The way you are going to earn money from mobile app will influence the popularity of your future solution. Correctly chosen app monetization model will increase the loyalty of your target customers, meanwhile, the wrong monetization strategy may make them even to delete your app. Today we will find out how to make money from apps and what mobile app monetization strategy to prefer in 2018 to stay in the win.
TOP-3 monetization models
According to Statista, worldwide mobile app revenue will amount near $190B in 2020. What monetization model to choose for a mobile solution, to get profit from the app? The most well-known options are pay-per-download, in-app purchases, and advertising.
Perhaps the clearest monetization model — the user pays one time for your app download. You, as the owner, get income immediately from the download. Paid apps’ users are usually more loyal — it is easier to hold them in the app.
With the paid download model, your main task is to get as many users for an app as possible, but it is quite difficult. People are reluctant to pay for something that hasn’t been tried before. Free counterparts apps that provide similar capabilities also bring demand down. Despite the difficulties, in 2017 paid apps have brought its owners $29 billion.
In what cases, you may choose the paid download monetization model:
- you provide a unique functionality that surpasses free apps’ offers;
- the application cost matches the opportunities it provides;
- strong marketing and PR of the mobile application.
When using this model, the application acts as a sales channel or an online showcase. You can sell virtual and real products or services, even access to content or new features within the application. Since Apple had introduced it’s in-app purchase microtransactions in 2009, it has begun taking over other monetization models and has got over 50% of mobile app revenue by 2017.
However, providing access to goods is not enough if you want to gain an audience. The process of shopping should be convenient, be sure to consider user experience, giving buyers the thrill of the interaction with the app’s interface, which can not give others.
When to choose In-App Purchases:
- if you create a shopping app;
- if in-app purchases bring real benefit to customers;
- if the user experience is considered in the application;
By using advertisement you can make the app free to download — this will attract more users. The important thing when implementing ads — it should be responsive to the potential audience’s needs. For example, in a sports men-oriented application, should not be advertising of baby goods or cosmetics — it reduces loyalty and gives no result as you don’t get paid per click. Also, consider ads placing, so it wouldn’t make an app difficult to use.
The most common in-app ads formats:
- banner advertising;
- pop-up ads;
- the reward — the user is shown a pop-up with a discount or other bonuses;
- notification — pop-up in the status line on the user’s smartphone.This type of ads is quite annoying and reduces the audience’s loyalty, so try to avoid it unless it’s something very useful;
- native advertising — is used in applications focused on content. For example in the Facebook feed native advertising is integrated — it goes with the overall style of the social network and practically does not differ from the application’s content.
Alternative monetization strategies
Freemium — the most recommended monetization model
The word ’Freemium’ comes from the merging of words Free and Premium. Accordingly, this monetization model provides opportunities for users of different app’s versions — from free to Premium. In the Freemium model, it is free to download the app and use its core functionality. If the user wants to get additional features, content, subscription, then he/she pays.
If to compare with the very first described option — Paid Download, Freemium is much more profitable — it allows to «taste» the product before buying. According to a recent survey of GLOBE NEWSWIRE, more than 60% of mobile app developers recommend using Freemium monetization model. Besides, this model has been already successfully applied by Evernote, Dropbox, MailChimp and many others.
Paymium — a model for a truly valuable solution
A combination of Freemium and a Paid Download. The user pays for the app’s downloading and gets access to basic functions, also he/she has the opportunity to buy a Premium version with enhanced functionality.
To monetize app by Paymium model is quite difficult — an app must deliver a quality user experience, a very useful functionality, important content. Of course, as a simple app with a Paid Download, Paymium model may alienate users who are used to first see and then buy. However, using this model you can win the competition with other paid applications by lowing download cost, due to putting part of the cost into additional functions.
White-label your code
White label — a progressive model of monetization, which is actively gaining popularity. The creation of a truly useful service requires a lot of resources — money, time, efforts. When using White-label model you «patent» part of the code or the application’s structure, and then you may sell it. If you have developed a generic service model which can be applicable in other areas, such as Uber, why not to give it White-label rights?
When to choose a Paid Subscription
In this monetization model app’s content is available on a paid subscription. A small part of the content is freely available and after the content has been used, the user should subscribe. This model is perfect for applications that provide high-quality content — video, audio, books, articles, etc. Business solutions also may be available by Paid subscription, for example, a CRM-system or any other solutions that suggest the necessity for a user to return to the application. For example, Paid Subscription use Netflix, Spotify and SalesForse.
What monetization strategy to choose in 2018?
According to Gartner’s forecasts, in 2018, users will listen more to friends, social networks, recommendation services and advertising, instead of searching for an app on play market. Even if your solution is much better than the competitor’s, users will hardly ever spend their time trying to look for it among millions of apps — this fact should be considered when choosing the strategy of monetization and promotion of mobile applications.
In general, next year mixed models of monetization will be popular. It can be the classic version — In-App Purchase plus Advertising and notification, which is used by Amazon and eBay, or something completely new. The main fact that remains unchanged — the application should solve the user’s problem, to be really valuable. In 2018, the application will even more focus on user experience and intuitive gestures. Usability will be the main trend and the app’s monetization model in 2018 should consider this.
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