Developers wondering how to monetize mobile apps only need to turn to their favorite app to find the answer: in-app purchases and in-app advertising. Each monetization method has its benefits, and, depending on the nature of the app, one may be more effective than the other. Other methods of monetization, such as charging the end user for the final product, selling app data, or establishing affiliate-based models, can be just as effective.
Freemium, or In-App Purchases
The freemium model is slightly more popular than advertising-based monetization models, according to Marketing Land. Developers who choose this model will distribute their core product for free, but offer certain features as paid upgrades. This is particularly popular among games, which can offer in-game bonuses, power-ups, and other rewards in exchange for cash.
For certain types of app, this can be a very useful and lucrative model. With complex apps that offer a lot of features, games, or apps that have different tiers of content or service, a freemium model may be worth testing.
However, the study in Marketing Land also indicates that just a minority of users actually purchase paid features in the apps. According to Marketing Land, “the overwhelming majority of freemium app users are not being monetized – that is unless the model is complemented with ads.”
How to Monetize Mobile Apps with In-App Advertising
The next most popular method is in-app advertising. This works well for pretty much any type of app, and can also be combined with the freemium model. It is also the go-to solution for apps that don’t offer enough functionality to warrant paid upgrades.
In-app advertising also offers perks that traditional display advertising doesn’t: users are more engaged and more targeted, therefore the ads themselves are more contextualized. Creative advertising solutions can blend seamlessly with the app experience, and all of these factors help increase user satisfaction and conversion rates.
The third most popular method of monetization is the paid model, where developers and software publishers simply charge users for the product. This model is often combined with the other two monetization strategies.
While paid apps can generate income, it can be a tricky and difficult business. Mobile users are often reluctant to pay for an app they haven’t tested and may not use, which is one reason the freemium model is so popular. The result is that paid apps, being less frequently downloaded, can require heavier investment in marketing and promotion. This, in turn, can eat away at profits.
Affiliate Marketing Models
The most effective monetization methods are often the most innovative. These methods typically deliver high value to the end user, complement the functionality of the app, and don’t stand out. Some apps, such as apps that deliver coupons or find daily deals, do nothing more than aggregate affiliate links.
Affiliate marketing is a commission-based sales method that has exploded in recent years. The most popular and successful way to monetize apps with affiliate links involves useful aggregation of data. The Hipmunk mobile app, for instance, is a competitor in the travel planning space. They stand out from the competition by offering more functionality in their search engines than the more mainstream planners: you can sort flights by price, number of stops, total duration, departure and arrival times, and so on.
By adding functionality and creating user experience that competes with existing markets, they’ve been able to put themselves on the map. And all they do to monetize their app is resell travel services through affiliate programs.
Data Sales, Code Sales, and Bundling
If none of these monetization methods seem to fit and you’re still wondering how to monetize mobile apps in your situation, then it may be time to consider alternative methods.
One method of monetizing an app is by selling user data or usage data to third parties. And no, we don’t mean anything shady here… anonymous user data, such as aggregated search data or certain types of in-app user behavior, can be useful to third party developers.
Other possibilities include bundling code inside of other apps, selling your source code to other developers, or building app functionality that can be sold in a B2B market. Thinking outside the box may be necessary here, but if your app is already outside of the box, it may be right up your alley.
While there are quite a few answers to the question of how to monetize mobile apps, these methods all come down to sales and marketing. Advertising looks the most promising, but at the end of the day, the most effective monetization boils down to how well you understand what your user wants, and if you can deliver it to them in a way that works.