6 models of app monetization

Models of app monetization – do you know how to get paid for your dedication and creativity? As you have already noticed, most of the applications are available for free. Is it profitable? The app creators have to spend their time and money to make great apps and then they grant free access to their software – is that not a clear loss? To dispel the doubts we have prepared a combination of 6 models for app monetization.

What is app monetization?

The simplest way to explain this, app monetization is the method used by app creators (and other stakeholders) to make money on an application. Accordingly to the data available on Statista.com it is expected that mobile applications will generate a revenue of 935 billion US dollars by the year 2023. As we see this is a market with potential.

But, to be able to enjoy any real income, one has to develop a strategy of how to earn money on a product. In the first instance, the users have to download the application – we have to decide if they should pay for it. You should analyze the pros and cons of both solutions.

More applications on the market could be downloaded for free. For this reason, users are accustomed to freeing offers. Moreover, the necessity to bear the cost just at the beginning of their adventure with the product can discourage them from downloading. On the other hand, people who decide to pay for the application are sure they need it and get more involved, hence we may expect that we will get active users.

Free download doesn’t mean that you will lose. There are other ways to monetize your app, read the text below to find out more.

Subscription

This model of monetization was already discussed in detail in a separate text. In short, this model means that the creator offers the user access to the application under a fixed, cyclical rate (subscription). The strategy matches the products, that offer access to content that is regularly replenished, such as music or e-books.

It is a good solution for the business to generate regular revenues. It allows the establishment of clients’ segmentation, what brings gives better adjustment of the offer to the selected users.

What is problematic is the necessity to persuade clients to purchase the subscription. What is helpful is the free trial, during which the users will have the possibility to find out about functions and the overall value of the application. It is worth using the time of free trial to build trust and loyalty, which should encourage the clients to stay with the solution instead of searching for alternatives among the competition.

Freemium

The other way to monetize the app is the freemium model. It relies on the fact that the basic version of the product is shared free, while access to the advanced functions or benefits requires an additional charge. The app creators have to develop well a division between the free and the paid version of their product. If the basic version of the product is fully functional and rich in free solutions, the client may not want to move and switch to a paid version.

From the perspective of the business, the freemium method, is a very good marketing solution, because free applications are eagerly downloaded by clients. On the other hand, clients do not get attached to this solution, hence they can be inclined to abandon the application, instead of buying the paid version. It is usually reflected in the wages of the company, which can record fluctuations in revenue.

Advertising

In the case of free applications, income is generated thanks to the advertisement. The owner of the app can settle with the advertiser for the number of clicks in the advertisement or the display. There are different formats in a creative advertisement, such as full-screen pop-ups, video advertisements, banners, etc. Additionally, such applications frequently collect data about the users. The data is later used to match the content to the client’s behavior or interests. Popular examples involve Facebook and Instagram.

In this model, the income is reached thanks to the offering of products that can be bought in the application. Those are both physical and virtual goods. Many mobile games are based on this monetization model, thanks to this users can buy additional lives or improvements. It has an impact on their involvement, loyalty, and reduction of the risk of application abandonment.

The benefit of this solution is the lack of pushiness from the app creator. The user has to decide if he wants to make shopping in the application.

In the case of the purchase of physical products, the creators can earn on goods related to their brand. This applies to the most popular players, who created the demand among the users for gadgets, accessories, t-shirts, and another such types of products that contain the logo or relate to the application. It is not a good solution for all app creators.

Transaction fees

If there are transactions inside the applications, one can use the model that charges the commission for them. The creation of a such platform, on which third parties can sell or buy different types of goods requires the owner to provide the security of transactions, data protection of the users, and preparation of the regulations. The income depends on the number of such transactions hence the app creators should build up a huge and active community, which will be eager to use the application.

Sponsoring

The less popular solution is finding a sponsor, that will want to fund the application, in exchange for the brand or products presented. To make such a solution sensible, the target group has to match the target group of the cooperator. The app owner has to offer this partnership to the company, which can benefit from the deal.

The biggest chances to earn profits from sponsoring have the applications that have gained popularity and have a large user base or that act in a specific niche.

Summary

The above methods of monetization prove that there are earning possibilities besides paid downloads. The applications that are available for free can generate income, that will satisfy the creator and the rest of the beneficiaries. The app owners can combine above models accordingly to the needs and strategies of the company.

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Author: Martin Sparks
E-commerce enthusiasts which constantly digs around the internet in order to make sure he hasn’t missed any important information on the topic of starting and scaling profitable online stores.
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