App development can take a lot of time and effort, and given how many there are on the market no matter the niche, effective app monetization is key to making sure it’s worth your while. In fact, despite the number of great (and free) apps out there, app development is creating new millionaires every single day.
So, how should you tackle app monetization, and are there ways to do it without limiting your customer base? Do you need to monetize your app with ads, or is there a way to do so without?
We’ll get into all of that, and more.
What is app monetization?
App monetization refers to how your app makes money, generating the revenue it needs to carry on being supported and even developed further as it matures and evolves to meet the wants and tastes of its users.
How exactly you go about monetizing your app will depend on a lot of factors including the type of app itself, and it’s a good idea to work monetization into your strategy and planning as early as you can during development.
The monetization model you choose may well dictate how users interact with your app and the customer journey as a whole, and it might also play a role in user acquisition.
So, there's no one-size-fits all method for monetizing your app. Choosing the wrong monetization strategy or changing monetization models once users are already used to how things work is also a risk that just isn’t worth taking, as it could lead to dangerous levels of customer churn and dissatisfaction.
That's why it's important to think about how to monetize your app idea right from day one.
Should you monetize your app?
The vast majority of apps that you’ll find online are free to download and use, so the first question many people might pose is whether monetization is worth discussing at all? After all, given the choice between a free app and one that needs to be bought to actually use, what is the average person more likely to be drawn to?
Well, part of the reason we’re drawing this guide up is because app monetization goes a whole lot further than free-to-use versus pay-to-use. The latter could be right for you in certain cases, but depending on your app’s type and content, one of the following models might serve you even better while also minimizing barriers faced by prospective users.
Let's dive in to 8 app monetization strategies.
8 app monetization strategies
1. The classic freemium model
Freemium is a term that can cover several monetization strategies, but all of them have one very important thing in common—users can download and enjoy a relatively robust experience with your app for free. Many app publishers and developers are getting a bit stingy with what they’re willing to let their free users do these days, but the idea is to sell a user on the usefulness of an app after giving them free access and then turn them into a customer afterwards.
This is a very common model when it comes to mobile games, and in fact the vast majority of gamers tend to remain in the “free-to-play” category. Most games give them a full experience, but offer different incentives for purchase, such as paid shortcuts to better gear or more “energy” to let people play for longer.
Check out Candy Crush Saga - although the app is free, it comes with 'in-app purchases', which are often pop-ups that give you more in-game tokens to play or level-up.
Portugal International footballer Diogo Jota, for instance, has admitted to spending hundreds in order to play Candy Crush during those long flights in between matches—an amusing thought given his self-professed love for more elaborate titles like EAFC and Football Manager.
All of that said, games are by far not the only type of app that suit the different types of freemium model you might see fit to deploy.
Many have a free tier and a premium tier (or multiple premium tiers) that give you advanced usage or features. Even dating apps have premium options that confer various benefits, such as expanded geographical coverage on searches, unlimited connections, or ad-free app use -which is something we’ll also touch on later,
2. Recurring revenue via subscriptions
Recurring revenue feels like the holy grail for a lot of businesses, and there’s a lot of reasons for it. You can read more about recurring revenue here, but the fact is that subscriptions and recurring payments are a whole lot more valuable in the world of apps than one-off fees—especially given the prices involved. A lot of people would think nothing of a $4.99 per month sub, but a $29.99 price tag? Oof.
Subscription pricing is often combined with the freemium model to offer paid full- or advanced-feature options to app users, letting them wield their budget if they think your app is worth it. Think about Spotify - while the app is free, you pay a recurring subscription for Spotify Premium.
This example is a type of freemium model that is also a subscription model. It offers a free trial and a free plan, but aims to sell users on a recurring monthly subscription.
Apps geared toward productivity or with business clients can make the most of tiered subscriptions, since you can charge for more users, usage time, top-end features, or just about anything else you can think of that your client firms might open up their checkbook for.
You can also choose to vary what sort of time intervals you offer subscriptions for. Shorter intervals such as monthly subscriptions tend to be the most useful since they guarantee cash flow, but giving your users longer options such as annual subscriptions can extract more value on a per customer basis since you’ll naturally see a certain amount of churn.
3. Offering in-app purchases
We’ve teased at in-app purchases already with the freemium model, so you’ve already got a decent idea of what this is all about. Games do it well, often through in-game currency that can be used to purchase items or energy, and sometimes even access to new levels.
For example, the Love Island Game allows you to purchase packs of 'Gems'. The gems let you make premium choices and advance in the game faster than if you didn't have gems.
Even if your app isn’t a game, you could try and include gamification elements which would then allow you to leverage some sort of in-app currency.
That being said, in-app purchases do need to make sense, and they’re usually employed by creators who have something to sell.
If you’ve got a coaching app, you could add an ebook or extra downloadable materials or resources as an in-app purchase so that users who enjoy and value your coaching can take that extra step.
4. Deploying in-app advertising
Even if you think that your entire user base isn’t likely to spend a single cent on your app (or your development philosophy is that you don’t want them to) you can still monetize your app through the power of advertising. Nobody really likes ads, but if you want to make money with an otherwise completely free app, they’re the easiest option to monetize.
There are several types of ads you can deploy, however, and some may be less intrusive than others when it comes to the user experience. Some advertising options that you can consider include:
- Interstitial ads
These are full-screen ads that show up between the different phases of the user experience, such as switching between modes or exiting a document such as on an ebook reader. Pay attention to what sort of ads you allow on your app—a loud audio-enabled ad surprising the user when they finish reading an ebook, for example, is a bad idea. - Video ads
Video is one of the most common ad formats both on the mobile platform and otherwise, so it’s one you should definitely allow for. Some video ads are also gamified, such as ads that let users play a little minigame while viewing it, often to get you interested so you download that app too. - Native ads
These are ads that blend in with the rest of your app, and might even be designed to seem as a feature with it. It takes some work to get native apps right, but if you’ve got the will, there’s a way… and your users will love you for it since they’re usually not disrupted at all by native ads. - Banner ads
On the other end of the spectrum, banner ads are targeted but, more to the point, are displayed in certain places on an app, most commonly on the top or bottom of the screen. They’re also not terribly conducive to appealing design, so use them wisely. - Rewarded ads
In this form of ad, users elect to view an ad in order to get some sort of reward, such as another attempt at a game level when their lives or energy have run out. These are usually game-exclusive ads, but could work in other types of app if you deploy them creatively.
5. Monetizing app data
Advertisers are very willing to throw money at app developers, especially free or freemium app developers, because they get seen by users. User attention, therefore, is what you’re selling to advertisers. You can also sell user data. Check this image to see how Duolingo handles the handling of data.
Now, there are strict regulations as to what you can and can’t do in this regard, and some areas (such as Europe with GDPR) provide significant consumer data protections. There are also ethical concerns when it comes to how much data you should consider up for grabs.
At the end of the day, though, the users of your app are likely to grant you permission to sell certain amounts of data to advertisers, with the understanding that this is how you’re going to be able to create and maintain the app and features that they love using.
6. Using your app for affiliate marketing
Affiliate marketing is an extremely powerful strategy for building revenue streams, and an app can be a great vehicle for it. To cut to the chase, affiliate marketing with your app means using it to convince people to buy other products, sign up for other services, or even download other applications or software.
Generally, you can start affiliate marketing by researching your niche and checking which companies have affiliate programs. Using these, you’ll be able to insert specific links in your app which, when your user clicks on them, tell the company that these prospective new customers are coming via your app. Then, you’ll get a cut of whatever they spend.
You can also deploy affiliate ads that encourage users to download other apps. The iOS and Google Play stores can then track those users as they leave your app to directly download the one you advertised, and again, you’re rewarded for it.
Affiliate marketing in general is another good way to monetize an otherwise free app, since it’s a strategy that becomes more useful the more users are exposed to it—it’s the number of affiliates that matter, so the more users you have, the more chance a few will do what you need them to.
7. Collecting transaction fees
Transaction fees are a very specific monetization model that suit apps that facilitate transactions between users. You could be connecting users to other users and playing the role of intermediary, and you could just as likely be linking users up with bigger brands doing the selling.
Either way, an easy way to earn revenue here is by taking a small cut of the transactions that take place on your app.
8. Selling your app with download fees
Last of all, we’re going to circle back up to the top with the model that we teased before getting into this list. A very simple way to monetize is simply to sell your app for a certain fee—it’s the oldest way to do it, and arguably, it’s a lot more customer-friendly than models that overwhelm users with ads or aggressive freemium practices.
For example, this calculator app has a one-time fee of $2.99. While it may not seem like a significant amount of money it's low enough to be an impulse purchase for many people.
In certain industries, such as with gaming that we’ve referenced before, a one-time-purchase download fee or purchase tends to be the norm on platforms like PC and console, while on mobile freemium tends to dominate.
The trick with a download fee or a purchasable app therefore is to ensure that you can market your app without relying on users needing to try before they buy. A significant value proposition and good marketing, or just having a pre-existing audience such as a community or newsletter, will help a lot.
Learn more about app monetization with Whop
If you want to learn more about app development and monetization, including whether or not to monetize your app with ads, make sure to check out Whop’s business section. There, you’ll find some of the internet's best think tanks when it comes to starting a venture of your own, including masterminds and courses run by entrepreneurs who’ve made millions with their own apps.
And, if, part of your business strategy includes a community, an online store and digital products to support your app, be sold through it, or funnel users or members to your app, consider getting yourself listed on Whop.
It’s completely free to use and features industry-low transaction fees starting at just 3% as well as some of the best affiliate rewards on the market, so just visit Whop and find out what Whop can do for you.