Imagine the following situation: you are trying to choose between two apps. They have more or less the same functions, but one of them is free, and the other one is paid. Which one would you download? We bet you would go for the free application. And that’s exactly what most of your users would do! In case your product is not absolutely unique and special, they are more likely to prefer a free version instead of yours. However, we guess, you are not developing apps only for fun — you also want to earn some money releasing them and go for mobile app monetization. But how to do this while keeping your application free to download? No worries, that’s possible, and we have prepared a detailed guide to help you. So just keep reading to discover how to gain profit with your free app using the best mobile app monetization strategies.

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What is Mobile App Monetization?

Mobile App Monetization is a process of converting users of your app into revenue. Some apps are designed to increase the average order value or the number of purchases by the user.

For example, in mobile game monetization, you can earn in-app purchases that give you extra lives, features you want, or the next level without waiting. You can also place advertising banners or videos in the application. If the mobile app monetization process is built correctly, then it will allow you to monetize even your free app.

Benefits of mobile app monetization

Below are some of the benefits of using an app monetization company:

  • Worldwide Mobile Traffic: You have the opportunity to monetize mobile traffic from all over the world.
  • Increased CLV. App monetization experts can help you increase Customer Lifetime Value (CLV).
  • User Loyalty: When users pay for an app, they are more loyal and engaged due to the upfront investment.
  • Fewer Competition: Many apps are free, so if your app is paid, you will have fewer competitors in your niche.

You may also find it interesting – Calculate LTV

Mobile App Monetization Statistics

  • Mobile apps are expected to generate over $935 billion in revenue by 2023. [1]
  • 98% of worldwide revenue comes from free apps, according to Google Play. [2]
  • Users are spending $380 billion worldwide on in-app purchases. [3]
  • Consumer spending on the App Store will reach nearly $200 billion by 2025. [3]

Mobile app monetization statistics

How to monetize your app with the best mobile app monetization strategies?

Advertising – most popular mobile app monetization strategy

Advertising is the most popular strategy among those companies which want to monetize their apps. Its main principle is very simple: your app remains free, but you equip it with some third-party ads. Therefore, you earn money from views, clicks, and so on. Here are some of the most efficient types of ads:

loyalty and marketing

Video ads

Video content is considered to be extremely engaging, so adding video ads to your application is a great decision. Videos can either be shown at transition points (for instance, while the game level is loading) or be offered to watch for a reward. In the case of rewards, a user can get a bit of in-game virtual currency for watching a video, or something like this.

Banners

Banners are ads placed at the top or bottom of your application’s layout. They are often shown all the time until a user stops using the app or closes the banners themselves, if possible.

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Interstitial Ads

Interstitial ads are usually more efficient than banners in mobile app monetization, as they cover the entire app’s layout. In most cases, users can skip such an ad only after it is shown for a certain amount of time. That’s why you should be very careful with interstitial ads and make sure that the content is impossible to skip and is catchy enough.

Mobile Ad formats Source: https://pixelfield.co.uk/

Playable ads

Playable ads can be especially useful in mobile game monetization. They work like this: users can instantly try playing the game (right in the ad!) and then decide if they want to download it or not.

Notification ads

These ads appear in the smartphone’s status bar, just like push notifications. Again, be careful and don’t overuse them. Otherwise, such ads will only irritate your users, and nothing more.

Native ads (“Sponsored”, “Featured”, “Recommended”)

Native advertising is becoming more and more popular, and that’s logical. This kind of advertising is more popular and effective than the traditional advertising strategies we described above, and statistical data proves this.
Here are some facts about native ads that assure that native ads are a reliable way in mobile app monetization:

  • Users view native ads 53%[4] more frequently than the traditional ones.
  • Native ads containing video, audio, or other rich media elements can increase conversion by up to 60%[4].
  • It is also able to boost the brand lift by up to 82%[4].

In-App Purchases increases mobile app monetization

In-app purchases is another popular strategy — the app itself is free, but its certain features or products are paid. For example, if your app is a game, you can offer users extra lives, an ability to customize their characters, etc.
And a few more words about artificial intelligence — it can significantly increase IAP (in-app purchases). Deploy the recommendation system, and your users will receive personalized offers that they are more likely to buy. That’s why products or features recommendation in-app using AI is a much more reliable way to monetize your app.

Another important thing to mention here is LTV prediction for mobile app monetization. With a proper algorithm, you will be able to offer products and features in a much more efficient way. LTV is a customer lifetime value, and we have already written a nice article about it — Customer Lifetime Value Prediction.

Freemium Model

The word “freemium” is a combination of the words “free” and “premium”, and this fact perfectly reflects the meaning of this strategy. A freemium app is available in two modes. The first one is free, but only the basic features are available. In turn, the premium model is much more convenient and pleasant to use. So, how will this mobile app monetization strategy help to monetize your app? The key to making freemium work is to provide users with enough value in the free version to convince them to open their wallets for more. Below you can find real-life examples of mobile app monetization strategies. Keep reading!

mobile strategy

Subscription model

Subscription model is another effective mobile app monetization strategy. If you are offering content to your users, the subscription-based approach is extremely successful. This type of strategy is often used for cloud services, streaming audio and video, and online news services. The subscription model is quickly becoming one of the best monetization options due to the fact that users can try the app for free and subscriptions can get a regular recurring income. The key to the subscription model’s success is to provide users with a constant stream of new and valuable content and services.

Sponsorship

Sponsorship is not as popular as the previous monetization strategies, but it is still an interesting option for monetizing an app. If the app publisher develops a good niche app for the target audience and manages it on behalf of another company, sponsoring your mobile apps can be a powerful mobile app monetization strategy. Here are some advantages of sponsorship method:

  • It includes offering ad space in your app to brands with exclusive content or discounts.
  • Brands can differ from their presence in the app, and users can take advantage of exclusive offers and discounts.
  • User interruption is reduced to minimum.

Mobile App Data Monetization

With this monetization strategy, you should be very careful — it implies selling information about your users’ behavior to analytics companies or diverse advertisers. It sounds very simple, but there are two things that you must always keep in mind when using data monetization. The first one is your users’ awareness of what you are doing. They should know that you use their data. Secondly, data privacy regulations are something you must never break. If you do this, you may face serious problems, while your app and your company, in general, may forever lose credibility.
However, there is one more extremely important thing to mention, and it applies to all the monetization strategies. Obviously, it is crucial to choose a strategy wisely, but it is also essential to predict the monetization future of your app. Predictive analytics and historical data gathered from your users will help you to do this.

Real-life examples of mobile app monetization strategies

Spotify

Spotify is a great example of a freemium model. Its free version offers only shuffle play, but the premium one is much more attractive. Apart from shuffle play, users enjoy an ability to listen to music offline, the absence of ads and interruptions, and so on. Spotify even offers several Premium modes — for example, there are packages For Family and For Students.

Netflix

Netflix is one of the most successful subscription-based apps on the market, with a revenue of around $25 billion per year[5]from its subscription-based service. Users can choose between paying a low monthly charge to use their app on a single screen and paying a larger monthly fee to add extra HD and Ultra HD screens with this model. Therefore, Netflix boosts the income of families or users who want to share a subscription.

VSCO

Another example is the popular VSCO photo editing application that uses in-app purchases strategy for monetizing. Application is available as a free download, allowing you to monetize the app’s 30 million monthly active users by selling photo presets in-app. Preset packs range in price from $0.99 to a few dollars, and each has its own style for making different image types.

To sum up

We have described several mobile app monetization strategies, so now you can decide which of them will perfectly suit your product. And, as always, if you still have any questions, you are welcome to get in touch with us. Would you like to ask anything else about AI implementation? Or about churn prediction for increasing retention? We are always ready to answer these and any other questions, just ping us a message in case you are interested in learning more.

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References

[1] Statista. com. Worldwide mobile app revenues in 2014 to 2023. URL: https://www.statista.com/statistics/269025/worldwide-mobile-app-revenue-forecast/. Accessed Sep 21, 2021.
[2] Spaceotechnologies.com. How do free apps make money in 2021?. URL: https://www.spaceotechnologies.com/how-do-free-apps-make-money/. Accessed Sep 21, 2021.
[3] Techjury.net. 17 app revenue statistics in 2021. URL: https://techjury.net/blog/app-revenue-statistics/#gref. Accessed Sep 22, 2021.
[4] Steve Olenski. 6 Types Of Native Advertising And How Each Can Benefit Your Business. URL: https://www.forbes.com/sites/steveolenski/2015/11/12/6-types-of-native-advertising-and-how-each-can-benefit-your-business/?sh=4eea76394455. Accessed Jun 25, 2019.
[5] Statista.com. Netlix: quarterly revenue 2013-2021. URL: https://www.statista.com/statistics/273883/netflixs-quarterly-revenue/. Accessed Sep 22, 2021.

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