Technology February 15, 2016 Last updated September 18th, 2018 1,251 Reads share

How to Choose the Right Monetization Strategy for Your Mobile App

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Choosing a monetization strategy for your mobile app is just one of the decisions you must make before launching your app. Deciding on a strategy depends on your business model, user base and the app you have created.

Currently a large percentage of the apps available on the app stores are free. This wasn’t always the case, but today, users opting to submit a paid app are certainly going against the trend and taking a chance that users will be willing to pay for their app when there may be free alternatives available.

If you decide to make your app free, you are likely to get more installs. Fortunately there are ways to monetization your app that are superior to charging users to download it. This article will be going through some of the advantages and the disadvantages of the common monetization models and offer advice on which model is right for you and your customers.

It is important that you understand the implications that your app monetization plan will have on the success of your app.

Here are the common mobile app monetization models:

Freemium

This is an app that customers can download and use it for free. However, with this strategy there are features which users will be required to pay for before they get to use them. The reason for its ever growing popularity is the fact that the freemium model is very flexible. It is very easy to adapt it to any app vertical.

The advantage of this model is the opportunity for users to try out the app before they make the choice to pay for the paid features. In many cases, users will become interested in the app and see its value, and then they will be willing to pay for the paid features. This model offers you the opportunity to have the ever expanding user base that goes with free apps.

On the other side of this coin, by failing to offer all of the features for free, your app may lose users. You have to consider that most app users are no longer willing to pay for an app. You must therefore put in place enough features that they can access for free so as to keep them interested. Furthermore, it must make sense to pay for the other features. Achieving a proper balance here may sometimes not be so easy.

If you give them too many features, you just may end up having a problem. In this case users may feel too comfortable to upgrade. Therefore, you should be careful when determining the number of features you choose to offer for free.

This could be a good model for your app if it has many levels (like in a game) or offers advanced features that an engaged user base would be willing to pay to have access to utilize.

In-app advertising

This model has become quite common because it allows you to monetize your app without asking for money from your user base. In-app advertising allows you to offer your app to be downloaded for free. This way you can build your user base and then businesses will pay you to place ads in your app.

If done properly this can be a very good choice. If your advertising is relevant, or better yet, targeted and personalized, users will not find that ads to interfere with the in-app experience. However, in-app ads tend to generate small amounts of revenue per user, so it works best when you have a large highly engaged user base. If you don’t anticipate your app being popular you may want to opt for an alternative strategy.

This might be the best strategy if there are no opportunities to utilize the freemium model or in-app purchases and if you think your app will be popular enough to justify its use. In-app advertising works best when you include a data program so you are able to offer targeted and personalized ads.

Sponsorships

This model involves offering a sponsorship opportunity to businesses. This model is the hardest to put into use. However, the difficulties of doing so are overridden by the fact that it can be the most effective of all the monetization models.

There are some clear advantages, specifically that there is minimal interruption to user experience. Everybody wins with this model. You get money from your sponsor, the sponsor wins by getting their name in front of potential customers in a premium position and the customer wins because they are able to download the app for free and are exposed to minimal advertising.

The major disadvantage to this model is the ability to sign a business to a sponsorship deal. Is your app new and without a large user base? In this case it could be tough to convince a business to sponsor it. To make the sponsors believe that the app will be useful to advertise their business you will need a strong brand and a sophisticated data about your users.

In-app Purchases

With this model, you give your users the option of buying real or virtual goods from within your app. This is not just for games. Many apps allow users to purchase extra features. Apps of all types can offer extra functionality or tools, perhaps advanced features or additional content.

The biggest advantage to this model is that there is minimal risk to using it. On the other hand, app stores will take 30% of in-app purchases and some users may be less inclined to download your app if you use this model.

Subscriptions

With this model you also offer your app for free download, but it has locked contents which users must pay for before they get to enjoy. The revenue from this kind of model comes from regular payments made by the user to keep contents available.

The advantages of this model include a consistent flow of revenue. But you will need to be on your toes, delivering fresh and high quality content on a regular basis to your users. Otherwise you run the risk of losing your customers. This model can have a strong, loyal user base that is highly engaged for the right app with the right content, often as a result of the quality of the content you are supplying them with.

One disadvantage of this model is it doesn’t fit all apps very well. Additionally, users will have to make a commitment to regularly pay for this service. This is not something that every user will be willing and able to do. With this, you should be ready to give your users an initial free or discounted trial.

Be careful when determining where to draw a boundary between what contents to provide for free and the ones which should be charged for as this decision may go a long way in determining the success of your app.

How do you decide which strategy is right for your application?

The best monetization model for your app will be one that not only fits your app’s industry, but also its functionality and user base.

Remember that these models are not mutually exclusive. If you can utilize multiple models within your app, go ahead and see if you can make it work. Apps regularly mix models in order to find what works for their audience.

Images: ”Business man pointing the text: How Your App Can Turn a Profit? /Shutterstock.com

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Kimber Johnson

Kimber Johnson

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