Hi everyone! In my small blog on this amazing website, I generally cover such topics as software development, blockchain development and use cases, security issues, and technology trends.
Though the creation of mobile apps is one of the key things I enjoy talking about, in this post, I'd like to write about monetization strategies as well as provide you with meaningful (I hope) tips of how to choose the best one for your application.
This will be a republication of my article "These Are The 5 Best Strategies To Monetize Your Mobile App In 2018" I wrote for Magazine Startus, that the audience found useful. I will appreciate if you share opinions and experiences in the comments below the post.) Let's start.
The global mobile app market has never been as competitive as it is today. What’s more, by 2020 it is expected to reach $188.9 billion! However, the percentage of successful apps is very low - about 0.01%.
While some product categories like shopping and productivity are seeing an increase in use, the popularity of certain categories that did well earlier, for example, mobile games and lifestyle apps, has declined recently. Why?
In the past, it was simple enough to make a profit by launching an app with a cool and innovative idea. Users didn’t expect something extraordinary and weren’t so pampered with thousands of seductive offers.
Today, you need to consider various factors, from preparing a quality technical specification and defining the product functionality to choosing the right monetization strategy.
Monetization is crucial for the product’s future – only one out of a hundred makes money. If the application meets user expectations but is monetized improperly, it will have many users, but won’t bring money.
For years, developers have been struggling to define the best monetization strategy. So, is there a truly successful way to monetize a mobile app?
1. Pay Per Download
Probably, this strategy is the easiest way to monetize a mobile application. When publishing the app on Google Play or the App Store, you set up the price (from $0,99) that users will have to pay for downloading.
As the product owner, you receive income once users start downloading it. Although people are always more reluctant to pay for something they haven’t tried before, paid apps’ users are generally more loyal.
Since the profit directly depends on the number of downloads, a big challenge is to attract a lot of users and engage them.
With millions of competitive apps, you’ll need strong marketing activities to achieve great results. However, despite these difficulties, in 2017 paid apps have brought their owners $29 billion.
When you should choose this monetization strategy:
The app provides a unique functionality that surpasses free apps’ offers – Before starting the development, make a competitor analysis and define the needs and preferences of your target audience. Your product should surpass similar ones and provide features that users will be ready to pay for, for example, offer improved user experience, unique features, or something else.
Strong marketing/PR presence – If your company has already had one or several successful apps that users love and enjoy, it will be much easier for you to promote a new product. They know your brand, are loyal to your products and have more willingness to pay.
Thus, pay per download is the easiest model, the difficulty lies in convincing users to purchase the app. Keep persuasive factors such as positive user reviews, high ratings, strong social media presence in mind and ensure you have them integrated into your marketing campaign.
2. In-App Purchases
When using in-app purchases, the application serves as a sales channel or an online showcase.
You can sell access to content or new features within the app, real products or services, or virtual items, for example, virtual money, extra lives in a gaming app, and more. For now, this monetization model is the most popular and accounts for over 50% of mobile app revenue.
A challenge is to find the perfect balance between paid and free items in the product so that users can use the app for free, but are interested in making purchases.
You should integrate in-app purchases if:
Purchases provide real value to users – If your application doesn’t imply something really engaging and very desired by the target audience, or isn’t associated with categories we will mention below, you should think about other monetization strategies.
You have a shopping, messaging, or gaming app – These app categories imply having plenty of users and many interesting features. You can offer, for instance, funny sticker packs in a messaging app or extra capabilities within a gaming app.
Though just over 5% of mobile app users spend money on in-app purchases, the amount of revenue is 20 times higher than companies earn from all other users (on paid app downloads), AppBoy survey reports.
3. Advertising
In the coming years, advertising will be all about the user experience. When using this model, developers need to define a balance between the number of advertisements, where they appear, and how users interact with them.
By choosing this monetization model you keep the app free and attract more users. An important thing is to make advertisements responsive to the potential audience’s needs.
For instance, in a sports men-oriented application advertising of baby goods or cosmetics will be weird and won’t bring results. Also, too many ads will reduce customer loyalty and result in negative feedback.
In this model, the income can be based on advertising only, but product owners often prefer to use a combination of monetization strategies.
You should use this monetization strategy if:
Your app is designed for a large audience, implying a high number of downloads and high retention rate.
The app isn’t built for receiving revenue directly from users: It has no items, content, or features they will be ready to pay for.
4. Freemium
The word ’Freemium’ comes from the merge of “Free” and “Premium”. In this monetization model, the app is free but offers premium functionality that has to be paid for. If the user wants to use additional features – they will need to pay.
A strong point of this strategy is the user’s opportunity to check out the app without paying for it. To bring high revenue, your app should provide a great user experience and offer valuable features that users will want to use.
A freemium strategy is often combined with advertising basis although in the paid version there cannot be any ads within the app.
According to a recent research by GLOBE NEWSWIRE, over 60% of mobile app developers recommend using the freemium model. Besides, it has been already successfully used by Evernote, Dropbox, MailChimp, and many others.
5. Subscription
This monetization strategy is similar to the freemium model. The difference is that a subscription model offers paid content.
Users install the app for free, but with the limited amount of content (be it music, news, etc.) before being prompted to subscribe. Usually, the payment is rather low to motivate users to pay.
At the moment, this strategy is experiencing an increasing interest. Analysts expect that between 2018 and 2021, mobile app subscriptions’ revenue will grow at a CAGR of 25% to reach approximately $34 billion by early 2022.
A subscription model will be the best choice when:
The app is content-driven: entertainment, music, news, service, or video apps.
The application implies a high number of downloads and high user retention rate.
Currently, the subscription model is becoming more complex. Most product owners establish several pricing tiers with many different features, which helps them persuade users to subscribe to a lower tier of membership.
Closing Thoughts For 2018
Observing the nearest future, developers will continue to benefit from the app economy with income from mobile app monetization set to grow throughout the coming years. Free apps will become the new normal and even must-have, so the use of pay per download model will decline in popularity.
Another trend is that in 2018 product owners shouldn’t rely on a single model. Instead, more and more developers will need to integrate hybrid monetization strategies. In a changing market and fluctuating user needs, the focus on several strategies will provide stability.
At last, the time users spend in their apps has already started to stagnate. According to Flurry’s survey, overall app session activity grew by only 6% in 2017.
Also, users now spend their mobile time across a diverse variety of apps as nobody is happy with too many ads, high prices, and the lack of quality content. Due to the free to download culture that is taking the center stage now, developers will need to place more emphasis on the monetization experience.
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