With the mobile app market surging to an unprecedented height, business owners see massive potential in building and launching mobile apps to reach their customers and earn profit. Mobile apps are categorized into various segments such as business apps, gaming apps, educational apps, utility apps, entertainment apps, etc. For different segments, there are different monetization models. But most business owners are confused about choosing the monetization model for their mobile app. Business owners who invest ample time and money in creating a mobile app should ensure that their app brings consistent profit to their business. There are several app development software that can help you with the right deployment technologies.
This article aims at helping you understand the different ways to monetize your apps. If you are also planning to develop a mobile app but not sure which monetization model to choose, then read the sections below that highlights the three top most app monetization strategies that are widely accepted and used.
The 3 best Types of Monetization Models for Mobile Apps
1) Subscription-based model:
In the subscription-based model, users can avail the services or content till their subscription period ends. The subscription can be on a monthly, quarterly, or yearly basis. Once users complete their subscription period, they can renew it again. Netflix, Disney+, Spotify, Amazon Prime, etc., are the best examples of subscription-based models. The advantage of the subscription-based model is that it has a recurring revenue model and locks customers for a longer duration.
When to use a subscription-based model: The subscription-based model is ideal for businesses that offer long-term value to customers. Whether it is a mobile app for entertainment or an educational app, the content should be intuitive and should be able to maintain the user’s interest from start to end. Before choosing the subscription model for your business, it is recommended that you conduct thorough research about the target customers and their preferences. Competitive pricing and flexibility on payment also play a significant role in the subscription model’s success. If your business cannot offer competitive pricing, then you should reconsider the idea of a subscription-based model. Generally, mobile app owners follow three types of pricing structures for subscription-based models: flat rate, tiered, and consumption-based. The subscription-based model is more prevalent among non-gaming apps and service sectors such as car rental and maintenance, gym and sports club, online tutorials, entertainment, etc.
2) Ad-based model:
In the ad-based monetization model, you can earn revenue by displaying ads on the mobile application. The app is free to use, and revenue comes from advertisers. Various types of ads used by mobile app owners are interstitial/full-screen ads, banner ads, rewarding ads, notification ads, etc. Based on the cost model, the mobile app owner can earn revenue. Generally, there are four types of mobile advertising model CPM (cost per mille), CPC (cost per click), CPI ( cost per install), and CPA ( cost per action).
When to use an Ad-based model: Customers like freebies and won’t mind watching a few ads if they get the services for free. It is one of the advantages with Ad based mobile apps. The ad-based model is recommended for mobile app owners with loyal customers or followers. For an effective mobile ad model, you must also pay attention to these three parameters – Ad network, Ad format, and Ad pricing model (CPC, CPA, and CPM.). Once you have a clear understanding of all these, making revenue through in-app advertising is pretty easy. Again, app advertising relies on the advertisers’ objectives. If the objective is brand awareness, then a banner image would be more suitable, and if he is inclined towards sales, then a video advert would be preferable. Before the advertiser decides on mobile ads, he needs to figure out the business requirement and priorities for the advert. In-app ads are the most suitable models for gaming apps.
3) Paid apps:
In the paid model, the users pay a one-time fee for downloading the app. Users often choose paid apps to avoid in-app advertisements and for a cleaner interface. To find and engage customers for paid apps is a little tricky compared to free apps; therefore, some mobile app owners even prefer using a freemium model. In the freemium model, the app owner offers few features (basic features) for free, and as users switch to premium features, they need to pay.
When to use a paid app: The paid mobile app can help you generate sales revenue quickly compared to any other monetization model. If your goal is to get a quick ROI, then paid apps are the best option, but it is not as easy as it seems. To earn revenue from paid apps, it is essential that your app has a niche audience and you have targeted them well. Also, your app should offer exclusive features and should solve the users’ issues. For instance, if you have a document management app that guarantees end-to-end encryption and a high level of security, then users won’t mind paying for the apps.
All of the above monetization models are different from each other, and there is no particular model that is good or bad. Each of these monetization models has its own pros and cons, but if they are executed with the right approach, they could be rewarding for the mobile app owners. These models can either by used individually or can be used in combination to gain better benefits. It eventually boils down to the business requirements and target audience.
But as per Statista, the most used monetization models for gaming and non-gaming apps worldwide in 2021 was video ads followed by display ads, in-app purchase, and subscription model. Whatever the model you choose, it has to complement the type of mobile app and the audience that you are targeting.
Conclusion,
Mobile apps can act as the best tool for expanding your business in the digital age. The rise in mobile phone users has created new opportunities for mobile app owners to generate revenues. Understanding various mobile app revenue models not just help in increasing the revenue but also helps to scale the business. Mobile apps cater to the purpose of both customers and mobile app owners – It helps customers to avail services at an affordable price, whereas mobile app owners can target audiences on a wider scale. To earn profit from your mobile app, it is necessary that you plan your monetization model right during the app development phase.
