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Popular Free App Monetization Methods
App publishers see fruit in investing time and energy in adopting the best possible strategy to monetize their apps. According to the Sensor Tower report, global consumer spending in mobile apps reached a record $111 billion in 2020. This figure represents 30.2 percent year-over-year growth from 2019 when app stores generated $85.2 billion. App developers have seen the importance of strategizing the right monetization strategy, depending on the kind of app he/she owns.
What is App monetization and why do we need it?
App monetization is the process of converting your app users into revenue. As mentioned above, this is an incredibly important way for app developers to generate revenue, apart from funding. This makes it incredibly essential to understand it, given the amount of time users spend on mobile apps every day. According to the 2017 U.S. Mobile App Report, Smartphone apps far exceed media consumption when compared against all other forms used by 50%.
Developers must shift their revenue model, to generate cash after download. This is where app monetization strategies come in. It's crucial to take the time to make one that ensures that:
- The app generates growing revenue.
- Users and the user experience are kept relatively intact.
Many forget about the gravity of the second point. It's just as important to look at how mobile monetization affects the app experience as much as it is to maximize revenue.
Different methods to monetize a free app
Free apps have an added leverage to garner more users from the very start. But it should be kept in mind that having a free app would involve strategizing the right monetization methods accordingly. Quality cannot be compromised by users, just because the app is free!
In case yours is a free app, here are some in-app monetization methods you may want to consider instead of the less popular paid app approach.
- In-app purchases:
While having a free app, in-app funding is integral for the app developer. In-app purchases can be of both kinds: consumables and non-consumables.
- Consumables (pay every time): A consumable in-app purchase is a temporary or limited service that is made every time the user downloads it, such as a one-time service. An example is in-game currency.
- Non-consumables (one-time payment): These in-app purchases need to be purchased only once by users. Unlike one-time services, the service does not expire or decrease with use, such as new race tracks for a game app or paying to unlock a new game level.
The important thing to keep in mind is that the app should be functional without the additional purchases; with the add-on services only enhancing the user experience.
- In-app subscriptions/ Freemium model:
The perk of this business model is its free trial service feature. The idea for the company is to offer you a slimmed-down version of their app for free, to get the user hooked to the game or the app. In order to get access to the rest of their services, the user will have to pay a certain amount.
The crucial part of inculcating this business model would be to strike the right balance between what's included in the free and premium versions. The goal is to tune users to upgrade the subscription, not to turn them off altogether.
There exists a huge difference between in-app purchases and in-app subscriptions. In-app purchases are typically items, events, or content that perform as a bonus or reward. They do not constrain the user from experiencing the app. In-app subscriptions, on the other hand, offer users a very basic, slimmed-down version of the app.
At this point, the question of inculcating which model would be more ideal for your app. According to Reuters Digital News Report from 2018, Depending on where your app is based, you could reasonably have about 20% of the population willing to pay for access to your content behind the in-app subscription.
If the app is a free app, a subscription service can be implemented in order to monetize your mobile app. This enables the developer to offer a different experience to paying users.
Another advantage of the subscription-based model is that it is easy to predict as there is a constant stream of revenue. In some cases, it can bring in revenues higher than from other strategies.
Subscription models are increasingly becoming popular by the day, for the sole reason that App developers have realized that a subscribing, engaged user is worth more than a single paid user. Netflix and Spotify are a few popular platforms that have adopted the monthly pay model.
An excellent way to secure additional funding is by collaborating with potential app developers or businesses. Also known as Influencer marketing, sponsorships and partnerships are an effective means of app monetization.
Businesses now notice the scope of mobile marketing and hence, are looking for opportunities. It's a win-win scenario for both parties as the app could be the perfect marketing opportunity for them, while secure funding goes a long way for the app developer. For example, if you have a cooking-learning app for vegetarians, you can work with partners that share those values --- giving users a valuable recommendation while generating brand awareness.
One way to approach investors by offering them free marketing within your product. If you have a large user base or have built an audience in a particular niche, brands may be interested in using your mobile app to connect with their target audiences.
- In-app advertising
It is the #1 source of revenue for app developers. Users understand that ads are a necessary source of revenue for app developers since the latter provide them with high-quality content- for free. What should be taken care of is showing users ads that may possibly interest them which consequently, will make money. One must be careful so as to how to integrate these into your app. By displaying the right kinds of ads (those that are valuable and relevant), you can earn good money, just as much as irrelevant ad content will result in a poor ROI. If ad content is completely irrelevant, you'll have a poor ROI from them, and waste screen space for the ads.
Here are some of the most popular types of ads you can use to monetize a mobile app:
- Banner ads:
These continue to be highly effective in terms of helping publishers make money. Despite being on the lower end of eCPMs, banner ads have endured as the second-highest revenue-generating format across all regions Its ubiquitousness and extremely high impression rates make it a reliably strong monetizing format.
- Interstitial ads:
These are well-designed ads (after fully understanding your app users and how they use the apps), which although take up the entire page, comes with an easy-to-find "X" button that allows people to exit shortly after it appears. Interstitials appear in between pages, stories, articles, levels, and so on. They can be of display or video format, and simply ask users to watch the screen for a few seconds (usually).
Interstitials are potential solutions to counter the interference of banner ads with user activity. Since these ads occur between separate user flows, the name interstitial.
- Native ads:
Native ads are those which are integrated seamlessly into the app. The ads match the overall feel of the app by taking a post template on the timeline. The trick is to make the native ad look and feel 'native' while providing a clear indication to the user at the same time that the content they land on is an advert. As you look closer, you'll see the "Promoted by" and "Shop Now" CTA, which indicates this is a sponsored native ad.
- Affiliate Ads:
These are ads that allow people to generate commission from other apps, products, and services by advertising them through your app. This method proves useful in converting when users trust the source.
- Rewarded video ads:
App rewards ads are popular as users spend a lot of time in the app, especially in the gaming category. In this scenario, users are offered a reward to engage with content. For this app monetization strategy to work, the content must be kept relevant to your user base.
Pay-to-Download Apps or Paid Apps
In the early days when mobile app stores were launched, the majority of mobile apps were paid and that was the only monetization model. Just setting a price and collecting the money after your app store of choice is the oldest and most straightforward app monetization strategy. Back in 2008, there wasn't a sophisticated structure yet that could monetize apps through advertisements or in-app purchases. Paid apps were in the majority during the early days of the iOS App Store. Now, user expectations have shifted.
With the paid apps model, app publishers get paid for each time their app was downloaded separately or as a part of the aforementioned App Bundle.
As of 2018, according to Statista, the average price for iOS paid apps was $4.37 and $4.86 for Android paid apps. Today there are still several app categories for which the Paid Apps model is more successful than others. These are Utilities, Productivity, Photo & Video, Navigation. The paid model is the basis for the iOS App Store App Bundle concept that allows iOS app users to purchase and download a number of related apps from the same app developer at once.