The Complete Guide to App Monetization

SOOMLA's Complete Guide to App Monetization

So you’ve created an impressive mobile app and, naturally, you want to earn revenue from it. Moreover, you want to maximize the profit after all the time and effort you put into its development, into attracting users, and keeping them engaged, but you don’t know how? This is where app monetization comes into the picture.

What is app monetization?

In short, app monetization is the process of turning your app into a strong source of revenue.

App monetization is critical in this day and age as an average consumer spends a remarkable amount of time using mobile apps. In fact, as comScore’s 2017 U.S. Mobile Report demonstrates, mobile apps were consumed far more than any other media forms and adults across all age groups spent average 2.3 hours every day interacting with mobile apps.
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It is estimated that by mid-2017 there were at least 2.8 million Android apps in the world, and 2.2 million iOS apps, whereas as many as 197 billion mobile app downloads were recorded in 2017 alone. The numbers keep on growing.

According to Statista, 2015 was the year when global app revenues reached $70 billion. In 2016, this number grew to $88 billion. Following this trend, the global revenue from mobile apps is bound to reach $190 billion by 2020.

These numbers are not at all surprising considering how big a role smartphone apps play in our everyday lives, jobs, hobbies, family, food, fitness, and so on.


Which app monetization strategies should you use?

Considering this data, it is of utmost importance that you choose the right app monetization strategy that will allow you to fully profit off your app-creating efforts. So let’s take a look at them.

1. In-app advertising

In-app advertising seems like the most obvious choice as mobile apps have been proven to significantly enhance the communication between advertisers and consumers. If you have a free app, displaying advertisements can be your go-to strategy for earning revenue. The most popular ad formats include native ads, banner ads, and interstitial (full-screen) ads. However, there are more types, like rewards ads, notification ads, playable ads, and so on.

  • Native ads are integrated ads that match the content and design of your app and usually show up in the app’s newsfeed;
  • Banner ads can be found within an app’s layout (at the bottom or top) and remain on the screen while the app is being used;
  • Interstitial ads cover the interface of the app entirely and show up at natural pauses or certain transition points in an app, reminding a bit of a tv commercial;
  • Rewards ads show up when the user acquires an achievement in the app, offering a coupon, gift card, etc.;
  • Notification ads pop up in your device’s status bar, making users more aware of the ad’s presence;
  • Playable ads allow the user to instantly play a part of the game and thus see if he or she likes it.Strengths: In-app advertising provides a great opportunity for collecting meaningful user data. If the apps are free, then advertisements can reach more consumers more easily. Additionally, they are more effective, provided they are relevant and used in the right place at the right time. Ads are also easy-to-implement for most app developers as only the SDK code is necessary for inserting them into the app.Weaknesses: Utility apps do not fare well with this type of monetization strategy, as they are created to perform certain functions (like getting a cab) and advertisements interfere with their use. Add the fact that some ads can be distracting and annoying, and you get a lethal combo for destroying your chances for revenue.Keep in mind: The most important thing to remember is that the ad format for your app shouldn’t affect the user experience. The ads should be non-intrusive and they shouldn’t hinder the app’s usefulness.

    2. In-app purchases

    Rather self-explanatory, this method refers to buying virtual or material goods (like custom stickers, rare collectibles, and more) within an app, with the app acting as a point of sales or a sales medium, keeping all the profit. Especially useful in free apps, in-app purchases represent a great opportunity for people to interact directly with your product. If your business offers services, in-app billing is another awesome feature to explore

    Strengths: Great for retail, services, or gaming apps, providing a high level of engagement and profit possibilities with low risk involved. Opens other possibilities such as partnerships and affiliate programs.

    Weaknesses: Most app stores take a big percentage of your profits for selling virtual goods. Accidental purchases can happen.

    Keep in mind: As with advertisements, be careful that this method doesn’t affect the user experience negatively. The most important thing you want to avoid is accidental in-app purchases, so make sure you have a mechanism for preventing such occurrences. The app also has to entice the users to want more so they could spend more.

    3. Freemium

    The freemium option involves offering your users basic functionality for as long as they like but charge them for unlocking premium or proprietary features such as buying upgrades, virtual goods, and extra content. In short, freemium apps are free to download but their full functionality or ad-free experience costs money.

    Strengths: This method allows mixed revenue from ads and users and opens a gateway to a large user base with long usage sessions. Additionally, the ‘try before you buy’ model is a good sales strategy.

    Weaknesses: Freemium users can be disinclined to actually give money for any additional features.

    Keep in mind: The freemium version of the app should act as a teaser, making your users realize they can’t live without your app (not literally, of course) and making them want to have more (i.e the premium version). Of course, the premium version has to be worth it so your users will leave positive reviews and recommend it to others.

    4. Subscriptions and Paywalls

    A more evolved and modern way of app monetization, subscriptions have increased in popularity with streaming apps such as Netflix, HBO NOW, and Pandora. They allow unlocking content (movies, series) or bypassing some restrictions if users sign up for a subscription, similarly as in the freemium model. To make your subscription services even more enticing, add multiple subscription options to allow your users to opt for the one that suits them best. In addition to having separate options, consider also including one subscription option that combines all the services together into a premium package.

    Strengths: Subscriptions allow a steady flow of income due to their ability to retain users. Additionally, this is a fertile ground for email marketing campaigns as people rarely change their email addresses. This, in turn, allows a greater exposure and customer engagement.

    Weaknesses: Only works in certain niches, like entertainment and news apps.

    Keep in mind: To get users to enter their email addresses in the subscription form, entice them with the prospect of some great benefit for email subscribers, such as unlocking valuable content or promotions, points, or tokens.

    5. Sponsorships and Partnerships

    Securing a partnership with an advertiser or another brand opens up a lot of possibilities to earn revenue for your app. This means turning your app into an ad platform for your partner (discreetly, of course). Advertisers could also offer incentives to users for completing certain in-app actions while allowing the app developer to take a share of the revenue from the redeemed rewards.

    Strengths: This strategy can enlarge your user base and fortify your brand outreach. If your partner incorporates advertisements featuring your app, the users might click that ad to go directly to your app. The method is also suitable for many niches and verticals and benefits end users due to possible bonuses.

    Weaknesses: This method is not fancied by all app stores and it can be difficult to find partners with a suitable customer base.

    Keep in mind: The critical thing here is to find a partner with a similar customer base who can offer something more to your users, or even create an integrated experience.

    6. Data Monetization

    This method refers to gathering useful insights into customer behavior by observing and quantifying the data that large app audiences generate when interacting with your app.

    Strengths: Data monetization offers multiple advantages, including a higher CPM (cost per thousand), monetizing your whole audience, and protecting the user experience.

    Keep in mind: All the data you collect will be valuable outside your own business as well, so a major analytics company may have an eye on purchasing that data from you if your app is widely used.

    7. Combining Different Methods

    Sometimes using just one strategy doesn’t yield the best results your app can get. Combining different monetization strategies could be just the thing. For instance, your app could be freemium with ads that disappear once the user upgrades to a paid, premium version.


    User Acquisition and CPI (Cost Per Install)

    Of course, app monetization isn’t possible if you don’t have users. This is where user acquisition (UA) strategies step in.

    These strategies can be divided into two groups: paid and organic. Paid marketing includes social media advertising, public relations, in-app advertising, email marketing, video ads, paid referrals, and so on. Organic marketing, on the other hand, involves increasing web traffic to your landing page or website through SEO (Search Engine Optimization), App Store search optimization to drive up your in-store rankings, increasing your social media presence through continuous interaction with the users, networking with influencers, getting into charts and top lists, reviews and recommendations, and more.

    Just like with monetization, this isn’t an exact science, as different strategies work with different people. With this in mind, you should try as many of them as possible, mixing them up to see what works and what doesn’t.

    To create an effective acquisition strategy, you need to go back to why you developed your app in the first place. What problems were you trying to solve with your app? Asking this question will help you target the right audience and reach out to them. Knowing your users is also important to have them become your biggest fans and spread the word about your app.

    You should also think about how much money you are willing to spend on user acquisition. This will determine your CPI advertising budget. In a CPI campaign, publishers place digital ads across a range of media in order to get people to install the advertised app. The charges are applied to advertisers only when users actually install the app, which is different from the CPM model where you pay for the advertisement just being viewed.

    A high CPI can help your traffic immensely so if you want a higher CPI (and of course you do), tracing the Ad LTV (Life Time Value) is something you should keep in mind, as a higher LTV means you can afford to pay higher CPI. Soomla can assist you in that with the help of its Traceback Engine, which traces the ad revenue and sends it to your attribution partner or in-house business intelligence (BI). As the only ad revenue attribution platform that detects the lucrative ad “whales” who generate the most ad revenue and have the high LTV required for UA campaigns, Soomla is one of the best monetization assistants for your app.

    Other tools at your disposal for checking how successful your monetization methods are, as well as gathering other important information include Mixpanel, Tamoco, Google’s Universal Analytics, Apple’s app analytics platform, and Apsalar.

    Final Takeaway

    If you use them prudently, these app monetization strategies can bring you the results and revenue that your app deserves. Just remember to always put yourself in your users’ mindset and think from their perspective. What would I like about this app if I was using it for my own purposes? Would this app give me something unique? Would this advertisement ruin my experience with the app? Are these ads even relevant to me as the end user? As with everything, make sure to keep an eye on the newest trends and innovations in the world of app monetization and on tools that will help you stay on top of your game and constantly measure your results.

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