Store less than $5.
However, this app monetization model has one drawback. You can’t attract as many downloads as you would get for a free app. Let’s quickly draw a head-to-head comparison.
The top 2 free apps are Google Pay and Zoom Cloud, both having 100 million+ downloads on Google Play Store. Now, when we look at the top 2 paid apps – Navigation Pro and Scanner Radio Pro – the number of downloads is 500k+ and 100k+, respectively. See the difference?
2. In-app purchases
If you want to give your app for free, you can monetize it with in-app purchases. PUBG Mobile, a popular mobile battle royale game, is available for free on the Play Store and App Store.
But the mobile game has collected more than $1 billion in 2020 alone, purely from in-app purchases. The game allows you to purchase different crates that you can buy to obtain various outfits and weapon skins for your character.
So, if you’re tempted to give your app for free, be sure to incorporate this app monetization revenue model.
3. Subscriptions
If you’re offering Software as a Service (SaaS) on mobile, offering mobile app subscriptions is a great way to develop a reliable revenue stream. You can either deploy a freemium model, in which you can provide a version of your app with limited features for free. If your customers want to unlock more features, they can subscribe to a premium plan and get more functionalities.
Subscriptions are one of the most popular ways to monetize a mobile app. Several SaaS giants like Salesforce, Hubspot, and QuickBooks, provide subscription plans. Netflix and Amazon Prime are also popular examples of subscription-based app monetization.
4. Advertisements
If you don’t have a product or service to sell, you can put ads on your mobile app to monetize it. It works similar to showing ads on your website. If you sign up for an ad network like Google Ads, the ad network displays ads on your app, and you get paid if someone sees or clicks the ad.
Many mobile app providers provide a premium ad-free upgrade. You can offer a free app with ads, along with an option to upgrade to an ad-free version.
Here’s a quick caveat, though. Consumers really frown upon ads on mobile applications. Pop-ups and advertisements that deteriorate user experience can hurt your app usage and brand in the long term. So, be mindful of the ads when putting ads on your app.
5. Sponsorships
A major drawback of showing advertisements on your app is the lack of relevance. Sure, the ad network won’t show adult advertisements on your site, but there’s no guarantee that the ads will be relevant to your users. If your app is about accounting and the ads displayed are about fantasy sports, your users simply won’t click on them.
Sponsorships are like an upgrade to regular advertisements. You can work with specific advertisers and show the ads that you want. This gives you full control, and you can decide which ads to display. Hence, you can put up advertisements relevant to your consumers’ needs, thereby providing a better experience.
Note: The opportunities are endless when it comes to mobile app monetization. You can share premium content like the New York Times, Washington Post, and Wall Street Journal do. Or, you can offer a multi-vendor marketplace and earn transactional commissions. It’s essential to understand your business model and determine which strategies can work best for you.
Future mobile App monetization trends to look out for
According to Allied Market Research, the global mobile app market was valued at $106.27 billion in 2018 and is projected to reach $407.31 billion by 2026 with a staggering CAGR of 18.4% during 2019-2026.
Source: Allied Market Research
In a nutshell, these mobile app monetization statistics show that the mobile app market will flourish, providing several opportunities for app developers and owners.
But to leverage this growth, it’s essential to stay up-to-date with the latest trends and changes. Here are some future app monetization opportunities and trends to look out for.
1. Targeted advertisements
As discussed earlier, most ad networks lack targeted advertisements. Irrelevant ads can ruin the users’ mobile experience, hurting both the app owner and the ad network in many ways. Hence, there’s a dire need for targeted, relevant advertising.
This demand has led to the rise of personalized advertising. Most mobile apps now deploy Big Data and AI to determine user behaviour and show relevant advertisements.
2. Free trials
Arguably, offering free trials has become the hottest mobile application trend of 2019-2020. Mobile app companies certainly want their users to make in-app purchases and subscribe to their premium services. Users, on the other hand, also want to, but they’re uncertain as to whether it’s worth spending the money.
To bridge this uncertainty gap, app companies offer free trials. Users can now use the ‘check out the premium version for free’ for a few days and decide whether they should make the purchase.
3. Subscription becoming the new norm
Back in the day, only providers like Netflix, along with some SaaS companies, offered in-app subscriptions. But now, it has become the norm, not only in non-gaming apps but in mobile games too. PUBG mobile, for example, offers a two-month Royal Pass upgrade, which allows users to unlock new weapon skins and costumes.
As the subscription model is becoming more popular, all app companies are coming up with their own unique upgrades.
4. Virtual goods
Who thought people would pay for items they can’t even physically use? In mobile games, users purchase outfits and upgrades for their in-game characters. Clash of Clans, another popular mobile game, allows you to buy ‘gems’ for real money, which acts as an in-game currency. And guess what – the game earned $727 million in 2019.
So, if you’re planning to develop a mobile game, selling virtual goods can be a lucrative monetization strategy.
Wrapping up
One thing to keep in mind, though, is that people are really sceptical when it comes to spending money on an app. Unless what you’re providing in exchange for money can change their lives somehow, they won’t entertain your premium offerings. Therefore, it’s critical to come up with an irresistible product, service, or upgrade that your customers can’t ignore. If you want help regarding app development or mobile app monetization strategies, feel free to get in touch with experts at TriState Technology.
