An estimated 3,739 apps are added to the Google Play store every day. Statista.com claims there were 3,148,832 apps on Google Play and 2,098,224 on the Apple App store in the fourth quarter of 2020.
Why?
Because apps make money.
Or rather, they can. Not every app is successfully monetized. In 2021 the most recent figures we’ve seen suggest that only 16% of Android developers make over $5,000 per month from their mobile apps.
But don’t worry about that. Trying to understand the app market by looking at averages and weighing your chances as though your chances of being a high performer among developers were random is a terrible approach.
There are millions of apps spread across at least four major marketplaces (in the West, anyway; Google Play, the Apple App Store, Windows Store, and the Amazon Appstore) across a multitude of categories of varying profitability.
Trying to gauge your risk level or potential profit by lumping them together is like trying to predict how successful a new pizza restaurant in Denver, Colorado is likely to be looking at the average monthly earnings and closure rates of all eateries globally.
Would that make sense? No, it wouldn’t. So avoid fixating on the mountains of data available on how much money an average app could make in an average month in an average market.
Instead, focus on what you can do to make your app one of the financial titans wildly distorting the average. Because while some would-be entrepreneurs are spending their time panicking over articles with clickbait titles like 9,999 in 10,000 Mobile Apps Will Fail: Here’s Why, the smart ones are asking how they can beat those odds.
We're a little skeptical of this surprisingly round number. But let's assume it's true. Who cares?
This guide will give you the tools to monetize your app, but only if it’s solid. A bad app can be monetized - it just won’t make much money. So before you read this, ask yourself; is my app ready for monetization? You can check out some of our other articles to help you if not, so don’t panic.
Wake up. This isn’t obvious.
App monetization has changed over the years. In a competitive market you need to make sure your understanding of the fundamentals are as strong as your competitors.
So by all means skip this section. But you do it at your own risk.
Still here? Smart move. It’s possible your competitors aren’t.
What’s the definition of app monetization?
Irrelevant. I could tell you that app monetization is the process of turning an app that doesn’t make money to one that does. But what would you do with that?
You’ve come here for actionable insights, so here they are. Here are the things that app monetization is not, and what it is.
You may be tempted to think of your app as something you’re doing as a fun project that might eventually turn into an extra source of income. A hobby that you don’t take too seriously, because if you did, you’d have to up your commitment levels (in time, treasure, or both).
If so, you need to hear this.
Your app is a core part of a business, whether you acknowledge it or not. If you monetize it, it may become a successful business. If it’s not your goal to own and operate a successful tech startup, that’s okay. But if it is, you need a plan to monetize.
Learn how to monetize your app with our complete monetization guide below.
There are six app monetization strategies for you to choose from. Which you choose should depend more on your intended business model than your personal preferences, however.
For example, you personally may not like apps with ads, choosing to pay for premium whenever possible. Perhaps you use an ad blocker in your browser (we won’t tell). Because of this distaste for ads, you might be unconsciously biased against using them to monetize your app. That would be a mistake. If the business case can be made, follow the money. Try to be aware of any such biases you may have and take a balanced view.
With that out of the way, let’s get into the six strategies of app monetization.
If you’re confident that your user experience is solid, ads might be the right way to go. The advantages of ads are that they're quick and easy to implement. Ad networks want to advertise and they do their best to make the process straightforward.
That said, you’ll need a decent number of users before you make a reasonable amount of money from advertising. Average CTR (click through rate) for Google Ads on mobile is 4.1% on the search network and an even slimmer 0.6% on the display network - which is very likely where your money would be coming from.
Of course, as we discussed earlier averages can be deceptive. For a full breakdown of CTRs by sector check out WordStream’s excellent blog post on industry-specific Google Ads benchmarks for mobile.
We know that ads are an attractive option despite their potential to erode the in-app experience. And without them, a lot of apps wouldn’t exist. They can seem like an easy route to monetization, but if you have a small user base you might want to consider alternatives.
Find yourself among the entrepreneurs with a healthy quantity of users? If so, it’s time to give some serious thought to in-app advertising.
But how will your apps be displayed? Not all apps are created equal. Just as different startups have distinct features that make understanding through averages problematic, not all ads are the same.
How much money do different ad types make?
Wondering why developers don’t just load up their ads full of long video ads? User experience, again. Those ads will only deliver money if they don’t decimate the perceived quality of your application in the eyes of your users.
Use them sparingly. And if you’re really sure your app is valuable enough to users to warrant it, you could offer a paid ad-free version. But more on that later.
Do you remember when you’d download an app only to discover that it required a subscription and immediately uninstalled it? Chances are, that was a while ago.
There’s a sense among startups that consumers are now much more comfortable paying for products and services online and in apps than they used to be.
But it’s not just that people are ‘in the habit.’ Apps are taken seriously now. People see that a service you pay for through an app can be just as beneficial as a gym membership. More, perhaps. Just think of the rise of the home workout app, especially (yes we’re going to say it) after COVID.
And then there’s the gentle way the subscription model reels users in. If you have to pay for an app before seeing its value first hand, I might be hesitant to pay.
But what if you can try it out for a trial period before having to pay anything? Chances are, you’ll be more willing to download. There’s no risk to you. Don’t like it? Cancel before your trial ends and you’ll pay nothing.
Of course, the bet developers make is that due to all their hard work you really will find their app useful or enjoyable and simply fail to cancel the subscription.
Afterall, not doing something is substantially easier than taking an action like cancelling your plan (which you’re much less likely to be in the habit of doing compared to allowing a modest monthly subscription to find its way into your credit card statement.
For some people, they may not even be regular users or particularly impressed with your app. They might just forget to cancel or find the time saved by not cancelling outweighs the $5.99 it will cost them to keep their subscription when the idea pops into their minds.
Subscriptions are great if you want to make money from a relatively small user base. But what is freemium?
Freemium combines the words ‘free’ and ‘premium’ because any app that can be called freemium is both free and contains optional premium (paid) features or content.
If a user is happy with the free version, they don’t have to pay for the extras. But if they want to upgrade their experience or the utility of the app in some way, that’s a choice.
One of the pros is that it allows users to self sort into one of two groups; those who are prepared to pay and those who aren’t. Theoretically at least, you can therefore please both.
Another benefit is that free regular users can build a habit of using the app, building trust and familiarity with your business, and making them more inclined to become paid users.
Now we’ve explained the definition of freemium, here are examples of apps using the freemium model:
Freemium is popular among successful businesses as you’ll see with a casual browse of your smartphone. Crucially, it’s popular with users, too.
You know it’s not that simple. There’s nuance here. But if you agree with the philosophy that businesses should work to create value rather than to simply extract it (and that’s why the best ones make money) then the subscription model - perhaps involving a freemium approach - may be the right monetization strategy for your business.
Remember that while it’s easy to divide a list up into ‘pros’ and ‘cons’, which items are important will depend on your own business plan. Nonetheless, here are the factors to consider:
At Develocraft, we’re huge fans of the subscription / freemium model. Spotify has offered us all a lot of joy during the long hours working from home during lockdown.
That said, it might not be the best choice in every instance. Look at Facebook. Zuckerberg can attest to the fact that ads on a free app or website can be a killer move in the tech world.
But Facebook has generated so much cash - $85,965,000,000 of revenue in 2020 - in part because they have built their own ad network - the Facebook Audience Network. They control the market for ads that appear on their platforms (and on many others). Remember that before discounting user-paid monetization models like subscriptions.
Facebook built their own ad network. They aren't representative of most apps featuring ads as a result.
You don’t need to be a shady outfit like Cambridge Analytica to turn data into dollars. It’s entirely possible to reconcile data monetization and integrity.
But what is data monetization?
Organizations aren’t interested in data for its own sake but for the value of the insights it might contain.
What is often called ‘big data’ amounts to large quantities of information about the (anonymized) behaviours of individuals. When it comes to monetizing an app, this data is created when users interact with the app in different ways.
It’s from these behaviours that, when quantified and analyzed, allow businesses to learn about their customers or other groups of interest.
As long as you make it very clear to users that their anonymized data may be passed to third parties and you comply with all legal requirements around security, privacy, and data protection, data monetization can be an effective monetization strategy.
After all, every time a user interacts with your app data is created. That data can be a resource that can help to sustain and grow your business. If you’re not going to take advantage of that resource, you need to make a clear case against it. Particularly if you have investors to think about.
If you’re not doing everything you can to recoup their investment and make them money, your investors will want to know why. Why leave money on the table?
Let’s summarise the pros and cons of the data monetization strategy:
It’s your call. But remember that data monetization can be combined with other strategies.
If you have children with thumbs large enough to navigate the Fortnite login screen, you’re probably familiar with in-app purchases.
Yes, in-app purchases - often called microtransactions when they’re on the small side - are popular in the games section of the app store.
Gamers may buy new skins or outfits for their in-game selves to swagger - or more likely sprint, jump, and wildly flail - about in. But they might also purchase a quantity of a special virtual currency or tokens that they can later exchange for special digital items.
You may chuckle at gamers throwing real world money after make-believe currency, but this is a serious business. In fact, criminals have successfully used the virtual currencies of PUBG (Playerunknown’s Battlegrounds) and Fortnite - two of the most successful survival-shooters - in very real money laundering schemes.
If you’re wondering why a company might benefit from users investing in growing a virtual wallet with said company’s digital ‘currency’, think of it like buying an option as opposed to a specific stock.
While the user has already handed very real money over in exchange for more of the virtual currency, they do not have to use that virtual currency immediately. They might never do so.
But having the digital currency incentivizes them to keep playing / using the app concerned. It’s a literal investment in the digital product. Additionally, by having the digital currency available for users to buy, the developers create an added opportunity for users to spend money without knowing precisely which in-app item / feature / product etc. they want.
There are different routes to monetizing in-app purchases. For example, a commission might be taken of a sale between two users - a vendor and a buyer - on a marketplace app for real-world goods and services.
Alternatively, a user might buy the right to access a particular feature - like an analysis tool in a data analytics application - directly from the app’s owners.
But we have a question for you. If you buy a house on a real estate app, is it a microtransaction?
By now you probably have some thoughts on the direction of your own app monetization strategy.
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