How Do Apps Make Money? Ultimate App Monetization Strategies for 2023

If you are still finding a way to get benefitted through your mobile app, you can find the best app monetization strategies to make money through this article.

Okay, so you are developing the mobile app for your upcoming business idea?

At one point or another, you would have pondered the question of how much do apps make money.

Most business and mobile app creators make one critical mistake when launching an app.

It is not deciding the proper monetization model for the app or leaving the decision after launch.

But that's a deadly mistake. To build a profitable mobile app, you will need the right monetization model.

Imagine this scenario. You have launched a free app. Users absolutely loved it. But then you decide to make it a fully paid app overnight because of expenses.

Two things will happen. First, the app will lose customer trust. Secondly, most users will abandon it slowly. All this because you had no idea who was actually ready to pay for your app!

To avoid such scenarios, you must have had an app monetization strategy before. In this guide, we have covered all the bases on how you can monetize your app safely without losing customer trust.

» What is App Monetization? Why Is It Important? 

App monetization is a process where developers decide how to monetize the app. Running a fully functioning, bug-free app isn't a piece of cake. As part of the app development process, several expenses are incurred, including server costs, maintenance, API costs, and other miscellaneous costs. As a result, developers and app creators must shift their app strategy to develop cash after each download to build a profitable app.

This is where you will need to decide on the right monetization model for your apps. But when choosing your monetization model, it is important to keep an eye on two things:

• • Your app should generate consistent revenue
  • You must be able to maintain user experience and retain users.

Unfortunately, most app developers completely forget about the second point during the app development process. User retention and user experience are just as important as making money. After all, if all users abandon your app, how will you generate revenue?

» What Do App Monetization Trends Say?

1. 1. User Experience > App Monetization 

More and more developers are giving priority to user experience. Too many ads can negatively impact the user experience. Thus it's critical to strike a balance between user experience and monetization.

1. 2. Goodbye Paid Apps. Hello Freemium

More and more users today want to first try an app before paying. Offering free apps allows developers to get more downloads. After users download the app, they can educate users on how premium or subscription is beneficial.

1. 3. Managing User Privacy

Imagine if suddenly you get a notification that someone stole 10,000 USD from your bank? That would be a nightmare, right? What if they told you that one of the apps that you installed on your phone is the reason your money got stolen? As a consumer, you would lose trust in the brand or app. And as a developer, you would lose a customer forever. That's why user privacy is a topic of discussion.

» What Are Different Types of App Monetization Models?

Whether you are thinking of building a paid app or a free-to-install app, you will need to design a profitable monetization strategy during the app development process.

Having the right monetization strategy before launch will not only help you meet user expectations but also keep your app profitable.

Following are some in-demand methods that will give you an idea you can use for your strategy.

1. 1. In-app advertising

Source Image: buildfire.com

Mobile advertising is the easiest and most popular way to make money from a free app these days. According to Statista's analysis, mobile advertising will spend around $336 billion in 2022 and $412 billion in 2024.

As an app owner, all you have to do is display your commercial advertisements within your mobile app, and you'll be able to quickly be paid via third-party networks and commercials.

Mostly, the app owners are paid when the user clicks or hits the ad or when the user installs the application via advertisement. The app owner gets paid.

There are 5 different ad variants to utilize in a mobile app:

Source: Misdev 

• • Native Ad

Native advertisements blend naturally into mobile apps. These ads are less invasive and therefore do not interrupt users. It's the primary reason why native apps are becoming increasingly popular.

• • Interstitial Ad

These advertisements are full-screen pop-ups that appear at a specific moment in an app. Pop-up ads generally appear when users open the app or are about to exit the app.

• • Banner Ad

These display advertisements come in a variety of sizes and appear at the top or bottom of the app screen. They are usually modest and unnoticeable, allowing users to use apps without much disruption. However, the downside is that it has lower engagement rates (CTR- click-through rate) and relies on brand familiarity.

• • Video Ad

A 10- to 30-second video ad is included in the app and plays automatically when there are natural pauses. This is the most often used advertising-income strategy among users.

• • Rewarded video

Most users enjoy receiving rewards but hate advertisements. But, with rewarded video ads, it is possible to reward users for a specific in-app action or engagement, such as filling out a survey. These app rewards have the potential to promote app loyalty and engagement.

Pros of In-App Advertising	Cons of In-App Advertising
In-app advertisements have a higher CTR.	Sometimes showing more than 1 ad can spoil the user experience.
You can select which ads to show.	In-app ads have low engagement with banner ads.
Gives functionality of Personalized targeting.	Sometimes video ads have Low quality and are hard to show due to network issues.

1. 2. In-App purchases 

Freepik

In the freemium app model, in-app purchases are a very common tactic. The in-app purchasing approach allows users to sell a range of virtual products straight from within the app. By allowing users to make in-app purchases, games like Pokémon Go, Clash of Clans, and Angry Birds, have improved their user experience.

By offering extra features or rewards, preventing ads, or unlocking additional app content. The app store handles all of these transactions, and the app developer is paid a commission on each one.

In-app purchases in free mobile applications are charged straight to the customer's app store-linked credit card (Google Play Store or Apple App Store account).

Pros of In-App Purchases	Cons of In-App Purchases
People Love Things that are Free.	Implementing in-app payments is hard.
No redirections for making purchases.	In-app payments require additional customer support.
Freemium apps often see huge download numbers.	Obtaining certifications for accepting payment is not simple.

1. 3. Subscription (Software-as-a-Service) model

Freepik

You can set up your revenue stream on a weekly, monthly, or annual basis for the service you provide using the subscription model. You can make available a free app from where your clients can enjoy your services by subscribing.

This type of model is mostly used by audio and video content providers, just like Spotify, Google Music or any digital news portals. Your customers will have access to your content when they choose a specific subscription plan provided by you. This subscription strategy is one of the most useful app monetization strategies of all.

It is only up to you as a publisher how much amount of time you want to provide for free access. After utilizing the free access, your customers have to pay charges such as a subscription fee to continue accessing content without any limitation.

Pros of Subscription Model	Cons of Subscription Model
It generates consistent cash flow.	It has a high rate of cancellations.
Loyalty is enhanced by a subscription model.	In the initial stages of a business, revenue is uncertain.
It provides you with compelling reasons to keep in touch with your customers.	The competition is increasing at a rapid pace.

1. 4. Sponsorship

Source

Gaining a sponsorship is a valuable approach to making money from a free app. This strategy is often accessible for services that have a large number of regular users. Applications targeting a specific market niche receive the biggest benefits with sponsorships.

As a result, you may approach sponsors in the same field about matching their brand with advertisements, content in the app, or adapting the app design to their brand.

In other words, if an app publisher creates a specialized app for a specified audience and launches it on behalf of another brand, it will be beneficial for both parties. Making a list of organizations and businesses that potentially benefit from the collaboration is a smart place to start before designing the app.

Pros of the Sponsorship Model	Cons of Sponsorship Model
It provides an immediate increase in revenue.	Performance evaluation is tough, if not impossible.
It aids in the development of relationships and the development of one's network.	Creating sponsored content is a time-consuming and costly process.
Sponsored content has a greater rate of engagement.	You must build tools for assessing success in order to measure performance.

1. 5. Paid Apps

Source

Under this model, users will need to pay upfront to use the app. Paid applications range in price from $0.99 to $999.99, and each new user generates income for the company.

The ability to present the perceived value of your mobile app with a killer app listing (which includes images, five-star ratings, and so on) that separates your app from your competitors is critical to success with this approach.

Premium utility applications, including high-end health trackers and business-centric apps, use the paid app model since most users trust them. Popular games, especially from big-name publishers, also use a paid app model. To encourage someone to spend money on a premium app, it must, of course, give considerable value.

Pros of Paid Apps Model	Cons of Paid Apps Model
Paid applications are an excellent method to increase client loyalty.	The money from purchased apps is split between the app store and the developer.
With each new download, app developers and advertisers receive money upfront.	Paid models are becoming a smaller portion of app store earnings.
The software normally does not contain any in-app advertising, which allows for a cleaner UI.	Paid applications are downloaded less than 500 times per day in 90% of cases.

1. 6. Freemium Model 

Freemium applications are available to download for free but contain paid or premium features. In-app payments are required to unlock these paid and premium features.

Users can download freemium apps without paying anything. If they enjoy the content, they can upgrade for full functionality by making a payment. Because premium services are optional, this strategy can quickly attract a large number of new consumers.

Some of the most popular applications generate money by charging for premium app content. Others have a free version of their software and a premium version.

Pros of Freemium Model	Cons of Freemium Model
Most users love freemium models, so getting leads is easy.	It's sometimes difficult to convert a free user to a paying customer.
It takes less marketing effort.	The free version's limited capabilities will leave the user frustrated.
You can make money by displaying advertisements to free users.	Converting the free users to pay will take a long time.

» How To Choose The Right Monetization Model For Your App?

1. 1. It’s All About User Experience 

If there's one thing you must do, it protects the user experience at all costs. Oftentimes, when developers decide on the monetization model, they completely forget about user experience. But that's just asking for disaster. Damaging your user experience will do more damage to revenue. Whenever you need to alter the user experience in any way, make the impact minimal.

1. 2. Look At Your Competition

When defining how to monetize the app or even starting the development, competitor research should be your first priority. Researching apps that have similar features to yours or are in the same vertical as you is essential to determine the potential monetization models.

• • See how your competitors are monetizing their apps? Is it paid? Is it a subscription model? Or advertising etc.
  • Is there a gap that can turn into an opportunity?
  • Can you do something different to accelerate the revenue potential?

1. 3. Know Your Target Audience

Another thing you should do while figuring out your monetization model is to do user research. Users are the most important part of your app. No users, no revenue.

Ask yourself, who are these people who should use your app? What do they want? And most importantly, will they pay for it when the time comes?

Conclusion 

Choosing the right monetization model is something every developer or app builder should include in the app development process. Choosing the right monetization can be hard, especially due to the varied interest of the audience and not knowing if they will pay for the app.

That's why it's essential to do market research to build a profitable mobile app. hopefully, this guide will help you make things clear and help you find the right model.