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What will decide about financial success of your app?
7 Monetization Models for Your App

Jan 09, 2015 by Petr Kudlacek | Post a Comment

First steps

Which monetization model of apps to choose? I think this question comes to your mind when you start thinking of your app development. Before choosing such a model you need to clearly understand the nature of your app I mean what is the kind and target audience of your app. For example, game or entertainment app users are less likely to get irritated by ads and in-app purchase notifications than those on an education or productivity app, which may demand continuous concentration. Take a look at the 7 most popular app monetization models you can use.

 

first steps

1. Paid apps

The paid app monetization model is the classic and proven monetization method; it just means your app is not free to download. If people want to use your app they must first purchase it from the app store. The key to success with this model is in your ability to demonstrate the value of your app. So the most profitable paid apps do a great job of selling their app’s unique features, whether it is design or functionality or brand.

 

Pros and Cons:

  • This model is very straightforward, the revenue is proportional to the downloads;
  • People who have paid for an app are more likely to turn into engaged users ;
  • In this model, the app does not usually have any in-app advertising;
  • Some users may be reluctant to buy apps, mainly on Android;
  • With paid apps, you are less likely to reach a lot of users.

 

2. In-App Advertising

This is a model you’ve probably seen constantly in the apps on your smartphone. In this monetization model, your goal is to gather a considerable user base and gather information on the people interacting with your app. Then, this data gets sorted and sold to app publishers who pay you to place targeted ads in your app.

 

Pros and Cons:

    • Mobile advertising companies mostly pay by the click;
    • Allows you to gain users quickly because people love free apps;
    • It’s hard to estimate income from ads;
    • Ads must be well-targeted;
    • Not an innovative model and people can get annoyed of ads and choose another app;
    • This model won’t work for special apps that are designed to help users perform important functions (ads will be too unnatural and annoying when people simply want to do something quickly).

 

3. Freemium apps

This model trades is based on Apple’s in-app purchase or Google’s in-app billing, which can be implemented in paid or free apps. People have access to an app’s basic functionality, but certain features in these apps are locked and cost money to be unlocked. The goal is to collect and attract app users until they are ready to pay for additional in-app tools.

 

freemium app

 

Pros and Cons:

    • In-app content must be worth the price;
    • People who “try before they buy” are more likely to become engaged and loyal users later on;
    • Purchase process must be simple and fast (as few clicks as possible);
    • Experience must be limited but not damaged otherwise the user may end up being frustrated;
    • If you offer too many features for free, it will be difficult/complex to convince your existing user base to pay for an upgrade.

 

4. In-App Purchases

This app monetization strategy involves selling physical or virtual goods within your app to retain the profits. One way to utilize this model is to sell virtual goods such as extra lives or in-game currency. This model can help you to make comfortable profits with the lowest amount of risk, plus, buying virtual goods can lead to deeper levels of engagement (growing monetization strategy).

 

Pros and Cons:

  • This model works for retail or services apps;
  • You provide goods with clearly-defined value;
  • In-app purchases can help app marketers make comfortable profits with the lowest amount of risk;
  • App stores usually take a cut of the revenue for virtual goods (but not physical goods or services) purchased inside an app.

 

5. Sponsorships

The idea of this model is very similar to ad-supported, but instead of going with an ad network, you sell your own sponsorships and have more control over ad topic, kind, size, placement and frequency. This will work well for apps based on a hobby or special interest. A related approach would be to have one company sponsor for the entire app so their branding is displayed when the app launches, targeted ads for each section and a video ad before playing any video content.

 

sponsorships

 

Pros and Cons:

  • Business model particularly suited for games;
  • Well-targeted audience, thus ads seem less invasive than purely random ones;
  • More users reached, thus potentially more income;
  • Innovative app business model which can be adapted for many verticals;
  • This advertising strategy will likely be better received by app users because it is relevant and related to an app’s purpose;
  • This app monetization model has not been as thoroughly tried and tested as the other ones.

 

6. Subscriptions

This model is similar to the freemium model except that it focuses on locking content, not features. Paywalls allow an app user to view a predetermined amount of content for free and then encourages them to sign up for a paid subscription to get more. This model is best suited for service focused apps and allows brands to earn revenue on a regular basis.

 

subscriptions

 

Pros and Cons:

  • This model results in a continual revenue;
  • Subscribers are more likely to be loyal and engaged app users;
  • Subscriptions and content locking also motivate app developers and app marketers to guarantee they create high-quality content that is worth paying for;
  • It doesn’t easily translate to all verticals (mostly suitable for news, lifestyle, and entertainment apps since they can limit such content as articles or videos).

 

7. Blended Model

As the apps become more complicated, there is expected a trend towards blended models. For example, you can start with a “free, but with ads” model and then offer users a paid upgrade to an ad-free version, which is a “freemium” approach.

 

Conclusion

As you see, there are many ways that you can monetize your mobile app, both before and after its launch. You just have to be ready to put some time and effort into perfecting the ideas, and into the content that will eventually maintain it. Choosing the right monetization model for your app is actually one of the crucial things that will decide about future financial success of the app, so do not underestimate it.

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