Four Ways Mobile App Startups Make Money

Have you designed a mobile app, are interested in selling it, but you want to know how to monetize it? Or, perhaps you already have a live mobile app and are needing ways to make an income. Either way, following a handful of steps will help you turn your mobile app into money.

Four ways mobile app startups make money are: advertising, sponsorships, subscriptions and in-app purchases. There are multiple strategies involved in this process. Some apps focus on certain areas of app monetization, while others often incorporate multiple aspects for monetization.

It can be challenging and at times, daunting to stay afloat in the app economy. Generating a steady stream of revenue will help to ensure your app doesn’t fail. Keep reading to find out how to monetize your mobile app and get a better understanding of the process so that you can make a sound decision.

Why is App Monetization Important?

Learning how to monetize your mobile app is very important, because it has become more and more common to find apps that are free to download. This is where you will need to formulate a strategy. 

It’s crucial to take the time to formulate a strategy that ensures these two things happen:

• Your app generates growing revenue.
• You keep your users engaged and having a positive experience.

This second point is often overlooked. Looking at and studying the effects of monetizing your mobile app is just as important as increasing your revenue.

Why is User Experience Important?

Experience is crucial to a successful app monetization strategy, because revenue requires happy users. Monetization mostly harms the app user experience. This can be alleviated, but it’s still there.

If you depreciate the value of the user’s experience, they will be turned off. This will result in reduced activity, reduced in-app purchases, less ad interaction and bad reviews that result in less app downloads.

Based on the number of active users, typically, you can calculate your monetization revenue. Again, user experience is key and will be affected by user experience.

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What Can We Learn from This?

As far app monetization goes, advertising is still the most popular strategy. However, it is starting to decrease per user. The main reason for this decrease could be due to the revenue per user is decreasing as additional apps look to get into monetization advertising.

Subscription models are becoming more and more popular. For example, pay monthly models are working in so many other industries. Look at Netflix, Spotify, etc. App developers are learning that users who subscribe, as well as engaged users are worth far more than a single paid user. We will discuss in more detail, all of these points, as we look at each of the four different app monetization strategies. 

Here are some questions to consider when formulating a monetization strategy.

• What app monetization strategies are there?
• Which ones are most effective?
• Which ones generate the most revenue for your app?

For those who are new to the world of app building, app monetization strategies can be very complicated. There are a number of different ways that you can garner revenue from your new or existing app. Some developers focus on one way to monetize their app, while others take a more hybrid approach. 

As you have learned, advertising is still the most popular among app owners, because it generally generates a lot of discussions. There is no one simple solution or a one size fits all approach to in-app advertisements. Each app is different and because of that, it implements advertising differently and attracts different audiences.

Let’s take a look at the different advertising options, shall we?

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Advertising

• Benefits – Advertising is quick to implement a simple app monetization process.
• Concerns – Advertising can have an affect on the app experience, only generating significant figures if you have a larger app audience.

The short truth is this – A lot of apps would fail without some kind of in-app advertising and mobile ad networks. Let’s look at the different types of in-app advertisements that are common.

Banner Ads

Banner ads were more common when there were two versions of apps, free apps and a paid version. The quickest way for an app to generate revenue was to have an ad-free version. But, banner ads are not the best ads due to them being unattractive, annoying, they have low engagement and they don’t garner much revenue.

Interstitial Ads

Like banner ads, as a developer, it is important to look at alternatives to bad in-app advertising. The most common problem with banner ads are their size and their intrusiveness. One way to rectify this problem for the user, is to take the same banner advertisements and make them full-screen ads.

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Native Ads

Unlike banner ads and interstitial ads, native ads are ads that have mostly been adapted to the feel of an app. The ads meld seamlessly into the app and when applied accurately, they do very little to affect the user experience.

Native ads have a higher engagement rate. This is probably due, because the ad corresponds with the app. However, there are questions about the effectiveness of the ads. In other words, if the ad is essentially tricking the user into clicking because they think it is an organic part of the app, this will harm the user experience.

It’s ideal to make the native ad look and feel ‘native’ or like it belongs, while also providing a clear indication to the user that the content they will land on is an advertisement. Twitter does this well on their mobile app, as well as most all social media platforms.

Affiliate Ads

Another method to monetizing your mobile app is to use affiliate ads. They generate commissions from other products, apps and services.

These ads work, because online shopping is increasing more and more. Remember, the key is the experience. Try and link the advertisement to appear at relevant points in the user journey.

Reward Ads

Reward ads are increasingly popular, especially in games that users spend a good deal of time playing. Here are some examples of reward ads:

1. Where the user watches an ad for an extra life or play.
2. Where the user watches an ad to wake up in-game characters.

This is a reward that encourages the user to engage with the brief ad content. All ads need to be relevant to the app.

Collecting Data

Collecting data from customers calls them out individually and allows for a more personalized ad experience.

Sponsorship

Obtain sponsors for apps. Example: Design a pill identifier or a pill reminder app which can be sponsored by a hospital or pharmaceutical company. Apps that are popular within a certain market, related companies in that same field may ask to sponsor your app to reach your audience with their brand.

As you think about and plan your next app or if you are looking to monetize your app, think about the target niche that it may attract and the different, related brands that would possibly be interested in that audience. If large enough, brand sponsorships could be a great choice for monetization.

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Subscriptions

Use the app for free for an allotted time or, if the app is a game, up to a certain level. Then, the user will pay for the services after the allotted time or level, etc.. Subscriptions can be split into two categories:

Non-Renewing 

Non-Renewing is for a fixed period of time. This include things like a sports season pass and subscriptions for a set period of time: 6 months, 1 year, etc..

Auto-Renewable

Auto-renewable are subscriptions for a period of time where the subscription will automatically renew. These include things like: newspaper subscriptions, magazine subscriptions and ongoing services such as Netflix, Hulu Plus, and NBAPass.

In-app Purchases 

In-app purchases can be separating into two categories:

a). Consumable – Items to be purchased every time the user wants to use them. 

You’ll need to buy these items every time you want them and once purchased. Examples include: game currency, extra health and special bundles.

b). Non-Consumable – You buy these items one time and you can transfer them to other devices that are associated with your user ID. These include: upgrade to pro edition, removal of ads, and unlimited hints.

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Frequently Asked Questions

• When is the best time to launch an interstitial ad?

The ideal time to deliver an interstitial ad is when a level is complete in a game app.

• If you uninstall and reinstall an app or install an app on a new device, will you still have the consumable in-app purchases?

If you uninstall and reinstall an app or install on a new device, you may lose your consumable purchases.

• If you lose a non-consumable purchase, can you download it again? 

You might be able to download it again at no additional cost.

To learn more on how to plan your own mobile app business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.