Monetizing Mobile Apps: Which Revenue Model Is Right for Your Business?
With over 2 million apps available on the App Store and Google Play, choosing the right revenue model is critical. According to a survey by Statista, in-app advertising and in-app purchases are the most popular ways to monetize mobile apps, accounting for 62% and 52% of global app revenues, respectively. However, the implementation of these models can be tricky. In this article, we will discuss the top monetization models for mobile apps and provide professional insights on their implementation to help you generate maximum revenue.
Exploring the Top 8 Most Popular Ways to Monetize Mobile Apps
There are various fundamental approaches to generate revenue through mobile apps, and you can either select a single mobile app monetization strategy or blend multiple ones. You have the option of creating a paid app from the outset or launching a free version with premium features. With numerous options to choose from, there is something for everyone.
The primary tactics for monetizing mobile apps consist of:
- Paid apps
- In-app purchases
- In-app advertising
- Affiliate marketing
- Subscription fee
- Product licenses
Let us delve deeper into each of these methods.
1. Paid apps
The simple model, where the users have to pay for mobile apps.
Although the paid app model may be considered outdated, it is still a viable approach for certain categories of digital products. For instance, productivity apps, photo and video editing apps, navigation apps, and utility apps are some examples of areas where paid apps can still be profitable. These types of apps typically offer specific functions or features that users are willing to pay for. However, to make this model successful, it is essential to ensure that the app provides value to the users and that the price is competitive in the market. Additionally, offering a free trial or a limited version of the app can be an effective way to attract potential customers and encourage them to purchase the full version.
2. In-app purchases
One of the easiest ways for an application to bring you revenue is by charging users for extra features or purchases they can make once they start using it.
In-app purchases can unlock extra premium features to your users but leave the core product free of charge (this is related to the freemium model).This model is commonly used in the fields of gaming, social networks, dating apps, and entertainment.
The types of in-app purchases:
- Auto-renewable subscriptions
Users are automatically charged every pay period until they cancel the subscription.
- Non-renewing subscriptions
Services or content for only a limited period. Users will have to purchase a new subscription once the current subscription ends.
After using all of a consumable purchase, the user purchases another consumable IAP again to enjoy the same benefits.
Once a user buys a non-consumable purchase, it’s permanently available to them. It does not expire with time or use.
What portion of your revenue do you have to give away?
3. In-app advertising
This approach offers ad placements inside your digital product. There are different types of ads like Banner ads, Video ads, Rewarded video ads, Native ads, Playable ads, Offerwall ads.
We can combine the in-app purchase (IAP) model with in-app advertising (IAA) to maximize revenue. This approach can include incorporating ads between game levels, using rewarded videos to offer consumable items to users who watch ads, and even combining IAA with features in dating apps where users can watch a few seconds of a video ad while browsing potential matches. It’s worth noting that this combination of IAA with IAP is currently proving to be highly effective in generating revenue for mobile apps.
In-app ads pricing models:
- Cost Per Mille (CPM)
The CPM is the price an advertiser pays a publisher for every 1,000 (mille) times the ad is displayed.
- Cost Per Click (CPC)
With the CPC pricing model, the advertiser pays the publisher only when an ad is clicked.
- Cost Per Action (CPA)
Requires the advertiser to pay the publisher when a click leads to a specific, pre-defined action within an app (registration, purchase, etc.).
- Cost per Install (CPI)
As the name suggests, this pricing model requires the advertiser to pay only when the action results in an install.
4. Affiliate marketing
With affiliate marketing in mobile apps, app publishers can earn commission fees when their users download a promoted app or take a specific action, such as making a purchase or subscribing to a service, after clicking on a link placed inside their own app. The links are usually provided by the affiliate network or program, which serves as an intermediary between the app publisher and the advertiser.
To participate in an affiliate marketing program, the app publisher needs to sign up with an affiliate network or program that matches them with advertisers offering relevant products or services. Once approved, the app publisher can start promoting the advertiser’s products or services within their app by placing links or ads that lead to the advertiser’s landing page or app store page.
When a user clicks on one of these links and takes the desired action, such as downloading the promoted app, the app publisher earns a commission fee based on a pre-agreed upon rate set by the advertiser. The commission fee can vary depending on the advertiser, the type of product or service being promoted, and the action taken by the user.
Here are some of the biggest affiliate app offers
5. Subscription fee
A subscription-based model for mobile apps is a popular revenue model used by many developers. In this model, users pay a regular monthly fee to access the app and its features. This model is widely used by apps that provide ongoing services, such as news or magazine apps, fitness apps, or productivity apps.
With a subscription-based model, mobile app developers can offer users a free trial period or a limited version of the app to encourage them to subscribe. Once a user subscribes, they can access all of the app’s features for as long as they continue to pay the subscription fee.
The subscription fee can be charged on a monthly, quarterly, or annual basis, depending on the app’s pricing strategy. The pricing strategy can also be tiered, with different subscription levels offering different levels of access or features.
One advantage of a subscription-based model is that it provides a predictable and recurring source of revenue for app developers. This can be especially valuable for apps that provide ongoing services or content, as it ensures a steady stream of income to support the development and maintenance of the app.
However, there are some challenges of the app subscription model:
- You need to continuously be providing new features and content. Since users are paying a monthly, recurring fee, they’ll expect more than they would for a one-off app payment. When asking users to pay a fixed fee for access to an app, you are obligated to continuously provide new content and/or features for the user.
- Onboarding / Free Trial Period is Vital and May Require Tweaking. Users need to be properly onboarded to understand the true value of an app (and why they should continue paying for access to the app each month). Attention really needs to be given to making sure your users can get up and running without too many roadblocks.
- Subscription apps need great support. Since users are paying a monthly, recurring fee, they’ll expect more than they would for a one-off app payment. When asking users to pay a fixed fee for access to an app, you are obligated to continuously provide new content and/or features for the user.
- If transitioning to a subscription model, be prepared for potential backlash. Launching an app with a subscription-based revenue model is one thing but transitioning from a one-time fee to a monthly charge can result in some serious backlash from existing users.
6. Product licenses
Subscription-based streaming services like Netflix or Spotify buy licensed content (such as film or music) from other companies. On the other hand, Shazam – the audio recognition technology – is often licensed to other companies to increase its revenue stream. Naturally, you can also license your proprietary technology to other monetization digital products that work with data, features, and APIs.
Engaging in an advertising relationship with a single advertiser can be a way for mobile app developers to monetize their apps while maintaining a high-quality user experience. By working closely with a single advertiser, app developers can ensure that the ads displayed in their app are relevant, non-intrusive, and complementary to the app’s content.
When selecting ads for their app, developers should consider the ad format, targeting, and relevance to their users. For instance, ads for health and wellness products may be fitting for a fitness app, while ads for toys or games may be appropriate for a children’s app.
Furthermore, developers should be mindful of ad placement and frequency within their app. Over-displaying ads or placing them in inconvenient locations can detract from the user experience and have a negative impact.
Crowdfunding platforms such as IndieGogo, Kickstarter, and GoFundMe can be a great option for app developers looking to generate side revenue. However, relying on them as a primary income source may not be the best strategy.
Types of crowdfunding:
- Peer-to-peer lending. The crowd lends money to a company with the understanding that the money will be repaid with interest. It is very similar to traditional borrowing from a bank, except that you borrow from lots of investors.
- Equity crowdfunding.Sale of a stake in a business to a number of investors in return for investment. The idea is similar to how common stock is bought or sold on a stock exchange, or to a venture capital.
- Rewards-based crowdfunding. Individuals donate to a project or business with expectations of receiving in return a non-financial reward, such as goods or services, at a later stage in exchange of their contribution.
- Donation-based crowdfunding. Individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return.
- Profit-sharing / revenue-sharing. Businesses can share future profits or revenues with the crowd in return for funding now.
- Debt-securities crowdfunding. Individuals invest in a debt security issued by the company, such as a bond.
- Hybrid models. Offer businesses the opportunity to combine elements of more than one crowdfunding type.
While crowdfunding can provide a boost in funding and help generate early adopters, it is important to remember that success on these platforms is not guaranteed. Campaigns require significant effort to promote and may still fail to reach their funding goal.
Instead, app developers should consider crowdfunding as part of a broader revenue strategy that includes other monetization channels such as in-app advertising or subscription-based models.
Monetizing Your Mobile App: A Comprehensive Guide for App Developers
This section will explore the implementation of the most popular mobile app monetization models on the example of the iOS operating system.
To effectively monetize a paid app, setting the right price is crucial. The first step is to select a base country or region for pricing. Apple uses this base to provide comparable prices on the other 174 storefronts.
Then select a price for your base country or region. You can choose from up to 800 price points by default. You can also submit a request to access an additional 100 higher price points.
Once you’ve done it, the next step is to determine the purchase method that best suits your app’s service and target audience.
If your app enables people to purchase physical goods or services that will be consumed outside of the app, you must use purchase methods other than in-app purchase to collect those payments, such as Apple Pay or traditional credit card entry.
There are two ways it can be proceeded.
- Client-server payment. Typically, the client will provide payment details, such as credit card information or bank account details, to the server, which then securely processes the payment and verifies the transaction. Once the payment is approved, the server will notify the client of the successful transaction, and any goods or services purchased will be delivered to the client.
- Server-server payment. This payment refers to a type of payment processing system in which one server initiates a payment to another server in order to complete a transaction. This type of payment system is commonly used in business-to-business (B2B) transactions, where one company or server needs to pay another company or server for goods or services.
How does the API perform mass payments?
- You replenish the technical bank account opened for the project, for the amount of payments.
- Form the register of recipients of payments according to the template, which specifies the details of the recipients and the amount of payments..
- After successful loading of the registry, in case there are errors in the filled format, you have the opportunity to correct them, which will be signaled by a list of lines in which there are discrepancies with the standard format.
- After the start of payments, which is initiated by the company, LiqPay online processes payments to the details of the recipients in accordance with the registry.
- The status of payments and the possibility of re-holding is available in the business account.
Additionally, there are apps known as “readers” that enable users to access previously purchased content or content subscriptions (specifically: magazines, newspapers, books, audio, music, and video). Reader apps may offer account creation for free tiers, and account management functionality for existing customers. Reader app developers may apply for the External Link Account Entitlement to provide an informational link in their app to a web site the developer owns or maintains responsibility for in order to create or manage an account.
The Dos and Don’ts of Ad Restrictions
Developers who want to display advertisements in their iOS apps must adhere to a strict set of guidelines set by Apple. These guidelines are designed to protect users from inappropriate or misleading content, as well as ensure that their data is being used responsibly and with their consent.
- Use only approved ad networks: Apple requires that all third-party ad networks used in iOS apps be approved by the company.
- Ad content must be appropriate: Advertisements displayed in your app must comply with Apple’s guidelines for appropriate content.
- Advertisements must be clearly labeled: Apple requires that advertisements displayed in your app be clearly labeled as such.
- No deceptive ads: Advertisements in your app must not deceive users or misrepresent products or services.
- User consent: Users must give their consent for the collection and use of their data for advertising purposes.
- Appropriate ad placement: Advertisements must be placed in a way that does not interfere with the user experience or make it difficult to use the app.
Implementing in-app purchases
In-app purchases (IAPs) can be created manually in App Store Connect or using the App Store Connect API. To implement IAPs in your iOS app, you’ll need to follow a series of steps:
- Set up the app in the App Store Connect dashboard:
Set up your app in the App Store Connect dashboard and create one or more product identifiers for the items you want to sell.
- Request product information from the App Store:
Use the SKProductsRequest class to request product information from the App Store for the product identifiers you created in step 1.
- Display the products and allow the user to make a purchase.
Once you receive the product information, display the products to the user in your app and allow them to select the items they want to purchase.
- Handle purchase transactions and deliver the content.
Once the user completes a purchase, the SKPaymentQueue class will receive a transaction object that contains information about the purchase. You can use this information to deliver the content to the user and update the app’s UI accordingly.
- Handle restoring purchases.
In cases where a user deletes and reinstalls an app or installs it on a new device, there may be a need to restore their previous purchases.
- Test the IAP implementation.
You can use Apple’s sandbox environment to simulate purchases without actually charging real money.
View payments and proceeds
There are also some requirements of payments you should follow:
- Have a Paid Applications Agreement in effect.
- Provide banking information in App Store Connect. Payments are sent to the primary bank account on file at the time a payment is processed. Payments to multiple or split bank accounts aren’t supported.
- Exceed the minimum monthly payment threshold for each country or region in which you sell content.
- Complete any monthly invoicing requirements you’re subject to based on your country or region.
- If you meet those requirements, payments are made to the bank account and the currency you provided within 45 days of the last day of the fiscal month in which the transaction was completed.
Marketing in-app purchases
The objective of marketing in-app purchases is to generate revenue for app developers while improving the user experience by giving access to premium content or advanced features.
There are a bunch of marketing strategies and tactics to promote and persuade users to buy items within a mobile app.
- App bundles make it easy for customers to buy up to 10 of your apps or games in a single purchase. You can create app bundles for paid apps or free apps that offer an auto-renewable subscription to access all apps in the bundle. Learn how to set up app bundles and effectively market them on your product page.
- Promo codes give press and influencers early access to your app or your app’s in-app purchases. You can give away up to 100 promo codes per version of your app, per platform — and up to 100 promo codes per in-app purchase.
- Offer codes can help you acquire, retain, and win back subscribers by providing a subscription at a discount or for free for a limited time.
- With iOS, users can browse in-app purchases directly on the App Store and start a purchase even before downloading your app. Promoted in-app purchases appear on your product page, can display in search results, and may be featured on the Today, Games, and Apps tabs. Learn how to effectively increase discoverability for content previously only found inside your app.
- You can grow and retain your user base by giving them a free or discounted price for a specific duration for an auto-renewable subscription.
- In-app events are timely events within apps and games — such as game competitions, movie premieres, live streamed experiences, and more. People can discover your in-app events right on the App Store on iOS and iPadOS, giving you an entirely new way to showcase your events and expand their reach — whether you’d like to reach new users, keep your current users informed, or reconnect with previous users.
- Apps that offer auto-renewable subscriptions and non-consumable in-app purchases can enable Family Sharing, which will allow users to share their purchase with up to five additional family members. You can choose which of your in-app purchases to allow Family Sharing for in App Store Connect.
Implementing the ideal monetizing strategy for your app is contingent on several factors such as your target audience, app category, and business objectives. By thoughtfully considering these elements and experimenting with various monetization models, you can identify the most effective method to generate revenue while ensuring an exceptional user experience. The TRIARE team comprises skilled professionals with vast experience to offer their clients smart solutions to optimize their services via mobile app development.