What is App Monetization and How to Monetize?
App monetization is exactly how it sounds: a way to generate money for your app. As of 2020, the increase of free apps is astonishing. Marketers need to work that much harder to gain revenue for these free apps. Additionally, the use of smartphones far exceeds media consumption and the amount of time spent on apps is also remarkable. Looking at the statistics below, one could easily understand the potential of the market and its potential to reach amounts of consumers and make money from them.
Before making the decision whether to have a monetized or not, one must understand the customer’s journey. Based on this train of through the understanding of how potential and future customers will utilize the app, the question to ask one’s self is: does it make sense to monetize the app?
The difference between monetizing and not monetized and that a free app any user can download from the app store without having to pay for any of the apps. Comparatively to a paid app, the app as soon as it is downloaded there is a price. However, this is only the tip of the iceberg when it comes to making money with mobile apps. Free app monetization can be broken down into many categories.
Let’s take a look at these monetization methods.
Strategy 1: Pay-to-Download Apps (Paid apps)
Pay-to-Download means to pay an upfront price to download the app. This is the oldest and most straightforward monetization strategy. Set a price and collect the money as soon as your app store takes its own share.
Only a few years ago, the majority of the apps were monetized apps in the iOS app store. In 2008, there was no sophisticated strategies to monetize apps through advertisements or in-app purchases. But today, in 2020, customer behavior has shifted and so has the market. Only a small percentage of paid apps remain.
Advantages:
- Money is generated as soon as the app is downloaded.
- The exact monetary value for each user is known.
- As soon as a user pays for an app, this signifies that the user is more loyal and is more likely to engage.
- User interaction is less cluttered since it’s free of ads and other monetized content.
Disadvantages:
- Paid apps don’t have a competitive advantage versus free apps.
- App stores and Google Play Store keep a high percentage of the profit.
- There are no other opportunities to make money (except for downloading the app).
- Gaining users might become a difficult task with the pay-to-play barrier.
- Expectations are higher which then results in close monitoring or quality, fraud, and also performances.
Strategy 2: In-App Purchases
In app-purchases in one the top number one source in making revenue within the app industry. “In fact, in-app purchases make up about 47 percent of the total revenue generated from apps worldwide. If you’re planning to create a free app, including an in-app marketplace is one of the best things you can do for your business.” For example, in the games “Clash of Clans”, users would be willing to purchase in-app tokens to further gain a competitive advantage over their opponent.
Advantages
- Having a free app will be attractive to users.
- This option is fairly low risk because the app is limited but gives access to many features.
- It is possible to make a large sum of profit with in-app purchases due to digital upgrades without the need for extra storage or maintenance of physical stock.
- As a user pays for these in-app purchases, the product/service improves, therefore, increasing the loyalty of the user.
- This technique can be used in conjunction with other monetizing strategies.
Cons
- Many users may love your app but will never purchase anything. Hence, revenue fluctuates a lot.
- Just like paid-apps, App stores and Google Play Store may keep a high percentage of the profit.
- Refunds may be asked of you if someone accidentally makes a purchase.
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Strategy 3: In-App Subscriptions
You may not want to monetize your app with pay-to-download apps or in-app purchases but there are other opportunities to charge users in the future: with in-app subscriptions. This strategy is particularly effective for games and is also seen within dating apps.
An in-app purchase monetization strategy is particularly effective for mobile games (extra lives, power-ups, in-game currency), but can also be seen in dating apps (more visible profiles, enhanced options) and other categories. When done right, in-app purchases allow both users and app publishers to win.
In-app purchases have become increasingly popular, as freemium apps are the new standard in app stores. Users like the idea of a free game, for example, with the option to spend more if they find themselves hooked on the gameplay. The numbers show that in-app purchases have been on the rise. The projected revenue for in-app purchases is expected to hit $71 billion in 2020, which is double what it was in 2018.
Advantages
- In-App subscription is perfect for news sites and blogs that have stable readers.
- An easy technique to gain users. Its like “try-before-you-buy”.
- In order to increase profits, it is possible to sell in-app content subscriptions out of the app store. The Premium members will then have a log-in.
- Subscriptions equal persistent revenue; not unpredictable one-off buys.
Disadvantages
- App stores and Google Play Store may keep a high percentage of the profit.
- Content within a premium app needs to be that much more valuable.
- The app needs to be updated constantly and needs relevant content.
- The app needs to have a balance between the free and paid versions. It is important to encourage users to upgrade, however, not turn them off completely.
Strategy 4: In-App Advertising
In-app advertising is a very effective monetization strategy for mobile publishers, in which app developers get paid to display advertisements within their mobile app. Not only does the app drives mobile usage but they also drive global media consumption. It is truly a vital marketing channel for brands, organizations, and agencies.
For users, the app is free to use. All that is asked in return, is to be able to show users ads that could possibly interest them and could lead to making money.
Advantages
- Having a free app will be attractive to users.
- You can use apps to collect data about behavior, location, and user preferences.
- When you show the correct ads, you can make money.
- In-app advertising is an optimal choice for e-commerce, entertainment, news, and gaming apps.
- There are three kinds of ads you can display: third-party, incentivized, and native.
Disadvantages
- If ads intrude on the user’s experience, they are more likely to quit the app entirely.
- If the ad content is irrelevant, the ROI will be poor and will waste screen space for ads.
- Redesigning the app might be necessary in order for the ads to fit.
- Not an optimal professional app, especially if the users need to be focused on the content.
What types of ad formats can be used?
With in-app advertising, there are tons of ways to display ads and to lure in potential customers. Pick a format that will bring you to the most revenue and build strong user experience.
- Classic banner ad: original mobile format with a large reach.
- Medium rectangle: larger banners than a traditional banner.
- Interstitial: Full-screen ads that cover the entire screen of the host app.
- Native Advertising: “Native advertising is the use of paid ads that match the look, feel and function of the media format in which they appear.”
- Interstitial videos: same as interstitial but video format.
- Pre-roll video: “A video advertisement that automatically plays directly before a featured video, on both mobile and desktop.”
- Rewarded video: “ […] are full-screen video ads that users have the option of watching in full in exchange for in-app rewards.”
- Outstream video: “[…] also commonly referred to as ‘in-read’ or ‘native video’, is a new video advertising unit that auto-plays in a large format player whenever a user navigates to it within text content (typically an article), even if the publisher doesn’t have their own video content.”
What Does App Monetization Mean For Marketers?
App monetization is crucial for marketers who want to remain in a competitive field with free mobile apps while also maintaining a healthy ROI. Additionally, another benefit to this technique is an increase in user experience. Marketers can personalize ads to target a segment or users, which results in the delivery of relevant content whilst also re-engage later on. Similarly, the users who have been targeted early on in the process with personalized ads will feel values more and may continue using the app on a long-term basis. Having a free app is definitely not a barrier to gaining revenue; one must simply find an original and monetization strategy to ensure the longevity of the app's success.
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