DEV Community

Cover image for How to Monetize an App?
Christine
Christine

Posted on

How to Monetize an App?

How to stay afloat when there are so many apps that are free to install? According to Statista, more than 95% of all Android apps on Google Play are free as of August 2021. This means that people are not just buying applications anymore.
If this is so, how do free apps make money? Is there any way to generate revenue from free mobile apps, after all? The answer is YES and we are going to speak about how to monetize an app. We will cover different monetization strategies with a focus on their good and bad sides. Read it if you are a developer or an entrepreneur.
When it comes to monetization strategies, there are no trivial points. Wrong strategies are a pain for your business and a waste of resources. Take 10 minutes and go through this article to know more.

Strategy No: 1: In-App Advertising

Yes, you are right! Ads negatively affect user experience. But the industry is smarter. New types of ads are being developed that do not interfere with user experience and add value. Let's talk about some of them.
Affiliate ads
This is a way to generate revenue by advertising other apps, products, and services through your app. But once again. How not to affect user experience? One solution is to suggest something that relates to the content of your app. Another solution is to link the advert to a relevant point of user journey. Users don't like to wait. So, you may run an ad when something is being downloaded or in-between game levels.
Info: 10 seconds is about the limit for keeping the user's attention focused on the dialogue. For longer delays, users will want to perform other tasks.
Native ads
These are perhaps the best ads that have been adapted to particular situations. Normally, there is a feed of some sort that does not look different from the posts in the timeline. That's why they are called ''native''. They are just like another post in the timeline. These ads have higher conversion rates and are rather popular because they don’t make impatient users even more impatient, in other words, they don’t affect user experience.
Reward ads
In this case, users are suggested to get an offer if they engage with the content. For example, when playing a game, users may be offered an extra life or power-up if they watch a video. This works well when the reward is offered at the right time. Rewards ads pay from $1 up to $15.
In-App Advertising: Pros and Cons
Pros:

  • A simple way to generate revenue;
  • Easy to implement.

Cons:

  • May affect user experience;
  • Is beneficial when the app audience is large.

Strategy 2: Freemium – Try Before You Buy

The Freemium model is easy to understand. The app offers basic or limited features to the users for free and then charges a premium fee for additional or supplementary features. It seems like a smart move but the question is “how do you convert your freemium users to paid users?”
The first and very important step is to offer users some value. Once they feel they need the app they may think of turning to paid users. But this is not all.
Another technique is to grant limited time, not limited access to features. If your users feel they need the app or get used to it, they will easily convert to paid users.
You may also unlock some features for a lower fee than a full upgrade. This is a lucrative step for some app owners as this gives users a sense of what the paid app will be like.
Another way is to offer an ad-free version. Users just hate the adverts and some of them would like to enjoy the app without them.
Finally, show your customers what they are missing by always highlighting the paid features.
Freemium model: pros and cons
Pros:

  • Attracts new customers;
  • Can generate revenue both from the ads and subscription.

Cons:

  • Companies may lose money supporting a large base of free users;
  • You may burn your cash until the users convert to the paid model.

Strategy 3: In-App Purchases

This is another good way of generating revenue while your app is downloaded or used for free. You offer goods and services on your app. You can offer additional features of your own app or sell other companies’ goods and services while making a commission from the sale. For example, Apple and Google both take 30% of every in-app purchase through your app.
In-app purchases are especially used in gaming. To level up, win or advance players are offered to spend a little money through in-app purchases. Free games are not really free.
In-app purchases: pros and cons
Pros:

  • Easy way to earn extra cash;
  • A way to increase the pool of paid users.

Cons:

  • It may be destructive to users;
  • Few may be willing to pay.

Strategy No: 4 Lead Generation

Lead generation is another way apps can generate revenue. What is it and how to generate money from leads?
Leads are prospects that are there in the market and have an interest in your product or service. Businesses apply various lead generation techniques such as:

  • Blogging
  • Email marketing
  • Social media marketing
  • Networking
  • Coupons
  • Live events and seminars
  • Website landing pages.

Many businesses make the mistake of targeting everyone and not only those that have an interest. This is a waste of resources.
How to identify potential leads?
The first step is to research the behavior and preferences of your customers.

  • Who are they?
  • What age?
  • What do they prefer more?
  • Why?

Answering these questions will identify prospective leads as it is most likely that they will have the demographic and other characteristics as your real customers.

Strategy No: 5: Mixed Monetization Model

Freemium? Premium? Ads? In-app purchases? This decision is not easy to make. A wrong choice or its poor implementation can cost you your business.
It may seem obvious that the best way is to use the mixed monetization model but when to use it, how, in what combination, and in which cases?
Image description
Question number 1: When to use the mixed monetization model?
The answer is “always”. It’s always good to diversify your income sources and generate revenue from multiple channels. That's why many successful businesses are turning to a hybrid model.
Question number 2: How to use the mixed monetization model or in what combination?
It depends on the type of your business. If you have a large audience, then advertising can be a good income generation tool. But if you are a startup, freemium may be the best choice in combination with in-app purchases.
In any case, you need to constantly study the type of your target audience and build and reshape your business according to their needs and preferences.
You can use various lead generation techniques, like blogging, email marketing, networking, and social media marketing. But always remember. Your budget is not limited. By studying the composition and preferences of your customers, you can target potential buyers and not just anyone.
Question number 3: In which case?
If you are a starting business, blogging may be an expensive tool for you. Instead, you can use aggressive social media marketing with a targeted audience. Once you are on foot, you can generate leads from your website as well.

Conclusion

We hope we have shed light on the question “how to monetize an app”. This list is not exhaustive and you can find other ways of monetization like in-app bidding, reward video apps, interstitial ads that also can help you generate money.
However, you need to be alert all the time as the mobile industry is changing rapidly and so do the monetization strategies. As developers continue to test what attracts players and users, new strategies are going to come up.
So far, the mixed monetization methods have been successful with many businesses. How and in what combination to apply these tools totally depends on the type of your business and your customer preferences.

Discussion (0)