How to Monetize an App

Update 28 Aug. 2023

If you spend months designing an app, creating a number of iterations, testing them, there’s no doubt you have a question: How to monetize an app?

After all that hard work you’ll want to get a bit of brand recognition, to heighten consumer awareness or to gain the loyalties of new customers. An app is only as successful as the number of users who download and use the application and just how much money the app generates in terms of overall revenue.

Sure, it happens once in a blue moon. Apps like Instagram, Vine, and WhatsApp come along and sell for huge sums of money. But, in the everyday world of app building and development, the average app won’t make billions. It’s just like the industry of publishing, there are thousands of authors, but only a few of them are bestsellers.

You need to be confident in the success of your app, but there is a small possibility that your app will land you in riches. Statistics reveal that around 2% of the app developers claim more than half of the app revenues. You need to be realistic about your vision of success, so let’s see what you can do with app monetization.

Business Model Decisions

There are several app monetization models and below you can see the most effective monetization methods as of March 2017:

First, you need to define what you want to achieve with the app you’ve created. There are some questions to be considered:

  • Can your app solve problems of the user, and if it is so, then how?
  • What features make your app different from all the other apps on the market?
  • Why will users pay for your product? What is its value?
  • Research apps in the same category: What business model they are using to sell and market their apps?

Once you’ve answered the questions above, you can move forward to create your own mobile app monetization model.

Below are some of the major ways to monetize apps you can choose from.

6 App Monetization Strategies

Strategy 1: In-App Ads & Free Mobile Apps

This business model is most attractive for users because they can download your app for free, without paying any penny and you are able to make money by selling data-driven advertising space.

How do in-app ads work in free mobile apps?

  1. You gather information about the users
  2. When you have formed a strong user base, you can sell the collected data to in-app advertising networks
  3. Publishers select your application to place their ads

As a result, users see the small banners or popups with ads. Ads typically appear at the top or bottom of an app. If the user taps the ad, all sorts of possibilities open up from watching a video to redirecting to the advertiser’s website. For social media apps like Tik Tok or Instagram, in-app ads usually are represented by video placements.

Also, there is one more interesting type of ad – notification ads.

Some people are calling them “Trojan horse ads” because they can send you push notifications with the ad even when the app is dormant.

Strategy 2: In-App Purchases

You get the revenue in this strategy by selling virtual or physical goods or services within the app.

It doesn’t matter what you’re selling. It can be clothing, gadgets, accessories or something virtual such as extra lives or in-game currency.

Strategy 3: Apps with Gated Features (Freemium)

This model is a bit like the free apps model.

The app is available for free but some of its features are locked (gated). To unlock these features or get access to premium features, users should pay some money.

Strategy 4: Paid Apps

You can assign a fixed price to every single app download.

Strategy 5: Subscriptions (Paywalls)

This model is similar to the freemium model. Instead of the locked features, it makes money by narrowing content.

Strategy 6: Incentivized Advertising

Incentivized Advertising is a kind of sponsorship. It means you form a partnership with advertisers, who reward your users for completing certain in-app actions.

Takeaway

As the competition between the apps becomes more complicated, you should use a creative approach while building your monetization strategy. You shouldn’t limit your strategy to one model. You can work with blended models. The end lesson here is: be creative and courageous as much, as it possible and you will bound to succeed.