Mobile app monetization: subscription-based model

If you have an app and you’re looking for a way to monetize it, our free ebook can help you choose the right monetization model.
 

Even though the paid subscription business model is the most common app revenue model, subscription-based mobile apps, including Netflix, Spotify, Tinder, Dropbox and Deezer have gained huge popularity in the last couple of years.

Mobile apps have become an integral part of everyone’s lives today, whether it’s in the area of shopping, booking, lifestyle, or service of any kind. People rather prefer to book most services with mobile apps than via phone calls or email, so creating an app became a smart move for numerous companies and businesses around the world. It saves time and makes the whole process easier and more enjoyable for users.

What is a subscription-based app monetization model?

The subscription model is similar to in-app purchases as it enables users to buy additional goods, content and features. But instead of giving them the option to buy whenever they wish, the subscription model introduces ‘subscription periods’. When users have an active subscription, they can use the app’s premium aspects, and when that subscription expires, users can no longer use them – unless they subscribe again. With the subscription model, users are able to use a feature or consume content for a predetermined amount of time called a subscription period. It can be a monthly subscription or an annual one. And when that period passes, they are prompted to extend their subscription in order to get continued access to those premium features or additional content.

2 main modes of subscriptions:

1. Non-renewing subscriptions
   Users pay for one subscription period, and when this period ends, users are prompted to choose whether they want to buy another subscription.
2. Automatically renewing subscriptions
   Users pay for the subscription and it automatically renews after each subscription period comes to an end.

Subscription model is quickly becoming one of the top monetization options due to the fact that users get to try the application for free and that subscriptions can bring in steady recurring revenue. And in addition to that, application owners pay less transactional fees to Apple and Google for long-term subscriptions – 15%, as opposed to other models that have a strict 30% fee.

The key to achieving success with the subscription model lies in providing users with a constant stream of fresh and valuable content and services.

PROS OF THE MODEL

• Provides you with recurring revenue
• Subscribers are usually loyal app users
• Significantly increases app engagement
• Users keep subscribing as long as they keep getting value from the app
• Can attract a large number of users with a free version of the app
• You can still monetize your non-subscribed users with ads

CONS OF THE MODEL

• Can be hard to determine what to put in the free version and what behind a paywall
• Paying users have extremely high expectations
• Needs to be constantly updated with new, relevant and valuable content
• Limits families from sharing the same app across multiple accounts and devices

How to make your app worth spending for your users?

If you have decided to develop a subscription-based mobile app, you need to ensure that your app includes unique features and provides useful content that is worth spending for your users. There are many free versions available that are somehow similar to your app, but how to stand out and make your features with spending money?

• You should be aware of your users’ needs and constantly work on improving their experience. 
  Analyzing their interests and behavior can help you get to know them and learn what type of content and features can keep them interested – content is behind the conversions. It is vital that your content in a subscription model is way better than the one you offer in the free trial.
• Providing users with personalization helps with keeping them happy and satisfied with your app. 
  You should also send notifications and emails when you launch your app updates as it will connect with their specific interests.
• Converting free trial users of your app to subscribers by offering discount offers on your subscription model can also be a great way of gaining subscribers. 
  If they liked the app during the free trial, there is a great chance that they would go for the subscription – just focus on the users whose free trial is ending shortly and target them with an offer they can’t refuse.
• You should limit the trial version of your app to just one device per user, so you can save the strategy of syncing multiple devices for subscribers. 
  That way, you can make users switch from a trial to a subscription model by paying a monthly or annual fee.
• Do research on your users and their spending habits. 
  If you have users from the 18-25 age group, be aware that they can’t afford the same amount of money for the subscription as the ones that are 28 or 35 years old. It’s not that much about the willingness, it’s about the possibilities and the income of your target group.
• Define your market wisely and find out as much as you can about your competitors. 
  Analyze what makes their apps stand out and find their weak spots – they are those key elements that can make their subscribers switch to your app.

If you’re interested in different monetization models and you would like to find out more about the future of monetization, download our free ebook!