The global mobile app market continues to grow exponentially, surpassing $39 billion in revenue in the first half of 2019 alone. With its 15% year-over-year growth and millions of apps available across app stores, there’s still room for disruption and improvement.
Today, established brands and growing startups are leveraging a variety of monetization models to enhance profitability. The best pricing model for your mobile app idea depends on a variety of factors like the type of app, target audience, and more.
If you are wondering what are the best ways to make money with your apps in 2019, here are a few effective strategies that work for our clients.
1. In-App Advertising Model
This is a fantastic trade-off as the user gets to use the app without spending a dime, and the company generates income while retaining control on the ads shown. Today, it’s the most popular strategy of monetization for a few reasons.
In the digital age, marketers are struggling to get the attention of their target audience. So if an opportunity presents itself to lead potential customers down their sales funnel, they won’t shy away from spending big bucks on it. Research suggests that mobile advertising will rise to over 41% of total media advertising by 2022. Such a competitive environment will lead to fierce bidding on popular keywords (with ad space being awarded to the highest bidder).
This means that the ads that pop up within your app will have a higher cost per click (CPC) or cost per thousand impressions (CPM) rate for marketers. This translates into more money for the app developer; however, to attract users, keep them engaged, and negate app abandonment, you have to deliver enhanced users experiences (UX).
To start earning, you’ll need to decide on an ad platform. Some leading ad networks to consider are as follows:
- AdColony (for mobile video advertising)
- Admob (the largest mobile ad network – powered by Google)
- Facebook Audience Network
- InMobi (for what’s known as Appographic targeting)
- Leadbolt (for premium ads)
- Unity Ads (is most useful for mobile games)
- Verizon Media (formally known as Millennial Media, the second most popular ad network after Admob)
Before you start generating income via in-app advertising, it’ll be critical to test different ad formats, analyze user engagement, and test innovative ways to help users dismiss ads seamlessly.
2. Subscription-Based Model
At Intersog, we have been building mobile apps from the day the first iPhone came out, more than a decade ago. When apps first emerged, the premium (or paid apps) model was the only option available to developers. It’s a simple business strategy where developers publish their apps and users pay a fixed price (with 70% going to the developer and 30% to the app store) to install it.
While still relevant, this approach to generating revenue from mobile apps is not exactly ideal. The fact that you have to pay upfront to use it also creates a significant barrier to adoption. Having said that, it’s important to note that this revenue model still dominates educational apps.
If you want to employ this model efficiently, the better approach is to implement a recurring subscription model that the larger user-base has grown accustomed to. I mean, just take a look around. Tech giants like Adobe, Microsoft, Netflix, and Spotify have all turned their products into services.
This app subscription revenue model is expected to generate more than $75 billion by 2022. It can be attributed to the fact that users feel in control of their spending when they have the option of canceling at any time. It’s a highly effective mobile application monetization model because subscriptions provide recurring revenue. This approach also makes it easier to plan and deploy the product roadmap instead of bundling all the features at once (just to attract customers).
Subscribers will also be more inclined to keep paying when they see continuous improvements rolled out, regularly.
3. Freemium Model
Freemium monetization models are prevalent. In the beginning, these apps were completely free, but today, they have evolved to offer limited trial “free” versions. Users can upgrade with payment to access more functions and features.
Some developers also offer separate versions of the same mobile app – one with in-app advertising and another that works as an “ad-free” premium upgrade; however, if you plan on embracing the freemium model, you have to tread carefully. This is because although users love to use mobile apps without making a financial commitment, there is always a risk of app abandonment (because of “annoying” ads and notifications to upgrade their membership).
Others may be happy with the features on offer and may decide not to upgrade to the paid version. The bottom line is that it’s crucial to find the right balance of features offered for free and ads they are going to see. At the same time, it’s essential to consider the fact that all your free users will be driving up server costs, making a significant impact on operational expenses.
4. In-App Purchase Model
The in-app purchase model is standard in the gaming world. In this scenario, you can monetize a free or paid app by charging users to access new levels, skins, extra lives, access new capabilities, in-app currencies, and more.
This approach is designed to enhance gaming experiences and keep players coming back to the game (and in-app marketplaces). One of the key benefits of this revenue model is the fact that users who invest in their in-app experiences tend to spend more time using it.
The mobile gaming market (that’s driven by in-app purchases) is expected to be worth over $174 billion by 2021. At present, mobile gaming accounts for about 47% of the global gaming market with smartphone games generating approximately $50 billion, while tablet games account for $13.2 billion in revenue.
5. M-Commerce Model
Finally, we have the mobile commerce monetization model. This segment is projected to generate over $267 billion by the end of the year.
It’s a straightforward approach that’s best suited for major retail brands and accounts for over 40% of all e-commerce transactions. As smartphone penetration rises year-on-year, m-commerce will cement its place in the online retail vertical.
M-commerce apps are built to deliver far superior online-shopping experiences that can’t be replicated with a mobile browser. It also provides an innovative way to deliver enhanced UX by leveraging smart algorithms.
Mobile apps now play an integral role in our daily lives. As the Internet of Things (IoT) grows more pronounced in the years to come, this segment will evolve to enhance efficiency, effectively.