For app developers, staying afloat can be a challenge without access to large amounts of external funding.
With competition so fierce, app developers and publishers need to stay informed on the latest mobile app monetization methods to ensure they stay afloat.
What Is Mobile App Monetization?
Mobile app monetization is the process of generating revenue from a mobile app without applying a download fee.
With the increase in free mobile apps across the digital ecosystem, users are increasingly reluctant to pay for any application, be it for gaming or news.
As such, app developers have had to look at different app monetization strategies. There are multiple monetization methods that leverage a user base to generate revenue from a mobile app, including in-app advertising, in-app purchases, the freemium model, and more.
However, knowing which monetization methods will be most effective depends on several factors.
Why Mobile App Monetization Is Important?
The exponential increase in free apps available via app stores over the last 15 years has made mobile app monetization an essential consideration for app owners worldwide.
While 77% of apps in the iOS App Store were paid apps in 2009, only 10% currently require payment at download. This is slightly higher in the Google Play store with paid apps accounting for around 31% of mobile apps.
This shift to free apps has meant app developers have had to revolutionize the way they generate app revenue.
To ensure an app continues to grow its revenue while maintaining a stellar user experience, app developers can adopt one of the following app monetization models. Alternatively, they can implement a hybrid app monetization approach, combining two or more methods to generate revenue.
12 Best Mobile App Monetization Strategies In 2023
1. In-app Advertising Can Boost Revenue
When the growth of mobile sales took off in 2008, following the launch of the Apple App Store, digital advertising as a monetization method was already well established across the internet.
App developers quickly pivoted to adopt app banner ads, leading to ads having to be adjusted for the smaller real estate of mobile devices.
Since then, banner ads have evolved to include several options specifically for the mobile environment, including interstitial ads, video ads, native ads, and text ads.
This app revenue model is one of the most popular app monetization strategies, and it shows no sign of slowing down, with predictions showing ad revenues obtained from in-app ads will almost triple by 2025, reaching $226 billion.
Advantages of In-app Advertising:
1. Drives Bigger Results
Many people associate in-app advertising with banner ads on a website. Though they are similar, their approach is different. Moreover, in-app advs perform better than banner ads.
2. More Targeted Audience
With in-app advertisements, your viewer chooses to download the app if you advertise relevant apps with a specific targeting audience, making your marketing more effective. They’re shown the apps that interest them.
Disadvantages of In-app Advertising:
1. Low Engagement
Although the audience is a captive one, the number of clicks can be low. With an average of a 0.1% click-through rate (CTR) on banners, these ads are probably not going to get a great deal of engagement.
2. Competitor's Promotions
Your competitors might end up appearing in the in-app ad so a user watching might end up clicking on the link and installing the app.
2. Use Interstitial Ads to Grow eCPM
With increasingly sophisticated analytics available to developers, app publishers now have unparalleled insight into user behavior. These insights have meant app developers have begun to pivot away from standard in-app ads such as banner ads in order to combat banner blindness and mitigate user disinterest.
One of the most effective in-app ad alternatives are interstitial ads. Unlike banner ads, which have size restrictions and are persistent and intrusive, interstitial ads are ads that cover the entire mobile screen and occur at natural transition points within the user flow.
This mobile app monetization strategy works most effectively when best practice is followed, with ads implemented at the end of a flow, for example in a gaming app, they should appear at the end of a level.
Interstitial ads are showing massive eCPM growth, with a 34% increase between 2020 and 2021 on US Android devices alone.
Advantages of Interstitial Ads:
1. Powerful User Engagement
The level of viewability that interstitial app ads get cannot be matched by banner ads. A full-screen ad is effective, and it is almost impossible to ignore it. This results in more prominent user engagement.
2. High CTR and CPM Rates
A user cannot miss interstitial ads due to their full coverage. Therefore, the chances of user engagement with the ad are high. This is why advertisers are ready to pay more for these ads. High CTR means more conversions and, therefore, more revenue for the publishers.
Disadvantages of Interstitials Ads:
1. Penalties for Improper Implementation
Publishers need to keep in mind the interstitial ad’s implementation. It must be done very carefully, considering all of Google’s guidelines and recommendations, otherwise publishers risk Google penalty or negative ranking.
2. Delay Loading Time
There might be the chance that the webpage takes a long time to load owing to interstitial ads, leaving the user feeling irritated at the delay. As such, both the ad and website need to load quickly.
3. Use Native Ads to Improve CTR
Native ads are an increasingly successful ad format within the app monetization model. Native ads are designed to integrate seamlessly into their host app, appearing as another post in the feed, and are best suited to news sites and social media.
When implemented correctly, these ads create minimal disruption to the user experience. They have also been shown to have one of the highest engagement rates, with one eMarketer study (PDF download) from 2018 suggesting the click-through rate (CTR) on native ads to be 8.8 times that of regular display ads.
Advantages Of Native Ads:
1. Drive Better Campaign Performance
Native ads perform better overall when compared with many other ad formats, helping advertisers to drive conversions and revenue.
2. Build Trust Among Your Customers
Customers find it difficult to trust brands initially; this is where native ads play a vital role. They help brands build trust among their audiences and share valuable content without any pop-ups or intrusive messages.
Disadvantages of Native Ads:
Complex Performance Measurement
Since native ads have a unique format, there is conjecture within the industry about which stats and metrics should be used to measure their success. Therefore, publishers need to ensure they have the right tools and all examining relevant data. Determining the right mix of native ad metrics will depend on your campaign goals and user behaviors.
Customer Targeting Seems Intricate
Since native ads help brands reach their most suitable audiences, publishers may need to rethink their strategy for customer targeting. For launching hyper-targeted campaigns, advertisers need to pull more customer data, build unique audience segments, and make sure that their content is personalized to each demographic’s interests and behaviors.
4. Freemium Subscriptions Can Drive Conversions
Falling under the broader umbrella of subscription apps, “freemium” is a mobile app monetization model with several advantages.
After users download a free app they are then offered in-app purchases that give them exclusive access to premium features, additional content, or digital goods.
Spotify is perhaps one of the best examples when it comes to the freemium app subscription model. Spotify, a music app that was developed in Sweden in 2006 was started as an alternative to the pay-per-song model of iTunes and the illegal pirating of downloaded music that was proliferating at the time.
Spotify offers many of its premium app features to its free users, however for a monthly subscription fee, users are able to unlock premium features, including an ad-free version.
Spotify is undoubtedly the king of the freemium app model when it comes to conversion. While most freemium apps see average conversion rates of 2-5%, research shows that Spotify converts 24% of users who start with the free version into paying subscribers.
But why is it so successful and how can other developers leverage this app business model to generate app revenue for themselves?
By constantly experimenting, A/B testing, and focusing on their users, Spotify has been able to create a “dynamically changing user-interface, behavioral prediction algorithms, and an ever-expanding catalog of music”.
Advantages of Freemium Subscriptions:
1. The Freemium Model Is Scalable
One of the greatest advantages of this monetization method is that it allows a new venture to scale up and attract a user base without the costly overheads of traditional marketing and sales campaigns.
2. Try Before They Buy
Freemium subscriptions give users the ability to try out your app before they commit to paying for it.
3. Wider User Base
Freemium subscriptions can help you generate revenue from users who would not otherwise be willing to pay for your app.
Disadvantages of Freemium Subscriptions:
1. Limited Interest in Upsell
There is a potential for decreased revenue if users do not upgrade to the paid app.
2. Affects User Experience
There is also the potential for users to become frustrated with the app if they feel like they are constantly being bombarded with ads or upsells.
3. Requires Careful Implementation
Freemium subscriptions can sometimes be confusing for users, which can lead to them unsubscribing or simply not using the app.
5. Use Premium Subscriptions to Deliver Stable Revenue
Premium mobile apps are paid apps that run via subscription models, however, they require users to sign up for a fixed fee immediately upon download.
This means revenue is directly tied to the number of downloads. Paid apps have been shown to have higher user engagement and customer acquisition.
Advantages of Premium Subscriptions:
1. Reliable Income Stream
App subscriptions offer a reliable and predictable revenue stream for app developers.
2. Increase Development Opportunities
Premium subscriptions can help to fund the development and ongoing maintenance of an app.
3. Ensures Longevity
Premium subscriptions can help to ensure that an app remains accessible and useful for its users over time.
Disadvantages Of Premium Subscriptions:
Premium subscriptions can be inflexible, meaning that users may not be able to take advantage of special offers or discounts.
Premium subscriptions can be expensive for users, especially if they don't use the app often, leading to a decline in user numbers.
3. Can Alienate Users
Users may struggle to identify value prior to using the app consistently, which can create a sense of unease. Moreover, some premium subscriptions can be difficult to cancel, which can lead to users feeling trapped or stuck.
6. Use In-App Purchases to Create Repeat Customers
In-app purchases is another monetization method that is gaining momentum in the digital ecosystem, particularly in the gaming arena. Offering in-app purchases is a great choice for gaming apps, for several reasons.
In-app purchases allow users to use real money to purchase features or items while playing a mobile game.
Depending on the game type, this can be anything from free lives, to extra coins, to the ability to unlock hidden or previously unachievable levels.
While the option of in-app purchase can be introduced at any point in the game, the smart way to monetize your app in this way is to analyze user behavior and strategically offer in-app purchases at points throughout the gaming app where users need help.
The process of setting up payment for in-app purchases is also extremely simple. When a user signs up to the Google Play store of the iOS App Store, they have the option to add a credit card to cover any in-app purchases and other app-related costs.
When a user decides to procure an in-app purchase, it is simply charged to their credit card, with app stores taking a commission (usually 30% unless you are a mobile app that is successful enough to be able to negotiate a different commission schedule).
That being said, in-app purchases are not a one size fits all proposition. There are four main categories of in-app purchases available to app developers, each with its own unique features and techniques. It is important for app publishers looking to use this monetization strategy to understand the different types of in-app purchases and which is most appropriate for their specific type of mobile games.
Types of In-app Purchases
The most common type of in-app purchases in mobile games, consumables refer to items such as in-game currency, bonus health, or power-ups.
As the name suggests, once these in app-purchases have been used they disappear, but can be purchased again at any time. While most games offer a certain amount of these consumables for free, consumables are a great option for users who don’t like the hassle of waiting to gain these items and are happy to pay to save time.
Unlike consumables, when users buy non-consumable in-app purchases they have permanent access to them. Examples here include unlocking hidden levels, bonus characters or cosmetic items.
3. Auto-Renewing Subscriptions
In-app subscriptions refer to regular payments users make to access premium content (somewhat akin to the freemium model mentioned above).
In mobile gaming, subscriptions can be set up to last for varying periods of time and to unlock everything from exclusive gameplay items to premium versions of the game.
4. Non-Renewing Subscriptions
Non-renewing subscriptions act in the same way as renewable subscriptions, except that mobile users must manually renew their subscriptions.
Advantages of In-app Purchases:
In-app purchases are convenient for users as they can make purchases without having to leave the app.
In-app purchases allow developers to offer a wide range of content and features for users to purchase, providing a flexible monetization strategy.
In-app purchases have become a major source of revenue for gaming and non-gaming apps alike. Indeed, one survey found that developers found in-app purchases to be the second most effective monetization strategy, behind only rewarded videos.
Disadvantages of In-app Purchases:
1. May Alienate Users
Users may feel like they are being "nickel and dimed" if they are constantly being asked to make purchases. Moreover, if the developer is not careful with the types of purchases on offer, the game may be dismissed as a “pay-to-win” app.
2. May Damage the Brand
There is always the risk that users will make an in-app purchase and then be disappointed with the product, which can lead to negative reviews and decreased downloads.
7. Affiliate Marketing Offers Flexibility
Many major technology companies, including Google, Apple, and Microsoft have affiliate programs open to app developers.
These affiliate programs involve promoting other mobile apps within your app. While the commissions offered in this app monetization strategy are generally not high, app developers do have the choice of which apps they wish to promote, which can encourage users to associate their app with similar brands.
Advantages of Affiliate Marketing:
1. Cheap for the User
Affiliate marketing can be used to generate revenue from an app without having to charge for downloads or in-app purchases.
2. Build Brand Relationships
Affiliate marketing can be used to promote and sell products or services within an app.
Disadvantages of Affiliate Marketing:
1. High Competition
Affiliate marketing can be quite competitive, as companies vie for affiliates who can promote their app effectively.
2. Risks Brand Trust
Affiliate marketing can be risky, as affiliates may promote an app in a way that does not reflect the app's quality or user experience.
3. Time Consuming
Affiliate marketing can be time-consuming, as affiliates need to be constantly recruited and managed.
8. SMS Marketing Can Improve Customer Retention
While SMS marketing may be considered a little old school in 2022, when written with style, smarts, and a touch of humor, it can be an effective way to reach out to your users and offer them discounts on in-app purchases or premium subscriptions.
It is essential to ensure that the people you are reaching out to have explicitly consented to your use of their data. Think carefully about the length of the message and time you are sending it—nobody wants to read a novel about your app at dinner time.
Advantages of SMS Marketing:
1. Easy to Implement
SMS marketing is easy to implement. Data can be collected via in-app prompts and messages can be sent via mobile marketing automation.
2. Effective in Retaining Users
A recent study showed that reaching out to users who haven’t recently engaged with an app via SMS can return a click-through rate (CTR) of up to 36%.
Disadvantages of SMS Marketing:
SMS marketing can be intrusive and disruptive, especially if people are not expecting it.
2. Reduced User Data
It can be difficult to track the effectiveness of SMS marketing campaigns, since people may delete messages without reading them.
3. Doesn’t Suit All Brands
SMS marketing may not be well-suited for all brands or products, especially if the target audience is not likely to be responsive to text messages.
9. Use Email Marketing to Increase Engagement
While email marketing may not seem like a logical fit for mobile app advertising, email marketing can be an effective way to engage existing downloaders and turn them into paying users.
With social media channels flooded with users, 75% of millennials now use email to communicate with businesses.
Again, it is essential that your email list has given explicit consent to use their data, and app developers should think carefully about how they will use this channel as an app monetization strategy.
If you can’t easily spell out the how, why, and when of your email marketing campaign, you probably need to go back to the drawing board.
Advantages of Email Marketing:
1. Emails Speed Up the Buying Process
Studies show that email marketing is up to 40 times more effective than social media marketing, with the buying process being three times faster than via social channels.
2. Easily implemented
Email marketing is relatively easy, and cheap, to implement. A simple in-app subscription gives access to user email addresses, which can then be used to send a variety of marketing emails.
Disadvantages of Email Marketing:
3. May Devalue the Brand
Email marketing can be considered spammy if implemented incorrectly.
4. May Be Less Effective Than Other Strategies
Email marketing can be less effective than other forms of app monetization, such as in-app purchases or advertising.
10. Sponsorship Ads Can Leverage Large Audiences
Another overlooked, but highly beneficial, app monetization model that is available to publishers is a sponsorship arrangement. If your mobile app has a large user base with high user engagement, this model may be ideal.
Essentially it involves finding a single company to become your app’s investor/sponsor, giving them exclusive access to advertising to your user base.
This can be done through your sponsor covering a more significant portion of the app’s interface with its logo, via a splash screen that is visible to your app users, or via push notifications.
When considering sponsorship as a way to monetize apps, developers should think deeply about their user base, and which products and services would be the best fit for their brand to further user acquisition.
Advantages of Sponsorship Ads:
1. Audience Targeting
Sponsorship ads can be targeted to a specific audience, which can result in higher conversion rates.
2. Brand Loyalty
Sponsorship ads can create a sense of brand loyalty among users.
3. Cross-Promotion Opportunities
Sponsorship ads can be used to cross-promote other products or services, which can result in increased user acquisition and revenue.
Disadvantages of Sponsorship Ads:
4. Difficult to Find Sponsors
Not only do developers need to find a sponsor willing to partner up on this strategy, it needs to be a brand that has a similar user base—otherwise this strategy can fall flat.
5. Can Be Intrusive to User Experience
As with all in-app ad campaigns, choosing appropriate ad formats and implementing them via best practice is essential to ensure they don't negatively impact the user experience.
11. Use Licensing for More Predictable Revenue Streams
If your application sits in one of the app categories that by its very nature collects user-generated data (think geo-locations), you may want to consider licensing this data as a monetization model.
Again, it is imperative that any data you collect and license has been explicitly signed off on by the users involved.
Licensing can be a great route of app monetization, as it allows the users to access the app for free, while the app is paid for by the licensing.
An example of this app revenue method can be seen with the highly successful traffic and navigation app Waze, which licenses its community-driven data collection to businesses wanting to place location-based ads.
Advantages of Licensing:
It can provide a reliable and predictable stream of revenue.
2. Data Control
It can help to ensure that data is used in a way that is consistent with the company's brand and values.
Disadvantages of Licensing:
Licensing data can be expensive for app developers, especially if they are small or independent developers.
Licensing data can be time-consuming for app developers to find and negotiate with data providers.
3. Limits Other App Monetization Methods
Licensing data can limit the ways in which app developers can use and monetize their data.
12. Crowdfunding Can Raise Capital and Build Communities
Particularly in the early stages of a free app’s development, crowdfunding can be an effective way to inject funds into a venture.
Crowdfunding platforms such as Kickstarter, IndieGogo, GoFundMe, and Patreon can offer app developers another opportunity for app monetization.
Many successful apps started out this way with the language app Fluent Forever raising more than $500,000 on Kickstarter from 4,000 platform users in 2019.
Advantages of Crowdfunding:
1. Provides Access to a Large Audience
Crowdfunding allows developers to tap into a larger audience of potential app users and supporters than you might be able to reach on your own.
2. Injection of Funds
Crowdfunding can provide a quick infusion of cash to help you get your app development project off the ground.
3. Community Building
Crowdfunding can create a built-in community of users and supporters who can provide valuable feedback and help promote your app.
Disadvantages of Crowdfunding:
It’s a Competitive Marketplace
With a bunch of apps competing for funders’ attention, having a strong brand voice and the resources to get this voice heard through the surrounding “digital noise” is essential. Without a clear vision, it may be difficult to get the crowdfunding ball rolling.
3 Best Practices for Mobile App Monetization
No matter which popular app monetization strategy a developer decides to employ, it is essential that app monetization does not override the importance of the user experience.
There are two ways to ensure an app monetization strategy is effective. The first is to ensure that the user experience is protected. For example, if in-app ads are part of the strategy, the correct ad format—be it video ads or interstitials—should be chosen to ensure minimal disruption to the app’s user flow. Ad revenue is great, but not at the expense of paying users.
Further to this, developers should consider the following when looking at revenue building for their mobile apps.
1. Invest in User Acquisition
In order to continue to scale monetization, developers should be constantly investing in user acquisition. As there will always be user churn, new users are an integral part of any mobile app's ability to not just survive, but thrive, in the current market.
2. Hybrid Monetization
Implementing several app monetization models can be extremely effective, with 1 in 4 developers stating that hybrid monetization is the best way to maximize ROI.
3. Analytics and Data
One of the most effective ways to optimize an app’s revenue-generating abilities is through analytics. If a developer partners with an app monetization platform, they should ensure they are receiving robust insights including revenue, user behavior, and geography. This data can then be put to good use- or sold to marketers for an ongoing income stream.
What Monetization Model is Best for Your App?
As with everything in digital marketing, there are several things to consider when deciding which of the different app monetization strategies an app owner should use for their app. Often app developers will decide to employ several of the above approaches to generate app revenue.
However, with advertisers pouring more than $600 billion into digital advertising in 2022, in-app advertising is undoubtedly still one of the most effective, and profitable app monetization models.
When looking to adopt an app monetization method, an app developer should consider the following:
What Does the App Do?
First things first. App owners should consider exactly what their app’s function and purpose is—what problem does it solve and how does it solve it?
When it comes to growing app revenue, not all apps are created equal. Whereas subscription models work well for news and entertainment apps, gaming apps are more suited to in-app advertising.
Who Is the Competition?
As with all product development, competitor research is an essential part of understanding where an app sits in the marketplace.
By researching apps in a similar vertical, developers can get an understanding of which monetization strategies are going to work best.
Who Is the Target Audience?
Finally, app publishers need to know their target audience. Who are they? What do they want? And most importantly, what are they willing to pay for?
By establishing the above, developers can work to create a strategy, or range of strategies to ensure ongoing success.
How Do I Monetize My Mobile App?
There are several ways publishers and developers can monetize their apps. The most popular and successful of these are mobile advertising, in-app purchases, and data monetization.
What Are The Best Mobile Ad Networks in 2023?
The five best ad networks for monetizing with in-app purchases for gaming and non-gaming apps in 2023 are as follows:
- Facebook/Instagram Ads
According to the same index, the top 5 ad networks for apps monetizing with in-app ads were:
- Facebook Ads
- Google Ads
- Unity Ads
How Much Money Can an App Make?
The amount of money an app will make depends on several factors, including the user base, the ad network, and the chosen revenue model. In many cases, a successful app can earn up to thousands of dollars per month.
How Do I Choose a Monetization Strategy for My Mobile App?
There is no one hard or fast rule for how to choose the best app monetization strategy for your app.
While the in-app purchases model may work well for a gaming app, for example, in-app ads will be a more effective way to monetize your app if you are offering news content.
The user experience is also a crucial part of the decision-making process. Will the app monetization strategy suit your target audience and how they interact with your app?
Android apps and iOS apps may also require different strategies to suit the platform and audience.
There are many different things to consider when approaching the issue of monetizing an app.
A few questions to ask yourself when getting started include:
- What is unique about your app?
- Would you be willing to pay for your app, and if so, what would you feel was a reasonable price?
- What is your current business priority? To increase app downloads or gain revenue?
At Publift, our ad technology is smart, strategic, yet simple to implement for maximum return on your advertising investment. We monetize apps via a range of ad formats explicitly optimized for our clients’ needs.
If you’re making more than $2,000 in monthly ad revenue, contact us today to learn more about how Publift can help increase your ad revenue and best optimize the ad space available on your website or app.