Mobile app monetization

4 Mobile App Monetization Methods You Should Know

Coming up with a ground-breaking concept for your app is just the beginning. You also need to get your head around the different mobile app monetization methods.

In other words: how will you make money from your app?

The method you choose to monetise will vary depending on the nature of your app, your industry, and, to a certain extent, luck.

However, the overwhelming majority of apps will be monetised using one (or a combination of) these four methods below.

We’ve broken them down to help you decide which one is best for your app.

Paid Downloads

Renew subscription pop-up iOS

If you want to make life as easy as possible, consider monetising with a paid download approach.

This cuts out all the hassle of (1) implementing advertisements and (2) developing features that only unlock after the user has made a purchase.

How it works

Each time a user downloads your app, they pay an upfront fee and you get paid.

Simple.

Both the App Store and the Google Play Store take a 30% share, meaning you take a 70¢ cut from each dollar revenue you generate.

The more you charge, the more you earn from each download.

Best of all, you know the exact monetary value of each user. This shouldn’t be underestimated when it comes to setting your promotion budget.

Any disadvatages?

The biggest obstacle you face with this method is the competition from thousands of other “free” apps.

For this reason, many developers create a free version and a premium “upgraded” version of their app.

The idea is that you win the user over on the free version, and they’ll purchase the premium version to access extra functions at a later date.

Secondly, when a user has to open a wallet to download your app, expectations rise. Regardless of whether your app costs 50p or £10, glitches are no longer tolerated.

Finally, there is also an unwritten rule that the user won’t encounter endless advertisements or in-app purchase requests.

You can still add extra monetisation methods, but you will meet more resistance.

How do I implement this method?

This is one of the easiest monetization methods to implement.

All App Stores will ask you to complete a pricing field when you submit your app for the first time. Simply set your price in this pricing field when you submit for publishing. Easy!

In-App Purchases

Mobile app monetization method: iOS in-app purchase screen

Concerned the price tag attached to your app will put users off?

Consider making it free to download and monetize instead by encouraging users to make purchases as they use your app. This is known as In-App purchases.

How it works

In-app purchases can take many forms: an extra workout in a fitness app, a one-time cheat for a mobile game, or a premium feature in a productivity app.

As with paid downloads, you pocket 70% of the revenue you generate, with Google and Apple taking the rest.

The important thing to remember is that your app should be functional without the additional purchase; with the add-on enhancing the user experience.

candy crush saga app
Candy Crush make $1 million every day with in-app purchases

A great example of in-app purchases in action is Candy Crush Saga.

Around 80% of its fanatical following get deep into the game without ever making a purchase. However, those that do, generate almost 1 million dollars in revenue every single day!

Any disadvatages?

In-app purchases can be a risk.

Even if users love your app, some will never, ever purchase anything.

In fact, it’s been estimated that no more than 20% of users will ever buy upgrades, and this number can be as low as 1%! When you monetise this way, revenue can fluctuate hugely.

Remember though: even if less users pay for your upgrades, this is offset by the fact that your free app will attract considerably more users.

How do I implement this method?

You’ll have to embed the “unlockable” content into the design of your app, and manage the details through the App Store.

For a more thorough explanation of what this entails, this is a good guide.

In-App Advertisements

mobile app monetization method: advertisements

If you want a tried and tested method of monetization, advertisements might be the one for you.

This is the method favoured by new developers, who perhaps don’t have the experience to implement in-app purchases but still want to generate revenue from their app.

How it works

With prices low and CTRs small, only certain types of apps suit the in-app advertising model.

Generally an app that has loyal returning customers tend to go for the advertising option. Categories like news, games and reference are a good fit.

The Flappy Bird app
Flappy Bird’s banner ads were seen by millions every day

This is how Flappy Bird became so lucrative.

Each game was notoriously short and there was a competitive element encouraging ongoing play.

Flappy Bird added a banner ad on every game-over screen, meaning their advertisements were displayed tens of millions of times each day.

Genius.

Incentivised Advertisements

In addition, many game developers have caught on to the power of incentivised advertisements.

Chris Chedgey of App Business Podcast gives his thoughts on the topic:

I love virtual currency combined with incentivized video — coins for hints, content, gameplays, power ups etc. It gives the users who don’t want to spend money in games — like me — an alternative.

By making video advertisements optional and offering clear incentives for users who watch them (for exmaple, receiving extra game credit), you’ll bypass the majority of user objections.

Get the value of your reward right and the majority of users will recognise the benefit of watching video adverts.

Your views will sky-rocket and so will your advertising revenues.

Any disadvantages?

This approach is somewhat intrusive and can diminish the user experience.

Think about it: how many times do you get frustrated by adverts disturbing your favorite tv show? An app is no different.

Having said this, if you don’t go overboard and look for natural points to display the ads, this can be avoided.

For example, a 30 second video ad before each game is far too imposing, but small banner ads are generally inoffensive.

Finally, as mentioned above, prices are small and CTRs low, so you really have to have a huge audience. Advertising doesn’t work if you’re not reaching thousands of daily active users.

How do I implement this method?

There are many ready-made solutions if you’re looking to add advertising to your apps.

Head over to RevMob for one of the better options.

Revmob promise the highest eCPM in the industry by promoting the biggest apps with the biggest reputations, and you’ll get paid each time a user clicks one of your ads and downloads the app.

Google’s in-house solution, AdMob, is another great option. It has the added benefit of mediating ads from multiple sources to maximise your revenue.

At Mobiloud, our customers get to use MoPub or Google DFP out of the box. They have maximum flexibility in placing banner ads and interstitials from their own inventory or ad networks such as AdMob, iAd or Vungle.

Native Advertising

The Buzzfeed app

Last but not least,  we have the new kid on the block: native advertising.

This is going to be big – so listen up!

How it works

A native advert differs from a traditional advert.

Native advertising is integrated into the overall look and feel of your app.

In other words, the ads aren’t there to distract users, but to enhance the experience. This means they’re far more user-friendly.

Consider a football game, where, after completing a certain level, you unlock a Manchester United shirt. The advertisement is hiding in plain sight, but it doesn’t detract from the user experience (unless you’re an avid Liverpool fan). For many, it makes the game better.

In the real world, BuzzFeed were one of the pioneers of native advertising.

Alongside their many quirky stories from around the web, their feed included one or two sponsored listings. Users were barely able to tell the difference because the content was of an equally high standard.

Everyone was happy: users got good content, advertisers got clicks and developers got paid.

With traditional ads all but ignored by users, this new approach to implementing advertising in a natural, functional manner has significantly increased CTRs-earning developers more money.

How do I implement this method?

Google, Twitter and current leader, Facebook (with their excellent Audience Network) are battling it out in a race to be king of the native ads.

Whilst they’re getting to grips with the platform, get in touch with InMobi and MoPub-the two leaders in the native advertising world.

Mobiloud already integrates MoPub’s native advertising solution.

MoPub native ad solution

MoPub, being a mobile ad server, gives our customers the option of selling their own inventory or using any native advertising network.

MoPub’s native ads give you the ability to work with direct advertisers, promote your own features and apps, and drive more revenue from over ninety-five demand partners on the MoPub Marketplace.

Want to find out more about Native Advertising? We go into more detail in this post.

Wrapping Up

While the vast majority of apps will be monetised using one of these four methods, unfortunately there’s no way to know which one will work best for your app.

To figure this out, you’re going to have to do some good old-fashioned testing.

Our recommendation would be to try each solution out for size before you commit to one method.

Good luck!

Looking for ways to market your app? Check out this post next.

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Pietro Saccomani

Pietro is the founder of MobiLoud, where he helps site owners grow their audience on mobile with their own mobile apps.