App Monetization Guide: How not to screw your app?

The app economy will double by 2020 and reach astonishing $101 billion in global revenue. People are eager to spend more money on great mobile products.

Yet, monetizing an app still seems to be an attainable goal for a lot of product owners.

The development of mobile app monetization plan before the app creation or in the early stages of it is crucial for the app success.

Failing to monetize it correctly is one of the most common reasons why publishers quit the market and abandon further development:

So that was the bad news.

Now you are wondering — how can I tap into the $101 billion revenue stream, instead of settling for those pennies?

Pre-Monetization Checklist

Before you start thinking dollars, you need to make sure that your product is worth paying for.

This quick checklist below accounts for the most common app development pitfalls and helps you avoid those.

Use it to build an app your users will enjoy:

How To Choose The Right Monetization Strategy

Finding the perfect app monetization model that completely fits your app requires the complete knowledge of your mobile goals. With the right model, you are at a higher chance to monetize your app properly.

For instance, games were among the top grossing apps for the past five years, according to AppAnnie and 98% of them are free to download.

With gaming — it’s simple. Most users are interested in all sorts of in-app purchases.

But what about other niches? Should you offer your app for free or ask to pay for it? How do you entice users to pay?

Considering that “free” is now the norm, we’ve looked into various in-app monetization strategies worth using.

In-app advertising via ad networks

There’s no lack of ad networks today for mobile apps. Yet, each of them has some drawbacks — low payouts, irrelevant ads, annoying terms and so on. The good thing is that you can combine different ad networks to achieve higher ad performance. If you have enough sales and ad operations expertise, you may use self-serve mediators, like Mopub, appnext, Admob etc.

If you want to save time and reduce your operational costs, it’s better to use a smart app monetization platform like Epom Apps that takes care of the mediation and ad optimization, while you focus on making your product better. This way you will be earning cash, and still have time to experiment with other monetization strategies. Here are the top-performing ad formats:

Best for: all niches

Pros:

• Rather effective if you opt for native ads and targeted advertising. Users engage with native ads 20% to 60% more often compared to banner ads.
• Mobile advertising spending will surpass desktop by 50% in 2018.
• Easy-to-implement for app developers as you only need to insert SDK code into the application.

Cons:

• People can get annoyed with ads, which may lead to app churn. Opt for native and non-intrusive ads to avoid that.
• Mobile ads can hamper in-app experience by claiming a good chunk of screen space.
• This monetization model does not work well for niche apps that are designed to help users perform important functions (e.g. catch a taxi).

Freemium

You offer users access to some basic functionality, but charge them for premium or proprietary features.

According to App Store’s top 200 grossing chart, Minecraft (priced $6.99), Grindr (priced $0.99), and Facetune (priced $3.99) were the only paid apps for the first quarter 2017. All the others use the freemium model, generating their revenue by selling items within the app.

Best for: games, educational apps, and products offering advanced functionality, any app that involves progress (has multiple levels).

Pros:

• Easy to implement if your app has advanced levels or features already built in.
• “Try before you buy” has proven to be a good business model.
• A great model for apps, which address an immediate need/pain.

Cons:

• The total cost of ownership for the app is unclear at the start.
• Only 0.5–2% users will pay for your app.
• If the free features aren’t captivating, you won’t entice users to pay.

Sponsorship

It entails partnering with advertisers, who will provide rewards to users when they complete certain in-app actions. This model assumes that your audience is big enough to attract brands to pay for exposure.

Best for: travel apps, dating apps, event apps.

Pros:

• Suitable for any niche.
• User engagement can be high since the content is relevant and/or valuable.

Cons:

• Сhallenging to find partners, whose customer base aligns with yours.

Fixed-priced revenue based on the original sponsorship agreement. You don’t earn more if the campaign performs better than expected.

In-App Purchases

In-app purchases are exactly what they sound like. In a nutshell, this app monetization strategy involves selling physical or virtual goods within your app, and then retaining the profits. In-app purchases can include a wide variety of consumer goods such as clothes and accessories.

Best for: games, ad-free apps.

Pros:

• Low risk/high profit, especially with digital or virtual goods.
• Flexible enough to support affiliate and partnership programs.

Cons:

• Most app marketplaces take a big cut of profits from digital and virtual purchases (up to 30–40%)
• You will need to incorporate a mechanism to prevent accidental in-app purchases.

Paywalls (Subscriptions)

At its core, this model is similar to “freemium” model as users get to test drive the app first, but then need to sign up for a subscription to bypass certain content limits and restrictions.

Best for: entertainment, lifestyle, music, and news-type apps.

Pros:

• Lower churn due to engaged users.
• Regular, ongoing revenue stream thanks to auto renewals.

Cons:

• Curating and/or creating the type of high-quality content your users will want to pay for is challenging.

Mixing App Monetization Models

The good news is that you can blend all the strategies mentioned above to match your business model.

The free version of your app, for example, can include in-app advertising that goes away once a user has upgraded to premium version or subscribed to premium content. Paid apps can offer in-app purchases to enhance monetization. And partnership arrangements can be integrated whenever a suitable advertiser comes knocking on your virtual door.

Just keep in mind that the best monetization strategies don’t interfere with the natural flow of the app experience and aren’t intrusive (as that only leads to churn).

What’s Next in Mobile App Monetization: Evergreen Trends To Know

Every year someone presents “The App Monetization Trends Report for (insert year)” promising to revolutionize the way you make money with apps. But don’t follow the hype and stick with the evergreen strategies instead:

The importance of mobile measurement and attribution will rise further.

Here you can find the essential list of the most important metrics to track. Hint: start with App Usage (MAU and DAU), LTV, and churn rate.

Mobile programmatic media buying helps you automate and optimize the mobile media buying process in real-time. Meaning you can serve more relevant ads to the users. Keep your app updated, use native ad formats and work with trusted advertisers.

Native and video ads are a great choice for the apps with higher churn rate, though they’ve proven its efficiency across all niches. Remember, ads need to focus on users experience first, thus should be engaging and non-distractive. Here you can find a comprehensive guide to make the native ads integration with your app.

Consider Snapchat, Messengers, IOS search ads as new traffic sources.

If you own a game app, remember that 50% of all global gaming sessions now occur in America, India, China, Brazil, and Russia. However, never stop discovering new localities: Vietnam, Latin American countries etc.

Proper planning and solid strategy are the key to increasing your app revenues. Keep an eye on your target audience and map out your monetization strategies and never stop experimenting.