How & when to monetize your app

When we’re speaking with clients about their app, there’s one question that pops up more than platforms, UX, features, and maybe even development cost: How will my app make money?

For good reason too – it’s an important question to ask – apps need to make money somehow. Fortunately, there’s lots of ways to monetize your app:

  • Advertising
  • Initial install cost
  • Freemium content
  • Subscriptions
  • In-app purchasing
  • In-app currency
  • Sponsorships

We’re going to get into each of these methods in a second, but first, we need to ask another important question: When is the right time to monetize your app? We’ll look into that after we go over the different ways you can monetize your app.

Advertising

If implemented correctly, ads can bring a lot of profit to your mobile app. This is the most common form of monetization within apps, and for those with large user bases, it can be remarkably profitable. There’s a lot more methods to advertising than the classic banner ad:

  • Interstitial – Fullscreen ads that appear during natural transition points, usually between two different screens in an app
  • Video
  • Native – These are ads that appear to be built into (or native content of) the app – like LinkedIn’s in-feed advertising
  • Rewarded ads

The trick to advertising within your app is making sure the ads both demand a user’s attention and mesh with the UX simultaneously. This can be achieved in a number of ways, a classic example being only selling ad space on your app to companies that offer services or goods your users would be interested in.

Possibly one of the most interesting forms of advertising is rewarded ads. With an eCPM of $16 on iOS, these ads have a very low CPC compared to other methods of advertising. Rewarded ads accept that users really don’t want to be bothered or interrupted by ads – and because of this awareness, they reward the user for viewing them with in-app currency, discounts, extra content, and many other digital rewards. Due to their self-aware nature, rewarded ads see the highest engagement and conversions when compared to other forms of advertising.

Initial install cost

For a lot of apps, an up-front install cost is going to stifle your growth. There are a few types of apps users are willing to pay for, however:

  • Health and wellness
  • Fitness
  • Productivity
  • Specialized services

ASO plays a huge role in convincing users to pay to download your app. As we’ve gone over before, keywords are your key to success on the App Store and Google Play. Your in-store efforts should work in tandem with your website’s SEO and Adwords campaign – utilizing the same keywords for both SEO and ASO gives you a better chance at capturing and funneling users into download conversions.

One thing to keep in mind is that if this is the only method of monetization your app utilizes, your user base must continually grow, or your profits will stagnate. Only the top performing apps really see a huge profit from downloads. For example, in Q1 of 2018, almost 20% of apps on Android saw 10-50 downloads total, while the top 0.1% saw over 5 million – a huge discrepancy.

Freemium content & subscriptions

Both of these methods of monetization work using the same general idea; show your users what there is to offer, get them hooked, and then ask them to pay for more. It’s try before you buy with apps.

Free trials that allow users to explore an app for a set amount of days work well for both consumer facing and internal business apps. If your app’s UX is strong and solves your users’ pain point (and they’ve had enough time to associate your app as the solution), getting them to subscribe is easier than you’d think. You can even have different levels of subscriptions, to catch a wider range of users – some may not need a “premium” package, but still want to use other features in your app.

Subscription based apps are great for audiences that might not grow, but engage. If your app has less than a thousand users, but every user is paying $10 a month, that’s a lot better than one thousand 99 cent downloads.

Freemium content can be a little trickier. This is a careful balancing act – your app must have enough free features to draw users in, and show your app’s value in their lives, but leave them wanting more. Just enough to keep them coming back, but with the promise of a better UX if they pay for it. This is a popular way to monetize your app – 64% of users of freemium mobile games make a purchase every month.

This method works very well with consumer facing apps like mobile games – a few levels or missions can be offered as a demo of sorts, which gets your users hooked by the gameplay or storyline, and then (when the app holds perceived value with the user), you offer them more.

In-app purchasing & in-app currency

Both in-app purchases and in-app currency are fantastic ways to monetize consumer-facing apps, especially games. One great aspect of in-app purchases is that they actually rank for keywords in the App Store, which can be a tremendous boost to your ASO efforts.

In-app purchases can be a one-time deal, or last throughout the user’s lifetime of engaging with the app. For example, a user could purchase a new costume or skin for their character that would be available to switch out at any time, or they could purchase actual in-game items that are depleted once used. Both are very tempting options for gamers.

In-app currency works much in the same manner – but these purchases are only consumable – meaning once they’re purchased and then used, they’re gone. Think $10 = 1000 coins, or whatever conversion rate makes sense for your mobile game. Just like tiered subscriptions, offering multiple packages at different price ranges is a great way to catch more conversions.

Sponsorships

If your app has a decent sized user base with high engagement, but is still struggling to turn a profit, you might want to consider sponsorships. Unlike ads – which are constantly changing, utilize different tactics to grab attention, and sometimes interrupt the UX and flow of an app – sponsorships are an unobtrusive way to advertise a company’s brand.

This is what happened with Runkeeper, an app that tracks workouts and rewards runners based on their fitness goals. Asics, seeing the value of the engagement users had with the app, sponsored it, giving them a continuous stream of users associating their brand with an app that was a part of their daily lives, and brought a great method of monetization to Runkeeper.

When to monetize your app

This is the most important question of all when coming up with ways to monetize your app. And, unfortunately, like most important questions, there’s no concrete answer. Users are fickle, and they’re more likely to delete your app than engage with it. Put yourself in your users’ shoes; would the method of monetization you’re considering interrupt the UX? Would it tarnish their relationship with your app? Do the ads bring extra value to the solution your app provides? Is your monetization pertinent to your app? Do you expect to grow rapidly, or slowly, but with high user engagement?

These are all great questions to ask, and one of the best ways to find out is with A/B testing. What happens to user retention when you add a sponsor to your app? Do users exit your app after being presented with an interstitial ad?

Don’t be afraid to test out different methods – but make sure they make sense.

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