App monetization in 2021 – Guide with 10 strategies
If you are developing an app, turning it economically viable is the stepping stone of your long business journey. App monetization is how a user base can be leveraged into a way for developers to earn money from the app. There are several app monetization methods. While analyzing the possible ways to employ, you need to figure out the best one which suits your app idea. With the right planning, processes, and innovation, you will be able to develop a robust app. And, can make it successful by implementing the right monetization strategy.
This guide is for anyone who wants to generate revenue from their mobile app. Now, let’s dig deeper into app monetization and discuss the potential impact on app growth and engagement.
How to identify the best business model for your app?
Mobile applications offer numerous monetization opportunities. As a developer, you definitely want your app to provide a sustainable source of revenue. But, figuring out a clear and effective app monetization strategy is critical. Research shows that only 2% of all app developers claim 54% of all app revenues. And, being a part of these
2% of these people are not so easy. There are dozens of business model options. But, you need to have a clear insight to identify which business model would best suit your app. Here are some questions you need to answer before bringing your app idea into reality:
1) What is the purpose of your app? What problem are you trying to address through this app?
2) In what way is your app unique?
3) Who is your target audience?
4) Why do people fall in love with it and spend money on subscriptions?
5) Which business models do your competitors implement and which ones have been successful?
If you have clear answers to these questions, you can proceed to choose a business model well suited for your app and put it into action before you launch it in the app store. To earn sustainable revenue, you may use one particular model or a hybrid model by combining some of them as you see suitable! And, you can always come up with alteration and up-gradation plans for your app monetization as time passes. Ultimately, to get new users as well as convert them into valuable customers you require an awesome app and an effective business model.
Different App Monetization Strategies:
The entire mobile app market is flourishing day by day. But to leverage this growth, it’s important to stay up-to-date with the latest trends. Here are some significant strategies to monetize your app as depicted by recent trends:
1. Freemium Apps (Locked features):
It’s difficult to convince someone to purchase an app they haven’t had a chance to try first. It’s no wonder, then, the freemium model became a popular way to monetize your app. The name itself is a combination of the words “free” and “premium”, which clearly says how it works. Here, users can download the app free, which includes only the basic features. Soon, after using the free version, they can choose to purchase a subscription to get the most robust version and unlock additional features. Examples of apps with a freemium business model are Dropbox and Spotify.
A. The total revenue of Dropbox was $1.914 Billion in 2021, an increase of 15% year over year.
B. And, in the last presented year, Spotify’s annual revenue totaled over € 7.88 Billion.
Keep in mind, the vast majority of your users will enjoy the free version. But, they are helping you to expand and get an expansive user base by recommending it to their friends. Then, if they are happy with your basic features, they might be willing to pay for the premium version to enhance their experience.
2. Paid Apps (Pay To Download):
Pay to download app business model simply means a user has to commit to paying the utilization of the app-provided technology before any kind of trial. While it seems like a great way to make money, the fact is, not everyone wants to download a paid app. So, your app must be unique in some way that differentiates it from similar free apps. They also should demonstrate value to customers. Surely, a particular section of users will always be there to pay for it.
Though paid apps use to get fewer reviews than other monetization models, they also enjoy a more extended life span and are used on a more regular basis. Because, the people who have already paid, want to be more benefited out of these. With this model, developers can achieve higher revenue with every new download. They can invest the revenue to provide a hassle-free user experience. And, as a result, the app becomes more popular day by day.
Minecraft and Calendar5 are two apps that capitalize on this strategy.
A. Launched in 2009, Minecraft achieved $415 million while its mobile revenue accounted for $110 million in 2020.
B. Calendars 5 by Readdle, also earned a lucrative revenue to date.
3. In-App Purchases:
Some apps can be used to the fullest by paying for additional features and functionality within the app. These so-called free apps with hidden costs are known as in-app purchases or commonly IAPs. IAPs are part of a “freemium” model, where the app itself is free but the developers can ask for a premium to allow the customers to purchase products or unlock bonus levels or subscribe to the digital contents available within the app. This facility to upsell without using other marketing mediums, allows the developers to make massive profits. Famous gaming apps like Pokemon Go and Candy Crush Saga are two notable examples.
A. In 2020 alone, Candy Crush Saga brought in more than $720 million.
B. According to Guinness World Records, Pokémon GO revenue was the highest ever of any mobile game in its first month, at $207 Million. And, its lifetime revenue surpasses $4 Billion till now.
By providing a beautiful in-app experience to the users, IAP also helps to strengthen a user’s trust in a specific brand. So, nowadays, in-app purchases are truly unputdownable to the creators for monetizing mobile applications or content.
4. Subscriptions or Paywalls App monetization:
The subscription model is one of the most widely used app monetization models. This model is ideal for apps that deliver content and encourages frequent usage. Here, users can download the app, consume content with it, but the amount of free content is predetermined. Later, they need to sign up for a paid subscription to access more. Subscription may be charged once to a somewhat extended package or monthly/yearly to get infinite access for the period. Generally, the longer you subscribe, the less you’ll pay.
Charging the right amount and delivering value to the users made this model popular as time passed. Also, it retains app users for a long period and allows the app developers to make reliable revenue on a recurrent basis. Medium.com is a notable example of paywalled content monetization.
And, some well-known examples of subscription-based app monetization are Headspace and Hubspot.
A. With having more than 2 million paying subscribers, Headspace’s yearly revenue is almost $100 million.
B. And, for Hubspot – total revenue amounted to almost $674.9 million which is up 32% compared to the previous year.
5. Sponsorship and Partnerships (Incentivised Advertising):
Another innovative way to monetize your mobile apps is to use sponsorships and partnerships. You may consider it when the app is very popular in a certain niche market. A partner with a similar customer base can have a dramatic effect on your users and your brand. In this model, brands generate revenue from sponsorships. You can set up a collaboration with sponsors who are interested in reaching your audience. A sponsor in your app can be presented with an icon or logo that is visible to your app users. It helps to draw in a large amount of popularity to them. This model works exceptionally well with event apps.
And, you can also put ads on your mobile app to monetize it. It works by selling data-driven advertising space in your app through partnering with advertisers. But, you should implement it in a strategic way and without deteriorating user experience. It’s worth mentioning that the advertisement model is extremely effective to strengthen your brand outreach. Two great examples that utilize this model are:
6. Email Lists:
One of the most engaging and excellent business models comes in the form of Email Lists. Research shows that the number of active email users is expected to reach 4.3 billion by 2023. Moreover, people hardly change their email addresses and they also check their inboxes regularly. So, Considering an email strategy, a tie-in with your app will be an effective way to increase customer retention. You can add an email subscription to your app and easily collect customer’s email IDs.
You can promote your app by sending regular emails. It will help to make people aware of it and encourage them to buy more from your app. This strategy can be an exceptionally action-oriented, customizable, and sustainable revenue source for mobile apps when utilized right.
7. E-Commerce Model:
Another famous way out of app monetization is the E-Commerce model. It simply means your app is a marketplace through which you sell physical goods. In this technical era, mobile apps are primed to be the go-to place for marketing. And, a lot of brands are turning to this model due to higher profit margins. If you’re hoping to flinch as much revenue as possible from your mobile app, the e-Commerce model is your destination. Here, you can maximize user engagement by creating a push notification strategy and making them more likely to buy from your business. For example, let’s look at Etsy and Shopify. Last year,
A. Etsy generated revenue of almost $4.97 billion US dollars.
B. Shopify has well over 2 million active users and has contributed $319 billion in global economic activity.
8. SMS Marketing:
SMS marketing is a method by which organizations can send app updates, reminders, alerts and promotional campaigns to a global audience within a short time. With this model, app developers can send messages(permission-based) to make better engagement with highly targeted customers. This monetization strategy has become a reliable source due to its fast speed, cost-effectiveness, higher open rates than email, ability to generate more sales by increasing brand awareness, and so on. Marketers may consider this method an old school, but these facilities made it essential in present times also. It works very well for e-commerce apps, travel apps, etc.
9. White Labelling:
One of the lucrative app monetization models is “White Labeling”. With white label licensing, you can sell a unique and fully supported product or service to another company, under their brand identity. This strategy is currently used for pulling quick and easy revenue from apps without disrupting user experience by implementing some other monetization models. It will also bring in a good return by reselling your mobile application’s top-notch code that has received positive user feedback. Companies can use the code as a basis to build their applications on it. It will help them save cost, time, and energy for the new solution development and deployment. Nowadays, this mutually beneficial practice has taken on particular significance and turned out to be the optimal solution.
A. GameZBoost and
B. BiznessApps are examples of apps that have successfully incorporated white labeling models.
10. Data Licensing:
If your app has a wide range of daily and active customer bases, you should start gathering their behavioral data. It helps identify the useful data and what aspects need to get improved to provide a better user experience. Furthermore, you can consider licensing your data to other businesses like advertisers and analytics companies to earn additional revenues.
This marketing method is an effective way to strengthen your business goal. It enables you to provide an app for free to users and you can monetize your app through data licensing. And, app developers can significantly step up their monetization game with this method. Some of the best examples of this monetization strategy are Foursquare City Guide and Waze.
A. Foursquare reported more than $100 million in revenue last year.
B. In November 2020, Waze’s latest funding round was an investment fund for $110M to an estimated 130 million monthly users.
More About App Development, App Monetization, MVP Development:
- The number of mobile apps in the market has skyrocketed in recent years. Research shows that 90% of mobile users’ time is spent on apps. So, a mobile presence through an app is an important part of any business. The marketplace is crowded with a wide range of apps. You can start building your app for your future customers’ clear and definite requirements. And, the cost of app development varies upon the app category.
- Another extremely effective methodology for a successful app – is developing a minimum viable product or MVP. It allows you to get user feedback with the simplest version of your app. With the feedback received from the early adopters, you can gain an understanding of your customer’s interests and can see whether it catches their attention or not. Then, you can make the desired changes in the final version of the app and keep up with competitors. Moreover, it saves your time and money as you do not need to spend all of the money right away. It’s assuring your product will stand out in the market and likely to be massively successful. So, building an MVP is indispensable nowadays to accelerate the growth of your app in the long run.
- Launching an app is just one part of creating a successful app. It will not be worth it until an effective monetization strategy is implemented. Fortunately, the opportunities are endless when it comes to mobile app monetization. As a developer, you need to generate cash after every download over a more extended time. And, you must think about monetization when you start developing the app. You can not figure it out later on as it is an integral part of the user experience. It’s needed to keep your app engaging and monetized at the same time. Take the time to familiarise yourself with the above monetization models. And choose one or a combination of several monetization mechanisms that are necessary for your needs.
In a nutshell, there is no ‘single rule’ to monetize your app successfully. It comes down to trial and error. Often the case is, merging the above methods will yield the best outcomes. You need a certain monetization strategy that its development should always begin with. And, to accomplish remarkable success in the mobile marketplace, you should implement it as per the purpose of your app.
App monetization strategy is an amazing opportunity to cultivate loyalty, expand your brand and make connections with customers which will open new additional revenue streams. And, the future is even brighter than you can think of!