Top 10 mobile app monetization models

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.

Whether you’re running a large international enterprise with thousands of employees and clients, or you’re a solo developer looking to build your first app, you need to understand how to generate money from your mobile application in a way that would be most beneficial for your business, but also your users. You need to build a sustainable mobile business, and the creation of a detailed strategy that will enable your application to grow and bring income to your business is a very important step when monetizing your app. If you’re looking for a way to do it, these are the models you want to explore.

#01 Premium apps

This monetization model is pretty straightforward – if people want to use your app they must first purchase it from the app store. Once they pay for your application, they get complete access to all of its features.

When the app markets just started, this was the only available monetization model. Today, successfully using this model can be quite difficult as the competition from free apps is extremely high and newer monetization models are proving to be more user-friendly, as well as more lucrative for businesses.

IDEAL USAGE

This monetization model is ideal for top of the line B2B apps that provide clear business values, as well as apps with unique features and niche audiences looking for very specific solutions.

PRO MONETIZATION TIP

Users are rarely ready to buy an application they haven’t had a chance to try out first, so consider providing them with a lite version that has an implemented free trial period. After they’ve had some time to really test out the app and its features, users will have a much larger

#02 In-app advertising

In-app advertising is a monetization model in which app owners earn revenue for showing third-party ads within their mobile applications. Without this model, a lot of apps wouldn’t even exist.

This is one of the most popular revenue models because it can be used in almost any application. Mobile apps that use this monetization model are usually completely free for users, and app owners focus on earning their revenue from advertisers. In-app advertising model is universal, as it can be used on almost all types of mobile apps and it works for as long as an application has active users.

IDEAL USAGE

This monetization model is ideal for all types of free apps that have the potential to be used frequently and for long periods of time.

PRO MONETIZATION TIP

Although it may sound like a good idea to put as many ads as you can into your application, the truth is that you always have to put user experience first. If a specific ad type or ad frequency within the app has a negative effect on user experience, users will be less likely to use the app.

#03 Freemium apps

The word “freemium” is a combination of the words “free” and “premium”, and it perfectly explains what this monetization model exactly is – free meaning users have access to the basic functionality and premium including additional features, goods, content and other options not available in the free version.

Freemium is one of the more complex app monetization models as it consists of two equally important aspects. A large portion of the app’s functionalities are completely free to use (and the app itself is free to download), but if users want to unlock additional features and options, they need to pay for them.

IDEAL USAGE

This monetization model is ideal for apps that provide a continuous value for users – ones with a great free version and a premium version that provides unquestionable benefits.

PRO MONETIZATION TIP

In order for the freemium model to work, the free version of your app needs to find the sweet spot between providing users with too many or too few features. If features in the free version of the app are too good, users won’t have the incentive to buy the full version. On the other hand, if they aren’t good enough, users won’t think the full version of the app is worth the money.

#04 In-app purchases

Despite the fact that only 5% of users make in-app purchases, revenue earned from this small percentage is almost 20 times higher than revenue earned from all the other users.

In-app purchases are one of the most widely used app monetization models – it revolves around the application being free, but enabling users to purchase various types of digital goods. Those goods can take many forms – from additional app features, in-game currency and power-ups to additional content, new levels, customization options and anything in between. A key component of this model is that the free aspect of the app must be fully functional – in-app purchases should serve only as enhancements to the user experience.

IDEAL USAGE

This monetization model is ideal for games and service-based apps that are engaging enough even if users don’t spend money, as in-app purchases are used to improve the experience.

PRO MONETIZATION TIP

Users like the idea of using a free application and having the option to spend money if they feel like it. You just need to make sure that every in-app purchase you incorporate into your app provides real value and boosts the overall user experience. Otherwise, your app might fall into a cash grab category and users really dislike cash grabs.

#05 Subscriptions

This strategy is like a free trial mode as it enables users to download and try the application for free, but then require a subscription to bypass feature or content restrictions.

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 app’s premium aspects, and when that subscription expires, users can no longer use them – unless they subscribe again.

IDEAL USAGE

This monetization model is ideal for apps that have top-quality features, are primarily service-oriented or very content-centric, and whose overall concept encourages frequent and
repeated usage.

PRO MONETIZATION TIP

Steady, reliable revenue and the overall financial predictability of this monetization model have made both Google and Apple double down in their efforts to make subscriptions the primary monetization model. They have even decreased their commission from 30% to 15% when it comes to all subscription renewals after the first year.

#06 eCommerce apps

This model is also straightforward – your application is a marketplace through which you sell physical goods.

Taking advantage of the eCommerce model focuses on building a mobile application that serves as your digital storefront. And more and more brands are turning to this model due to higher profit margins and the fact that app stores don’t charge a commission for selling physical goods through an app (as opposed to virtual goods that are sold as in-app purchases and are subject to a 30% fee).

IDEAL USAGE

This monetization model is ideal for apps whose primary focus is selling physical goods to specific audiences.

PRO MONETIZATION TIP

If you want to maximize user engagement, you need to leverage push notifications. As users are more likely to see a notification than open an email, you can incite them to buy more by creating a push notification strategy and sending offers specifically tailored to their needs.

#07 White labeling

If you created a mobile application with unique functionality or one that solves a specific problem, you can monetize it by reskinning it for other brands or licensing your code to other companies.

A white label product is a term that means you are creating a product that another company can buy from you, rebrand it and sell as their own. It is a great option for earning additional revenue from that application without affecting your customers’ experience by implementing some other monetization models.

IDEAL USAGE

This monetization model is ideal for apps that are built on unique concepts that can be applied to multiple brands. It is also great for pulling additional revenue from apps that are at the end of their lifecycle and have stopped being profitable on their own.

PRO MONETIZATION TIP

In addition to earning revenue by reskinning and reselling your entire application to other brands, you can also resell your mobile application’s code. This will enable other companies to use your application’s code as a framework that will enable them to build their own applications on it.

#08 Data licensing

If your mobile application has a large number of active users, you can start collecting information on their behavior and sell anonymous data to third parties like advertisers and analytics companies.

App owners have been collecting user data for ages – it showed them how their applications are being used and what aspects should they improve. But, prices that companies are willing to pay for user data are constantly rising, so a lot of app owners want to leverage that situation and generate additional app revenue. The more daily active users an app has, the more precise, relevant and valuable that data is for data collectors.

IDEAL USAGE

This monetization model is ideal for apps that have an extremely large and engaged user base and can generate a significant amount of data on client preferences or habits.

PRO MONETIZATION TIP

If you decide to focus on data licensing as your primary model of monetization, make sure to be mindful of different privacy laws connected to the action of selling customer data you’ve connected through the application.

#09 Sponsorships

Sponsorship revolves around brands and agencies paying to have an exclusive spot within your app. With this model, brands provide relevant rewards to your customers when they perform specific in-app activities, and you earn money by taking a share of the revenue from redeemed rewards.

This model is among the newest addition to app monetization as app owners looked for a way to gain revenue from advertising, but without decreasing the application’s user experience by incorporating traditional banner ads. By directly partnering with specific brands, you can not only control the type of promotional content that will be displayed within your application and make sure that it is relevant to your target group, you can also create brand activations that are more creative, engaging and interesting to your users. And that can ultimately lead to increased user loyalty.

IDEAL USAGE

This monetization model is ideal for apps that want to provide their users with customized experiences and can partner with a brand that has a similar user base so all their activities feel like native elements of the app.

PRO MONETIZATION TIP

For the sponsorship model to be effective and provide you with revenue, your mobile application’s user base needs to be either large enough or niche enough to attract brands that will want to pay to get additional exposure through the application.

#10 Indirect monetization

This monetization model is quite different from the others as it doesn’t provide direct financial benefits through the app itself. It revolves around creating a custom mobile application that takes your business models, digitizes them and provides you value by making your business more streamlined, efficient, profitable or just better overall.

With more and more companies embracing digital technologies as one of the primary ways to upgrade their businesses and speed up past their competition, demand for high-quality custom mobile applications that can turn traditional business processes into technologically advanced agile solutions is constantly on the rise. To have the most effect on your business, mobile applications need to be tailored to fully fit your needs. In order to do so, they can be implemented with a wide variety of customized features.

IDEAL USAGE

This monetization model is ideal for companies that want to digitize their business processes and have decided to leverage the benefits of mobile technology in order to do so.

PRO MONETIZATION TIP

If you create a mobile application to streamline, simplify or upgrade business processes within your company, try to see if your application could be turned into a Business Process as a Service (BPaaS) platform, and earn even more revenue by licencing it (or smaller, less feature-packed parts of it) to other companies.

Want to learn more about mobile app monetization?

Besides these specific monetization models, there are also hybrid models of app monetization. A hybrid model is a combination of two or more monetization models that complement each other to provide your users with more choices when it comes to using the application, and you with more opportunities to earn income.

If you’re interested in creating a detailed strategy that will enable your application to grow and bring income to your business, or you just want to find out more about app monetization models and their pros and cons, download our free ebook!