Choosing the Right App Monetization Strategy for your Business

Avantika Shergil

20.05.2019

app monetization

“Financial fitness is not a pipe dream or a state of mind. It’s a reality if you are willing to pursue it and embrace it.” – Will Robinson

If you have just built an app and expect success to follow immediately, it is nothing other than a daydream. The masterpiece that you have created won’t necessarily keep or make your business successful unless it creates value for the end users and brings massive returns to the business. When you want the app to generate better revenue, in reality, it’s essential to have a well-planned monetization strategy where the amount spent on customer acquisition must pay off in terms of sales, loyalty, referrals, sharing, and more.

The good news is that several available monetization strategies can help in ensuring a steady stream of revenue. But the revenue models to capitalize on the app cannot be a perfect fit for all types of the businesses and they should not be implemented in the app just for the sake of earning money. In addition to employing the right revenue model that works for the business, it’s imperative that it should not interfere with the user experience.

Let’s dive deep into each strategy and understand when it works best, and the things to keep in mind.

1.Make it Premium

In 2008, the paid app was the only monetization strategy that businesses leveraged to earn dollars. Later, the negative shift appeared in the revenue model with the emergence of the free app era. Users were no longer interested in purchasing an app that doesn’t provide a free version or let them try the app at least once for a limited period. This is why there was a steep decline in the number of paid apps that reduced to nearly 6% on the Google play store and 12% on the Apple store.

These staggering figures indicate that the premium model still works as opposed to the freemium model, but only when it’s used well. The app vendors can convince and convert the searchers with a pay-per-download monetization model when they invest optimal time and money in setting up the marketing material that showcases why and how the paid app outdoes the free ones out there.

The things to consider when marketing the paid app:

  • Create a landing page that communicates the app’s value with app description, clear explanation of features, best screenshots, and self-explanatory videos.
  • The PR and app reviews have a significant influence on the prospects. List the resources such as Techcrunch, The Verge, or Forbes where the app description is published. Maintain an affordable pricing structure

2.Keep Advertisements

The in-app advertisement is the most common revenue model where the ads are displayed in the app. The greater the number of users acquired, the greater will be the ads viewed or clicked by the users. It is valuable to the advertisers as they are getting enough eyeballs and it benefits the vendor who is getting high revenue based on the ad pricing model. The model is lucrative to the vendors who enjoy the virtue of having a massive user base, which is why it’s most often clubbed together with the freemium model.

There are many ways that the vendors implement the ads, such as displaying third-party ads on free apps (iOS and Android), creating the ad network on the social platform or listing classifieds to work like a pro. But, on the flip side, the key downsides associated with in-app advertising can impact the business and the users.

There a few things to consider:

  • Advertising too frequently and too early will annoy the users and affect the user experience and thus the retention rates. Choose the right ad network partner, such as Google’s AdMob, which helps in creating smart and interactive ads. Also, view the ad performance, which helps in making data-driven decisions.
  • It’s not just the high frequency of ads that brings frustration, but also poor ad formats. There is a whole slew of ad formats like: native ads (they give a native look and feel to the app), banner ads (the small banner appears at the top or bottom of the app screen), interstitial ads (the full-screen ads appear during transitions in an app), video ads (the promotional clips are displayed as an ad), or offer wall ads (typically, a page making suggestions for assets or resources). These can all be implemented in the app when they go well with the user experience and bring handsome revenue. Here, when testing the ad format it is better to maintain a fine balance between what you are getting (dollars) and offering (user experience).
  • Perhaps, you are not paying enough attention to the ad pricing model, but the selection of the right ad pricing model can help you get more revenue. Basically, there are three ad pricing models: CPM (cost per mile), where the ad network pays the vendor every time the ad gets 1000 views; CPC (cost per click) enables vendors to earn revenue when the user clicks on the ad, but is not so profitable as the ad impressions will be given for free; and CPA (cost per action), which brings revenue to the vendor when the user clicks the ad perform for the desired action such as download another app, but again they risk giving away impressions and clicks for free. So opt for the ad model and keep the price tag which creates a win-win situation for both.
  • Some apps have prioritized the user experience without sacrificing the revenue coming from the ad model by making the app premium. Yes, the apps like Spotify provide two different models to the users wherein the premium model offers the ad-free experience that comes at the price tag of $9.99 for 30 days.

3.Consider the Freemium Option

The ability to try the basic version of the app before buying is the most significant factor that has brought high popularity to the freemium model in the app market. The vendors ship the functional app that’s free to download and use, and if the app is able to entice the users, they readily pay to unlock the advanced features or levels. Majorly, the free app is made premium when it’s complemented with in-app purchases or in-app subscriptions.

The freemium strategy works best when the initial testing of the app leaves the users in the state of wanting more right away.  Any app employing a freemium model must impress the users from the beginning and so gear them up to spend dollars on the premium version.

The things to consider:

  • Striking a fine balance between the functionalities that the app offers to the users for free or in the paid version is essential, because if the basic features are not enough to engage the users, making the users pay for the unlimited version is impossible. When the free version is loaded with features, it gives no reason for the users to subscribe or make purchases for premium features. So, select the free functionality and premium functionality after brainstorming and testing to ensure the free version creates value, engage the users, and triggers them to buy the premium version.
  • Showcasing the power of what has been built and available in the free version and the paid version is all-important to show the users about the perks they can enjoy post-downloading the app. It’s a prerequisite of the app to elucidate the content in a clear and concise manner that makes it easier for the users to figure out what the app is. Second, boasting a lot about the premium functionality is not a good practice, as it makes users feel like you are selling something to them. Instead, don’t stress more on the values the paid version offers; simple guidance will work and they will then willingly make a purchase.
  • The app vendors bring changes in the app structure to scale and grow the business revenue and users. Many times, the companies bring unexpected changes to the app’s premium features without any prior notification, which sometimes results in the app uninstalling. In order to prevent such occurrences, the vendors should inform the users about the changes to the fee structure. As a result, the users will not get confused and reluctant to adopt the changes made.
  • The unique features that create conversion will not necessarily bring conversion forever. A few tweaks to the features may be significant, but it’s hard to figure out what’s the best trigger to boost conversion. Ideally, testing the features on the real users helps in determining which changes will be welcomed by the users and which will not.

4.Create, Mine and Sell

The well-designed app will certainly capture and collect the users’ micro-moments and micro-interactions, which will reveal users’ behavior, preferences, and their interests. The mountain of data holds great value, and when sold to third-parties it can bring amazing results. For instance, it can be highly valuable for Starbucks to send their loyal customers an invite for a coffee when they are in the vicinity of a Starbucks branch.

To take a step ahead, a lot of time, resources, and efforts are invested and building the app is capitalized when the vendors sell the API. Yes, lifting the veil of API and allowing the app developers to integrate the API has helped the vendors to enhance the public reputation of the application. It opens a lucrative opportunity to earn money. For instance, the AI-powered software charges directly for the API sold, the Uber API helped Uber to increase its customer reach, or the financial industry APIs such as Braintree or PayPal provide the payment API and charge a fee on every transaction that users conduct.

Make it a white label. Many app vendors engineer a mobile app and then sell it to other companies, who then rebrand it under their name without needing to build an app from scratch. Business apps are one of the critical platforms today that the small and medium enterprises must focus on and create a custom mobile app to help their business grow.

The massive amount of data, the APIs created, and the app already built, offer additional opportunities  to reap the rewards only when they are done right. Want to see how?

The things to consider:

  • Don’t forget, the GDPR in recent times is very effective, which mandates companies not to sell data unless they have gained the user’s consent to sell the data. In the event that a company that trades in Europe sells the data, or a European company is gathering and trying to sell the data, make sure the complete process abides by GDPR, otherwise, the business can be subjected to a huge penalty.
  • The API monetization is a little tricky. The selection of the right API monetization model is essential as it depends on business nature and size. Although eBay generates 60% of the revenue through API, and Salesforce earns additional revenue from the data they have through the company’s API, monetizing APIs via data analysis cannot be a perfect fit for small companies.
  • The white label applications must be tested rigorously to ensure that they perform well and support the varied range of devices and platforms to gain wider acceptance. The customization feature should exist so that brands can tailor the solution to the business needs.  

Epilogue

Preparing the monetization strategy before the project is launched is important because the app development needs to be aligned with the business monetization model. Look into the details of the array of monetization models, and do the necessary homework to identify the best revenue model that helps in locking down the users in the app ecosystem and feels natural to them, in addition to creating the aha! moment.




Avantika Shergil is an enthusiastic Operations Manager at TopDevelopers.co, coordinating and managing the technical and functional areas. She is an adventure lover, passionate traveler, an admirer of nature, who believes that a cup of coffee is the prime source to feel rejuvenated. Researching and writing about technology keeps her boosted and enhances her professional journeying.

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