Modern civilization is, at its core, a mobile-driven one. Our phones and tablets make work, study, shopping, and entertainment remarkably easy to reach wherever we go. We can handle an incredible amount of tasks thanks to apps inhabiting our beloved and indispensable gadgets. With the increasing popularity of high-tech products, the mobile app market has become one of the most lucrative business fields. You don't have to look further than your phone to see the utilities and games that generate ever-increasing revenue for IT companies that manage to capture the public's fickle attention.
However, big-time prospects also mean fierce competition. How can you make sure you will satisfy the global audience and make money with an app you offer them?
You need to meet several important conditions before you can create an app that makes money. You should discover the demand for a certain application type, start with building an MVP, stick to a human-centered design process, make the most of a UX designer's work, and do dozens of other things necessary to create a user-friendly and visually appealing product. However, all these efforts may go down the drain if you don't know how to make money on apps.
This article will explore the most effective strategies to make money with mobile apps to help you devise a profitable app model for your product.
The best ways to make money with a mobile app
Let's take a look at the most popular app monetization models utilized by astute entrepreneurs in this industry:
1. In-app advertising
This is the simplest and most widespread way of making money with apps, utilized by 32% of solutions on the market.
There are several approaches to including advertisements in an app:
Banner ads. The pop-up pictures with images and text that appear in various parts of the screen. Modern apps often utilize user data to create personalized offers, maximizing their efficiency.
Interstitial ads. Unlike banner ads, these take up the entire screen space but appear only when the app is loading or paused. They are considered the least invasive ads since they can be closed.
Video ads. As a rule, such ads are accompanied by loud sounds and can't be skipped or closed. The video screen typically includes a link that viewers can click to download the advertised product.
Native ads. The main value of such promotions is that they don't look like ads at all, which means users won't try to block or skip them. They are seamlessly integrated into the app's fabric as a part of the publisher's content.
Incentivized ads. Also known as sponsored or rewarded advertisement, this method of making money from apps offers customers rewards or bonuses (virtual cash, in-game points, a discount on a product, etc.) for doing something the advertiser wants them to do. According to estimates, such an approach increases conversion by 27%, as people enjoy getting tangible benefits here and now.
A real-world example of in-app advertising — Royal Match
Their games contain videos utilizing the fail ads approach. In them, a player is shown to botch some task, and viewers are invited to do better after downloading the demonstrated game and receive a 50-coin reward.
How do you make money from an app ad? The most common ways of calculating your profits are Cost Per Click (conventionally computed as cost per thousand), Cost Per View (better suited for video ads), and Cost Per Action (signing up, downloading, or making an in-app purchase).
2. In-app purchases
Microtransactions — Genshin Impact
This monetization model is widely employed in game apps. For instance, such ads can encourage players to acquire exclusive currency, extra lives, and in-game items. Alternatively, players can pay for a monthly pack and get a bunch of assets at once. The trick here is giving your user the possibility to enhance their experience at their own discretion.
Non-game in-app purchases can include ad removal, premium features, extra storage space, etc.
3. Subscription model
Regular fee for access to the content or service – Netflix
It is a good example of utilizing the subscription model to make money with mobile apps. By paying a fixed monthly sum, you obtain unlimited access to an incredible quantity of content (TV shows, movies, documentaries, etc.). Moreover, customers can create individual profiles for each family member to enjoy a highly personalized viewing experience. Subscription is the primary method of making money with an app for streaming companies, news portals, e-newspapers, and cloud service providers.
4. Freemium model
Upgradable minimal free product – Dropbox
This model works well for SaaS providers. Under this approach, companies offer a limited product or service with an option to upgrade to a more advanced version. It can be a one-time payment or subscription, but in both cases, it will appeal to customers who have appreciated the free version and want to utilize the app's potential in full.
Dropbox knows how to make money with an app utilizing this model. Its 600 million registered clients get two gigabytes of free storage and can increase it to one terabyte for a monthly or yearly subscription fee. 11 million customers purchased the increased cloud storage in 2017, and since then, the number has grown exponentially.
5. Sponsorship and partnership
Collaboration – Spotify and Uber
To make money from mobile apps, these non-competing brands joined their efforts to create a combined car-music experience for passengers and reach out to each other's target audience. The ride-sharing behemoth offers its customers the ability to connect their Spotify accounts to the Uber app and choose the music they like to listen to during their ride. As a result, the streaming platform's user engagement soared, and Spotify got one more channel for customer acquisition.
Another common partnership use case for money-making apps is inviting influencers (opinion leaders, popular bloggers, or celebrities) to recommend the product and highlight its functionality. This can be done on a barter basis in exchange for discounts or other similar benefits.
6. Crowdfunding model
Collective financing – Kickstarter
The most obvious way how to make money on the app is by taking a small percentage of the cash flow if the application allows it. For instance, Kickstarter offers startups exposure and easy connection with their target audience, all the while collecting a 5% cut if the project was successfully funded. CrowdFunder, GoFundMe, and other apps of this type follow a similar monetization model.
7. Data monetization
Information merchants – Michelin
It's not only about how to make money from apps directly but also how to capitalize on the information an app can gather. As a rule, such data relates to clients' demographics, social media accounts, or shopping behavior and can be sold to various organizations, which will utilize it to obtain actionable insights for customer segmentation and devising their marketing strategies.
Michelin is good at doing it. They offer raw data generated as a by-product during the sales of their tires (pressure, mileage, GPS, temperature, etc.) as well as driving behavior records. Both kinds of dossiers are high-demand items among their B2B clientele.
8. Hybrid models
As you see, there is more than one answer to the question of how to make money from mobile apps. And you don't have to choose just one of the listed options. Your product can include several money-making features, combining them in healthy proportions and getting the best of different models. But how do you discover this proportion and prioritize your app's most efficient money-making functionality?
How to choose the winning making-money strategy for your business?
There are some important factors that ultimately determine the optimal monetization model for your app.
The goal you pursue
. If you aim for quick income, in-app advertising is just what you're looking for. If you think long-term and want to win or expand your audience, the subscription model will suit you better.
Target audience
. Once you learn about your customers' needs, motifs, preferences, and pain points, you will know the best ways to win their hearts and minds.
App type
. Games, social networking, and entertainment apps are currently the most popular products in the niche. Each of them differs in the efficiency of monetization strategies that can be used there. For instance, in-app purchases or incentivized ads work better for games, while subscription or freemium models reign supreme in the world of streaming apps.
Competition in the domain
. In such an oversaturated market as app development, it is highly advisable to try and emulate what industry leaders are doing rather than challenging market norms. Study how they handle a problem, and you'll probably find the best available solution.
Assessment metrics
. The success or failure of your chosen monetization technique can be determined only if you adopt the appropriate indices as yardsticks. The measurement criteria can be conversion rate dynamics, number of downloads, or average spending, but the KPIs should be relevant for assessing the efficiency of a given money-making model.
The latest trends in mobile app development
Here is a short list of technical progress achievements that are all the rage in the contemporary IT industry:
Wearable apps. With the rapid spike in the popularity of smartwatches, head-mounted displays, fitness trackers, smart jewelry, and other wearable devices, the demand for the software that powers them is sure to grow exponentially.
Artificial Intelligence and Machine Learning. By utilizing these technologies in a mobile app, you can add multiple features for image, sound, and text processing that will allow you to personalize content, recommendations, promotion campaigns, and more.
Cloud-based apps. If you opt for cloud-based app development, you will obtain a high-performing and scalable product compatible with multiple third-party systems and improved security and data-sharing capabilities.
Progressive Web Apps (PWAs). These products are not apps in the strictest sense of the word but a type of website. Unlike native apps, PWAs don't require installation on a device, have minimal weight, perform well on any screen size, are SEO-friendly, and are much cheaper to develop.
Voice feature. Mobile apps equipped with a voice recognition feature improved accessibility and additional customer loyalty thanks to their convenience.
Dark mode and gradients. Being envisaged at the stage of writing design specifications for the app, these techniques not only pave the way for an attractive UI but also minimize eye strain and prolong battery life.
Consider Dworkz as your trusted partner
Dworkz is a seasoned IT company with dozens of completed projects in our portfolio. Our qualified and certified experts possess all the necessary skills and experience to deliver top-notch mobile apps of different types. In addition to the full-cycle software development, we can advise you on the monetization model that suits the product we have built to a tee. Contact us to get a high-performing product at an affordable price tag.
FAQ
What tools can I use to measure the success of my app's money-making strategy?
The most popular solutions used to assess the efficiency of an app monetization model include Facebook Audience Network, Apple Search Ads, Amazon Advertising, Fyber, and StartApp. AdMob has a narrower focus since it is honed to deal with in-app purchases.
How long does it take to get the profit from apps that will cover the costs of the strategy?
It depends on the app type, market niche, existing competition, and chosen monetization approach. If you start your app-powered business from scratch, the average cost recovery term is 3–5 years. In case you already have a sizable user base and launch a fairly simple app, the pay-off period may be reduced to several months.
Can I combine multiple strategies, or should I focus on one?
It is always better to envisage several ways of making money with your app than to put all your eggs into one basket and hope the selected strategy will pan out. However, you should still determine the dominant monetization method and use others as auxiliary models.