The 411 on App Monetization
September 29, 2016

app monetization

So you’ve got an app. You’re pretty sure it’s going to be the next big thing, and let’s be honest, you want it to make some money. There are so many success stories out there about the app developers who made it big with monetized apps (think Skee Ball and Angry Birds), so why not try it for yourself? Hold that thought: First, you need to understand how app monetization works. Second, you need to decide which monetization strategy will be most effective for you. There are several ways you can make money off of an app, but not all of them are going to be the best solution for your app. So, let the learning begin!

How It Works

If you’re looking to profit off of your app, you’ve got more options than simply charging for a download in an app store — though sometimes that’s the best method. Here are some of the most common forms of app monetization:

Charging for download: As mentioned, this is the most straightforward way to monetize your app — choose a set price for a one-time download and away you go. Be sure to examine the marketplace thoroughly before you decide how much you want to charge; if there are already similar apps out there, you’ll want to make sure your price is competitive.

In-app purchases: You offer your app for free, but allow the user to purchase extra features once they’re using the app — like virtual currency or in-game bonuses. This avenue works best when the in-app purchases have real value, and when the app itself has a good enough user experience to keep people coming back without those extra purchases, too

Premium upgrades: You make a freemium version of the app available with the ability to upgrade to a more substantial version. The freemium has less functionality than the premium version, but it should offer enough value that users will want to pay for the full app.

Advertising: You offer your app for free and rely on in-app ads to provide revenue. This model is often paired with freemium apps, with the option to remove ads once the user has paid for premium.

Subscription: Like a freemium model, this method allows users to pay extra to bypass a paywall, upon which they’ll have access to the gated content. Works best for content-heavy apps, like ones for newspapers and online news sources.

In order to put together the best monetization strategy, you need to base it on the factors surrounding your app. Which of the above would work best based on how your app operates? It’s important to determine your strategy before you even think of putting your app up for download.

Assessing the Pros and Cons

Just as there are many ways to make money from an app, there are pros and cons for each method. If the end goal is to make money while still providing an optimum user experience, then you’re going to have to find the balance between receiving a profit and not interfering with an app’s functionality.

Take a free app with advertising, for example. According to SocialTimes, the pros include easily generated downloads, potential profit from marketing companies, and the ability to gather demographic data. On the flip side, cons include users finding ads to be repetitive or annoying, or the ads interfering with the app experience. Sure, you’re going to want to make money, but you don’t want to cause users to uninstall your app.

Now, take the freemium model with in-app purchases. While you can leverage user engagement to help drive more purchases, you also risk losing users if they can’t move forward without paying. Likewise, with freemium apps you need to strike a balance between just enough features to make a download worthwhile, but not so many that a user doesn’t want to bother paying for the premium version.

Strategize Before You Start

You’re going to want to determine which pricing model best fits what your app does, or what problem it solves. You’ll have better luck with charging more if your app fills a vital consumer need, while you may struggle if you overvalue your app’s offerings, or if you give away too much for free. So long as your monetization strategy is part of your app plans from the beginning, you should be able to refine what you offer for what you charge.

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