Building a mobile app or game? Here’s how businesses are making money

mobile app monetization

Are you thinking about building an app or game? Development alone might be the barrier to stop you, but then you also need to think about your product, monetization, and marketing strategies.

Before you think about abandoning ship, App Annie, a leader in app data and insights, projects that gross revenue across all app stores will exceed $101 billion globally.

A slice of this cake would be pretty nice.

When it comes to thinking about your core business model, your monetization strategy could make or break your business.

In order to capture opportunity in a crowded marketplace of app publishers, you need a solid go-to-market strategy that can adapt to the evolving preferences and demands of users. During the conception stages, it’s important to remind yourself of the core building blocks behind monetization: Value Proposition, Competitors, Features, and User Acquisition.

Here are the 6 most used monetization strategies for driving app revenue in a dynamic mobile landscape.

 

1. Freemium

mobile app fremium

Modeled after free-to-play, the freemium model offers users the ability to access the product or service for free, with limitations, or for a small cost, with premium features.

You want people to download and use your app. The free version often serves as a trial for users to understand the product, and mentally, to get invested.

Publishers will typically make basic features available while making growth, exclusive or additional features available with a one-time or subscription fee. About 0.5-2% of your user base will opt-in for premium variants or features to enhance their experience. In order to make this percentage profitable, you will need an acquisition strategy that has marketing built directly into your app. Think offering more plays or lives by inviting your friends to download the game. Virality and social validation is key.

Clash of Clans, one of the most successful mobile games, reported generating a revenue of around $1.5 million per day during its most popular period.

Keep reading to learn more about how premium features and/or access are broken down.

 

2. In-App Purchase

mobile in app purchase

In-app purchases are a subset of the freemium model. While the app is free, users have the ability to make purchases directly in-app to better augment their experience.

In-app purchases represent virtual goods or products that are optional for purchase in order to unlock features, gain access to exclusive content, and/or receive in-app currency which would otherwise require more time to achieve.

This model is most commonly found in gaming apps. Games have many components that affect a user’s journey to completion or a high score. From a scaling perspective, it’s much easier for publishers to release new content to monetize on a regular or event-based schedule.

You will also need to understand your users interests in order to shape what type of premium content on your roadmap will be successful.

 

3. Subscription

mobile subscription

Subscription-based apps can work with or independent of the freemium model. In most cases, content-based apps lead the way to capitalizing on the subscription model.

A subscription model, when competitively positioned, is one of the most successful monetization strategies.

Paired with freemium, users will usually get limited access to the app and its basic features – this is the trial period. In order to extend usage or access additional content, users will need to pay a recurring fee.

Let’s take a look at Spotify. While everyone has access for free, paid subscribers receive an ad-free experience, exclusive content, and additional features like playlist sharing and offline listening.

In the case of media or content-based apps, delivery of original or licensed content will require a subscription to start. The incentive for brands to innovate with a mobile app touchpoint is to captivate mobile-first users with exclusive content only available through their app.

Service-based apps use the subscription model to deliver their service at scale for users. Tinder uses subscriptions to unlock features like unlimited swipes or impression boosting. IFTTT uses subscriptions to enable features like multi-action steps, unlimited users, dashboard analytics, support, and more.

 

4. Advertising

mobile ads

Advertising is also one of the most popular models. This strategy can be implemented with both free and freemium apps, serving as a way to monetize with different models simultaneously.

Advertising forms:

  • Banner Ads
  • Video Ads
  • Interstitial Ads
  • Native Ads

Some of the popular advertising implementations:

  • Free apps with long user sessions and high DAU. Ad impressions and clicks are the money drivers. Think of all that money Flappy Bird made.
  • Freemium apps that have ads for free users while offering a one-time or recurring fee to remove the ads.
  • Action or moment-based advertising. Kiip comes to mind with its performance and brand solutions. Users are presented tangible rewards, like 15% off your next pizza at Pizza Hut when you reach level 50. These rewards are designed to attract users in the most seamless and native way possible.

Ads can be very fruitful when done right, but can also be damaging when the experience is affected. Spending time to creatively integrate advertising can mean a night and day difference for your users, and ultimately how you make money. We recommend incentive and reward-based advertising strategies to garner better results that provide the best user experience. These will usually come as native ads as well.

 

5. Sponsorship

mobile sponsorship

Many brands are partnering with apps for a more targeted, exclusive, and integrated presence.

Sponsorship deals are not only lucrative to the app publisher, but are also producing stronger results for brands. Brand products or services are often more relevant to users on apps that serve a hyper-specific need. Sponsoring apps are a growing trend for brands and their mobile marketing strategy. Thinking hypothetically, it might make sense for a brand like Dick’s Sporting Goods to sponsor apps such as theScore or Thuuz.

Marriott and Subway are just a few of the brands that have sponsored a mobile app.

 

5. Crowdfunding

mobile crowdfunding

Crowdfunding for apps is still fairly new and most notably applies to the development and launch stages.

In many cases developers will run campaigns on popular platforms such as Kickstarter gain exposure while taking donations for development and marketing. Initial capital is typically spent on concept designs, and the marketing efforts of the crowdfunding campaign.

Historically non-gaming mobile apps have been the most successful according to Mobile Growth Stack. While crowdfunding has been largely successful for console gaming, it does not translate the same for mobile.

MGS states: As of May 2017 on Kickstarter, there have been 138 non-gaming apps that raised funding between $10,000 — $100,000, compared to 29 mobile games that achieved a similar funding goal.

 

Conclusions

The mobile app ecosystem is going through rapid expansion. It is becoming increasingly harder for publishers to stand out in one of the most crowded marketplaces. Despite having a phenomenal app, success is dependent on user demands – something that changes frequently. If your monetization strategy does not shift with these expectations, your presence will take a hit.

We recommend you implement a mix of these different models to test and see which works best. In some cases, multiple models at once will perform just fine. When barking up the advertising route, we advise to always consider user experience before anything else. If premium fees at attached, how you come up with a competitive pricing model will require an in-depth analysis – don’t forget to factor in platform fees that apply to purchases processed by app stores.

If you’re finding yourself stuck, we’d love to help strategize with you.

Want to read more on emerging trends for app monetization in current and new markets? Here we take a deeper dive.

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