The 7 best ways to monetize mobile apps
Konstantin D
???? IT Lead Product manager | B2B | B2C | Digital | Mobile and Web Apps | R&D |
Article 20/34 about #productmanagement with a focus on Hard skills
Mobile apps have become an integral part of our lives, they serve various purposes ranging from entertainment to productivity. However, creating an app requires time, effort, and resources. To make this endeavor profitable, app developers need to think of effective monetization strategies. In this article, we will look at ways to monetize mobile apps and discuss the key factors to consider when using each method.
1. In-App Advertising
In-app advertising is one of the most popular monetization methods. The app remains free for users, and the owners earn money from displaying ads. This method is suitable for apps with a wide audience and a high level of user interaction. However, it is important not to overload the app with ads so as not to degrade the user experience.
Example: The duolingo app
Duolingo is one of the most popular language learning apps that uses a monetization model through in-app advertising. This free app offers users the opportunity to learn different languages through interactive lessons, games and tests.
How the monetization through advertising model works:
Free to use: Users can download and use Duolingo for free. This attracts a large number of users, which increases the volume of audience viewing ads. Ads: The app shows advertisements on a regular basis. These can be banners, video ads or inter-page ads that appear between lessons or after completing exercises. Rewards for viewing ads: Users can receive bonuses, such as doubling experience points or other in-game benefits, for viewing video ads.
Benefits of the model:
Accessibility: The app remains free for users, which contributes to its massive popularity and wide audience. Ad revenue: Duolingo earns money from the ads that are shown to users, providing a steady source of income. Additional perks: Users who actively interact with ads receive additional benefits, which increases engagement.
Usage Examples:
Video ads: After completing a lesson, users can watch a short promotional video to get double experience points. Banner ads: Banners advertising other apps or services can be seen in the app interface. Inter-page ads: Ads can appear between transitions from one exercise to another.
Additional features:
Duolingo Plus: For users who want to get rid of ads, Duolingo offers a paid Duolingo Plus subscription. This subscription not only removes ads, but also provides additional features such as the ability to download lessons for offline use. Results: Through its monetization model through advertising, Duolingo has been able to maintain its free foundation, attract millions of users worldwide, and create a sustainable source of revenue. This has allowed the app to continue to grow and offer new languages and features to learn.
2. Freemium
The freemium model assumes that the basic version of the app is available for free, but users must pay to access additional features or content. This model works well if the free version of the app is valuable enough for users, but the additional features make it even more useful.
Pros and cons
Like other technologies, Freemium is not perfect. Its strengths include the ability to quickly gather a large number of users, and most of the users will continue to work with the functionality of the program, not just download it. Having evaluated the capabilities of the free version, they will definitely want to buy the full functionality.
There is only one disadvantage — the need for a competent distribution of functions. If their wide set is available without payment — few people will agree to buy more, too small a base will encourage people to leave the game.
Example: Spotify
Spotify is one of the most popular music streaming apps in the world, using a freemium monetization model. The app gives users access to an extensive library of music, podcasts and playlists.
How the freemium model works:
Benefits of the model:
User Attraction: The free version helps in attracting a large number of users who can try the app without any financial commitment. Motivation to subscribe: The limitations of the free version and the added benefits of the premium version encourage users to upgrade to a paid subscription. Stable income: Subscribing to the premium version provides a stable and predictable source of income.
Usage Examples:
Limited functionality: In the free version, users cannot select specific tracks to play, only playlists or albums in shuffle mode. Ads: The free version regularly plays audio and video ads. Benefits of the premium version: Premium users can download music for offline listening, listen to tracks in high quality, and use the app without ads.
Additional features:
Results: Through the freemium model, Spotify has managed to reach hundreds of millions of users worldwide. As of 2023, Spotify had more than 200 million premium subscribers and nearly 500 million active users. This has enabled the company to take a leading position in the streaming services market and generate steady revenue growth.
3. In-App Purchases
This method allows users to purchase digital goods directly in the app. These can be additional features, game currencies, levels or content. It is important that the free version of the app is functional and that the purchases enhance the user experience.
Example: Clash of Clans game
Clash of Clans is a popular mobile strategy game developed by Supercell. The game allows users to build their villages, train armies and fight other players. Clash of Clans uses a monetization model through In-App Purchases (IAP).
How the In-App Purchases model works:
Free Play: Users can download and play Clash of Clans for free. This attracts a large number of players and creates a wide user base. In-Game Purchases: Players can buy virtual goods such as gems, which are used to speed up construction, troop training and other gameplay. Gems can also be obtained for completing quests and achieving objectives, but their quantity is limited.
Benefits of the model:
User Attraction: The free-to-play basis of the game attracts many players, which creates a large active user base. Additional revenue: In-app purchases provide significant revenue, as players looking to progress faster in the game are willing to spend money on virtual goods. Flexibility: Players can choose whether or not to spend money, making the game accessible to everyone regardless of their financial means.
Usage Examples:
Gems: A basic virtual commodity in Clash of Clans. Players can use gems to speed up the construction of buildings, train troops, and research new technologies. Special Offers: The game regularly features special offers, such as discounts on gems or rare item packs, to encourage users to purchase. Cosmetic Items: While Clash of Clans focuses mainly on gems, some in-game updates include cosmetic items such as hero skins that can be purchased with real money.
Additional features:
Events and promotions: The developers regularly run in-game events and promotions, offering players unique opportunities and additional incentives to make purchases. Clans and Socialization: The ability to join clans and interact with other players provides additional motivation to develop and purchase virtual goods.
Results: Thanks to the monetization model through in-game purchases, Clash of Clans has been able to achieve tremendous success and become one of the most profitable mobile games in the world. As of 2021, the game has generated billions of dollars in revenue for Supercell and continues to be popular with players around the world
4. Subscriptions
The subscription model allows users to access premium content or features for a regular fee. Users can try the app for free, but a subscription is required to continue using paid features. This model provides a stable and predictable revenue stream.
Example: Netflix
Netflix is a leading streaming service that offers an extensive library of movies, series, documentaries, and original content. The app uses a subscription model to monetize by giving users access to its content for a monthly fee.
How the Subscriptions model works:
Subscription service: Users can choose from several subscription plans that vary in price and include different levels of access to content and video quality. Regular Payments: Subscriptions require recurring monthly payments, which provides a steady and predictable revenue stream for the company. Trial periods: Netflix often offers free trial periods for new users, allowing them to evaluate the quality of the service before subscribing.
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Benefits of the model:
Predictable revenue: The subscription model provides a stable and regular revenue stream, which helps in long-term planning and development of the service. User attraction: Trial periods and different subscription levels allow you to attract a wide range of users with different financial capabilities. User loyalty: Regular content updates and exclusive materials help to retain users and increase their loyalty.
Usage Examples:
Different subscription plans: Netflix offers several subscription plans: Basic, Standard and Premium, which differ in the number of supported devices and video quality (SD, HD, Ultra HD). Trial Period: New users can take advantage of a free trial period of 30 days to evaluate the quality of content and service before signing up for a paid subscription. Original Content: Netflix actively invests in original movies and series like “Stranger Things” and “The Crown,” which attracts and retains subscribers.
Additional features:
Multi-platform: Subscribers can use Netflix on a variety of devices including smartphones, tablets, smart TVs and computers. Custom Profiles: The ability to create multiple profiles within a single subscription allows each family member to have personalized recommendations and playlists. Offline access: Subscribers can download content for offline viewing, which is especially convenient for traveling. Results: Netflix has become one of the largest and most successful streaming services in the world because of its subscription model. As of 2023, Netflix had more than 230 million subscribers worldwide. Constant updates to its content library and investments in original shows and movies have contributed to the steady growth of the company’s user base and revenue.
5. Electronic commerce (eCommerce)
The eCommerce model involves creating an app through which physical goods can be sold. This model does not charge a commission for the sale of digital goods and is suitable for brands with a wide range of products
Example: AliExpress
Description: AliExpress is an international online retail platform owned by China’s Alibaba Group. The app allows users to buy a wide range of products, including clothing, electronics, accessories, home appliances and more, directly from sellers around the world.
How the eCommerce model works:
The platform for commerce: AliExpress acts as an intermediary between sellers and buyers. Sellers list their products on the platform and buyers can purchase them. Transactions: Buyers can search for products, add them to their cart and make purchases using various payment methods such as credit cards, e-wallets and others. Commissions: AliExpress earns commissions on sales, as well as on additional services such as product promotion and paid advertising.
Benefits of the model:
Wide range of products: Users have access to a huge number of products from different sellers, which increases the probability of finding the right product at an attractive price. Global reach: The app is available to users all over the world, which expands the market for sellers and increases the customer base. Convenience: Users can shop anytime and anywhere using their mobile devices.
Examples of use cases:
Product Categories: AliExpress offers products in various categories such as fashion, electronics, home and garden, health and beauty, toys and hobbies, and more. Reviews & Ratings: Shoppers can leave reviews and ratings for products and sellers, which helps other users make informed choices. Promotions & Discounts: The app regularly offers discounts, coupons and promotions, which encourages users to make purchases.
Additional features:
Order Tracking: Users can track the status of their orders and receive delivery notifications. Secure Payment: AliExpress offers various secure payment methods, including Alipay, which protects users’ data and their financial transactions. Customer Support: The app provides customer support via chat, email and phone to help resolve issues and answer users’ questions.
Results: Thanks to its business model, AliExpress has become one of the largest eCommerce platforms in the world. The platform attracts millions of users and sellers by providing convenience and a wide selection of products at competitive prices. AliExpress continues to expand and improve its services by offering new features and enhancing user experience
6. Data Licensing
If your application collects a large amount of data on user behavior, this data can be sold to third parties such as advertising and analytics companies. This method requires a large number of active users and compliance with data protection laws.
Example: Strava
Description: Strava is a social platform for athletes that allows users to track and analyze their workouts and physical activity. The app uses a monetization model through Data Licensing, giving access to anonymized user data to third parties such as research organizations and companies.
How the Data Licensing model works:
Data collection: Strava collects data on its users’ workouts, including routes, speeds, times, heart rates, and other metrics. Data Anonymization: Data collected by Strava is anonymized and aggregated to protect user privacy. License sales: Strava sells access to this anonymized data to various organizations that use it for research, product development, and marketing strategies.
Benefits of the model:
Additional revenue: Selling data licenses provides an additional source of revenue for Strava beyond subscriptions and premium features. Research support: Data collected by Strava can be used for health, fitness and urban studies. Privacy: Data anonymization helps protect users’ privacy by keeping their personal data safe.
Examples of use:
Urban planning: City planners can use Strava data to analyze popular routes and improve infrastructure for cyclists and runners. Health Research: Medical research institutes can analyze physical activity data to study the impact of exercise on health. Marketing and Product Development: Companies can use data to understand the preferences and behaviors of their target audiences, which helps in the development of new products and marketing strategies. Additional functions:
Social features: Strava allows users to share their workouts, compete with friends, and get support from the community. Data Analysis: The app provides users with detailed analysis of their workouts, helping them improve performance and reach their goals. Support for multiple sports: Strava supports multiple sports including running, cycling, swimming and other activities.
Results: Through the Data Licensing model, Strava has been able to create a sustainable revenue stream that complements their core subscription model. This has allowed the company to continue to develop and improve their app, as well as support research and development in a variety of areas
7. DLS model, downloadable paid content
The model is the ability for a user to purchase add-ons to existing content. The visitor has free access to something, learns information, plays a strong character, etc. Then, to continue using those or other benefits, or to get full access, download something, it is necessary to pay the cost.
Example: OnlyFans
Description: OnlyFans is a platform for content makers that allows users to upload and sell exclusive content to their subscribers. This monetization model is based on Direct-to-Consumer (DLS), where content makers earn from selling downloadable paid content such as photos, videos, and other exclusive content.
How the DLS (downloadable paid content) model works:
Content Creation: Content makers create exclusive content that can be uploaded and is only available to subscribers. Subscription: Users subscribe to content makers by paying a monthly subscription to access their content. Additional sales: In addition to subscriptions, content makers can sell individual photos, videos, or other content for an additional fee. Tipping: Users can also send tips to content makers, supporting their work and encouraging the creation of new content.
Benefits of the model:
Direct revenue: Content makers receive direct revenue from content sales and subscriptions, bypassing middlemen. Exclusivity: The model allows them to create exclusive content that is only available to paid subscribers. Flexibility: Content creators can set their own prices and decide what content will be available for free and what content will be available for a fee.
Examples of Usage:
Photos and videos: Content makers sell photos and videos that can be downloaded for a fee. Exclusive content: Special content such as behind-the-scenes videos, tutorials, or personalized posts are only available to paid subscribers. Chat and Interaction: Some content creators offer paid access to private messages and exclusive chats.
Additional features:
Tier-based subscriptions: OnlyFans allows content makers to offer different subscription levels with different levels of access to content. Live broadcasts: Content makers can host live broadcasts available only to subscribers. Social features: Users can interact with content, leave comments and participate in discussions. Results: OnlyFans has become a popular platform for content makers, offering them the opportunity to earn from exclusive content directly from subscribers. The platform has attracted millions of users and content makers, giving them the flexibility to create and sell content.
Conclusion
Choosing the right monetization strategy depends on the type of app, its target audience, and your overall business plan. Experimenting with different models and their combinations will help you find the best solution for your app and achieve the highest profit.