How to monetise a mobile application

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Mobile app monetisation serves as the financial backbone of your application, transforming it from a mere download into a sustainable and successful digital business. In this comprehensive guide, we'll explore the essence of mobile app monetisation, delve into the critical elements of user experience, various monetisation models, and the evolving landscape of data and advertising.

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Jump to:

• In-App Monetisation Models
• Subscription and Freemium Monetisation Models
• Advertising Monetisation Models
• Cost Models for Advertising
• Best Mobile Ad Networks of 2023
• Data Monetisation Model
• What monetisation model is suited for your mobile app?
  

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What is Mobile App Monetisation?

Mobile app monetisation is the key to generating revenue from your application. It involves selecting suitable monetisation models that cater to your target audience. Balancing profitability and user satisfaction is crucial to building a positive brand reputation and sustaining long-term app usage.

In today's world, many apps are available for free download. As a result, app owners must establish a reliable revenue stream through monetisation to ensure sustained growth. A confident and successful app monetisation strategy is vital for financial success and driving user engagement.

In-App Monetisation Models

In-app purchases offer a seamless and unobtrusive way to monetise your app. Whether non-consumable, providing permanent unlocks, or consumable, offering temporary advantages, IAPs can significantly enhance the user experience. This model can involve introducing virtual currency within the app, allowing users to make purchases using this digital currency.

Consider the success of the meditation app Headspace, which uses in-app purchases for premium meditation courses. Users can buy subscriptions for advanced features, enhancing their meditation experience.

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Implementation:

• Consumables: Items that can be used or depleted, such as in-app currencies, hints or temporary power-ups.
• Non-Consumables: Permanent unlocks, features, or ad removals, typically a one-time purchase.

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Examples:

1. In Candy Crush, users can buy extra lives or power-ups (consumables) or unlock new game levels (non-consumables).
2. In photo editing apps, users can purchase in-app currency for special effects (consumables) or permanently unlock all premium features (non-consumables).

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Benefits of IAPs:

• Increased Revenue Potential: In-app purchases provide an additional revenue stream, allowing users to spend money on virtual goods or features.
• Enhanced User Experience: Offering valuable IAPs can keep users engaged, as they have the option to improve their experience through purchases.

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Drawbacks of IAPs:

• Dependancy on High Spenders: In some cases, a small percentage of users who spend a lot of money generate a significant portion of revenue from IAPs. This can be risky as the app becomes dependant on a specific user segment, and if their spending habits change, the app's revenue can be impacted.
• Balancing Value: Striking the right balance between offering valuable IAPs and not alienating free users can be challenging. Poorly managed IAPs may lead to negative user reviews and a decline in overall app satisfaction.
• Complex Implementation: Developing and managing IAPs requires careful planning and implementation. Poorly executed IAPs can lead to technical issues, which might result in a loss of user trust.

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Subscription and Freemium Monetisation Models

Subscriptions provide a standard in-app purchase method, which involves users paying a recurring fee at regular intervals (monthly, yearly) to access premium content, features or services within the app. This allows app owners to offer varying access levels. Tiered subscription packages cater to diverse user needs.

Freemium models combine "free" and "premium," allowing users to access basic features for free while offering premium, paid features. This dual-tiered approach caters to a broader user base while enticing some users to upgrade for enhanced functionality.

The streaming service Netflix effectively utilises a subscription model, offering users access to a vast library of movies and TV shows for a monthly fee.

Implementation:

• Tiered Subscriptions: Offer different subscription levels with varying features and pricing. Some apps include a free subscription, the "freemium" model.
• Time-based Access: Users pay for continued access to premium features during time-based intervals.

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Examples:

1. Tinder offers basic features in its app for free users and premium features for paying subscribers.
2. Spotify provides a free tier with ads and a premium tier for an ad-free experience, offline listening and higher audio quality.

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Benefits of Subscription Models:

• Predictable Revenue: Subscriptions offer a steady, predictable income stream, providing financial stability for the app owner.
• Exclusive Content for Subscribers: Subscribers often enjoy exclusive content or features, encouraging users to opt for premium subscriptions.

Drawbacks of Subscription Models:

• Subscription Fatigue: Users might hesitate to commit to multiple subscriptions, leading to subscription fatigue. This challenge can result in a reluctance to adopt new apps that require recurring payments.
• Content Quality Expectations: Users expect a continuous stream of high-quality content with subscriptions. Maintaining this standard can be resource intensive, especially for smaller app owners.
• Free-to-Premium Conversion: Persuading users to upgrade from free to premium versions can be difficult. Striking the right balance between free and premium features is crucial to entice users to upgrade.

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Advertising Monetisation Models

The most prevalent method to monetise mobile apps is through in-app advertisements. Various formats, such as banner ads, interstitial ads, native ads, video ads, and rewarded video ads, offer app owners a flexible approach to delivering relevant content and generating revenue.

Affiliate Ads:

Monetising through affiliate ads allows apps to earn commissions by promoting other apps, products, or services. Strategic placement within the user journey ensures a seamless experience.

Social media giant Instagram seamlessly integrates sponsored posts (native ads) into users' feeds, providing a non-intrusive way of monetising through advertising.

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Implementation:

• Banner Ads: Small, static ads, usually displayed on the bottom or top of the app interface.
• Video Ads: Full-screen video content is often used between app transitions.
• Native Ads: Ads seamlessly integrated into the app's content for a natural look and feel.

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Examples:

1. Instagram uses native ads integrated into the users feed.
2. Mobile games may display rewarded video ads between levels, or offering users incentives or "rewards" for watching.

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Benefits of Advertising Models:

• Diverse Revenue Stream: Ads provide a diverse revenue source without directly relying on user payments.
• Global Reach and Brand Exposure: Ads enable apps to reach a global audience, enabling brand exposure and recognition of a larger scale.

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Drawbacks of Advertising Models:

• User Experience Impact: Excessive or intrusive ads can negatively impact the user experience, leading to unhappy and frustrated users. Balancing revenue goals with user-friendly ad placements is a constant challenge.
• Ad Blockers: The rise of ad blockers threatens traditional advertising models. Users increasingly turn to ad-blocking solutions, limiting the effectiveness of display ads and affecting revenue.
• Ad Blindness: Users may develop "ad blindness" over time, where they subconsciously ignore or dismiss ads. This challenges advertisers to create more engaging and relevant content.

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Cost Models for Advertising

Cost models for advertising determine how advertisers pay for campaign inventory. Navigating the cost models for mobile advertising is essential for optimising campaign expenses. These cost models can depend on the industry, location, target audience and competition.

For example, Snapchat utilises a cost-per-install (CPI) model, where advertisers pay based on the number of app installs resulting from their ads.

Key models include:

• CPM (Cost Per Mille)
• CPC (Cost Per Click)
• CPI (Cost Per Install)
• CPA (Cost Per Action)

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Best mobile ad networks of 2023:

Selecting the right ad network is crucial for effective advertising campaigns. AdMob is a notable example, but numerous networks, such as AdMaven, ClickAdilla, and RevU, cater to diverse needs. When deciding, consider factors like targeting capabilities, pricing, ad formats, support, and overall ad quality.

These five ad networks are undoubtedly the best options for monetising with in-app purchases for both gaming and non-gaming apps in 2023:

1. Facebook/Instagram Ads: The average CPC (cost per click) across all industries in March 2023 was reported to be $0.40. Source
2. Admob: The average cost per click for Google ads is $2.69 for search and $0.63 for display across all industries. Source
3. Smaato,
4. Unity,
5. InMobi.

The leading five ad networks for monetising in-app ads for apps are:

1. AppLovin,
2. Facebook Ads: The average CPM (cost per 1000 impressions) was $7.19. Source
3. Google Ads: The average Google AdWords CPC (cost per click) is between $1 and $2. Source
4. ironSource,
5. Unity Ads.

Data Monetisation Model

Leveraging first-party data responsibly offers app owners valuable insights into user behaviour. This data can enhance user experiences, trigger targeted advertising, and optimise in-app advertising inventory for increased revenue.

Social media platforms like Facebook analyse user data to provide targeted advertisements, ensuring a personalised experience for users.

Implementation:

• Anonymous Data Insights: Aggregating and selling user data without revealing personal information.
• Personalisation: Analysing user behaviour to provide personalised content or recommendations.

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Examples:

1. Healthcare apps may collect anonymised user health data for broader health trend analysis.
2. E-commerce apps analyse user purchase history to personalise product recommendations.

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Benefits of Data Monetisation:

• No In-App Ads: Precise data monetisation can eliminate the need for intrusive in-app banner ads.
• Higher CPMs: Accurate data can significantly increase CPMs, providing app owners with more consistent income.
• Platform Neutrality: Data monetisation offers a consistent income regardless of the app's platform.

Drawbacks of Data Monetisation:

• Privacy Concerns: Monetising user data poses privacy issues as users are becoming more aware of their data, and any perceived mishandling could lead to trust issues and backlash.
• Regulatory Compliance: Complying with data protection regulations like GDPR and CCPA can be challenging, and failure to do so can lead to legal consequences and damage the app's reputation.
• User Perception: Respecting user privacy while providing personalised experiences is crucial, as users may feel uncomfortable knowing their data is being sold.

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Best Practices for:

App Monetisation:

1. Protect User Experience: Prioritise user experience to prevent adverse impacts on app motivation.
2. Active User Engagement: Increase user engagement to boost time spent on your app, translating to greater monetisation.
3. Continuous User Acquisition: Consistently invest in user acquisition to counteract user churn and drive active monetisation.
4. Hybrid Monetisation: Experiment with multiple monetisation methods simultaneously, ensuring a diversified approach without compromising user experience.
5. Measurement and Analytics: Regularly measure, optimise, and adapt your monetisation strategy based on comprehensive analytics.

Addressing Drawbacks:

1. Transparent Communication: It is essential to clearly communicate the benefits users will receive in exchange for their engagement, whether making in-app purchases, subscribing to services or receiving personalised experiences based on their data.
2. User Feedback Integration: It is essential to regularly gather feedback from users and promptly address any issues to ensure your monetisation strategy aligns with user expectations.
3. Continuous Optimisation: It is important to periodically review and optimise your monetisation strategy based on evolving user preferences, industry trends, and technological advancements.

What monetisation model is suited for your mobile app?

App owners have a range of options to choose from when it comes to app monetisation strategies. To maximise revenue, it is common practice to utilise multiple methods. Therefore, carefully considering the different approaches available is critical to ensuring success with your app monetisation strategy.

In-app advertising has consistently demonstrated its effectiveness and profitability as a monetisation model for apps, even in the face of the massive digital advertising budget of over $600 billion in 2022. Its proven track record makes it a confident and reliable option for businesses and app owners to generate revenue.

For example, The travel app TripAdvisor successfully combines in-app purchases for premium features with advertising, offering users a comprehensive and monetarily diverse experience.

When deciding on an app monetisation method, the app owner should take into account the following:‍

What does the app do?

App owners must clearly understand their app's purpose, primary function, and how it effectively solves the problems it is designed to address.

To maximise revenue growth, it's essential to recognise that not all apps are created equal. Subscription models may work well for news and entertainment apps, but in-app advertising is the way to go regarding gaming apps.

Assessing the competition

Thorough competitor research is an indispensable aspect of any successful business venture. Gaining insight into the market and determining the app's positioning enables a business to make informed decisions and stay ahead of the competition.

Determining the target audience

Knowing the target audience is another important step. Knowing who they are, what they want in an app and what they are willing to pay enables the app owners to create a strategy well-suited to ensure a thriving application.

Prioritising User Experience

The success of app monetisation depends on the prioritisation of user experience. Generating revenue is important but should not be achieved at the cost of user experience. By balancing revenue generation and user experience, users will be more engaged and contribute positively to revenue generation, leading to a win-win situation for users and app owners.

To achieve a successful monetisation strategy for a mobile app, balancing generating revenue and prioritising user satisfaction is essential. This can be accomplished by adopting various monetisation models and staying up-to-date with industry changes. By doing so, app owners can confidently cultivate sustainable success in the constantly evolving world of mobile apps.

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