The Guide to App Monetization: Best Strategies and Tactics

Most apps get lost in the vast volumes of the iOS and Android stores. There are literally thousands of apps that enter the market, targeting the same audience as yours. This is where it becomes difficult for apps to actually monetize their users because they always have a cheaper or free alternative available to them – regardless of the small compromises they may have to make.

But there are apps that have been able to monetize in-app purchases successfully. Apps like Clash of Clans, Game of War, Candy Crush and more, have been making millions for a while now. The key to their effective monetization is a robust user-driven strategy.

What Does App Monetization Mean?

The market is now full of mobile apps that are free of charge. How do developers of such apps earn money? They do it with the help of app monetization. App monetization refers to a range of methods, such as advertising, in-app purchases, freemium models, etc., that can help developers of free apps earn money from an app. In this article, we’re going to take a look at several app monetization strategies and find out how to improve mobile monetization.

How Do You Monetize an App? App Monetization Strategies

There are several key strategies that can help you monetize an app:

In-App Advertising

In-app advertising is a proven monetization strategy. Users actively download free applications, and publishers profit from displaying ads. In such a strategy, it is important to collect as much data about the target audience as possible. This data is then analyzed and provided to advertisers who are willing to pay for the ads.

Ads organically fit into games, social networks, news and entertainment applications, instant messengers, etc. A good example is the Facebook app. The social network collects arrays of data about users and shows them targeted ads.

There are the following types of mobile ads:

• Banners. This is the most common type of advertising. Banners often have the lowest CTR and, as a result, CPM. But at the same time, they have the highest fill rate. 
• Interstitials – ads that interrupt the interaction with the app and require some action (either close the ad or click on it). As a rule, this is a full-screen ad. Most often, it is shown either at the app launch or during some event in it (for example, if you have completed a level in the game). 
• Video ads. It is a variant of an interstitial, i.e. a full-screen ad where the video is shown to the user. There are different types of video ads. For example, in terms of user loyalty, they can be skippable and unskippable. If a video lasts 30 seconds, then the skip button usually appears after 5 seconds. If the video lasts 15 seconds, then most often it is unskippable.
• Native ads are ads that look like part of an app’s interface or content. A vivid example is Facebook ads. These ads look natural in the app and, in most cases, do not annoy users. 

Pros:

• A free mobile app can quickly attract an audience.
• The strategy is efficient if the advertising is targeted.

Cons:

• Advertising is limited to a small screen.
• Some users may abandon the application because of annoying ads.
• The publisher will not make a profit if users use ad blockers.

Freemium Model

A freemium application is free in the basic version with an option to purchase extra functionality. The user may be charged for plugins, extensions, support, integration, pre-personalization, etc. For example, Candy Crush Saga is a freemium game that currently generates about $950K a day. Another example of a freemium is the Angry Birds game. The application is free, but some “goodies” (for instance, advanced features of evil birds or extra levels) are hidden from the user until they pay.

Pros:

• Freemium applications attract a lot of loyal users who are ready to use them for months.
• The freemium principle is very flexible and suitable for most mobile products.

Cons:

• It is crucial to find a balance between basic and paid options. If the free functionality is too basic, the users will abandon the app. If it is too large, they will not buy additional options.
• The percentage of conversion from free to premium is very low because not everyone is willing to pay.
• The freemium model makes sense and has the greatest chance of success if the market is huge, and people to whom you offer your product for free will create added value. There should be a huge base of customers who will switch from free to premium from the very beginning. This is a big investment in marketing, often unprofitable. When you think about freemium, you should consider these circumstances and keep in mind that everyone should benefit from the result, be it you, the users of the free version, or paying customers.

Free Trial

This is one of the most popular app monetization strategies. The idea behind the free trial monetization model is that the user gets access to all features during the trial period, typically 30 days. During this time, the user will have time to test the product, become interested in its functionality, evaluate the comfort of tools, etc. This creates some kind of addiction to the product. When the trial period ends, the user can feel that they have lost something they need. As a result, at a certain point it becomes more difficult to refuse a product than to pay for it, so they purchase the app. However, if the user does not have any interest in the app, they do not buy it. Therefore, it is crucial that the product remains ahead of competition in terms of ease of use and “stickiness.”

The Deezer Music mobile app is free, but there is also a premium paid profile that can be tested for 30 days. There are no ads in the Premium profile, but there are options for downloading your music, playing it offline, and many other bonuses.

Pros:

• A free trial period allows the user to evaluate all advantages of the app.
• Using a free trial is a great way to push the user to a target action. Instead of getting something for free and forever, although, with some restrictions on use, the user will look at the free trial offer as a potential object for closing a deal. The user already thinks as a buyer, but they will also welcome the opportunity of a “test drive” of a possible purchase. This is the perfect way to convert leads to customers because you have full control over the conversion funnel.

Cons:

• The publisher has only one chance to convince the user to buy the full version.

In-App Purchases

Applications monetized in this way sell real goods (clothes, accessories) and virtual goods (game money, characters). An example is the MeetMe mobile application, a service for meeting new people, where users can pay to increase profile visibility.

In-app purchases are a perfect way to monetize games. However, a good free-to-play allows you to maintain balance in the game world, regardless of whether the user acquires any content. Experts recommend not selling skills or character levels – it is best to concentrate on interesting costumes, accessories, houses, as well as the ability to edit a profile.

Also, this monetization method is great for e-commerce. Entrepreneurs do not spend money on renting premises, which helps to significantly increase margins. All you need is a detailed description of the product or service because Google and Apple are now asking for more details to better protect users.

Pros:

• Flexible monetization model, which is optimal for e-Commerce and m-Commerce.

Cons:

• Information about paid services should be transparent, this is required by the user protection program.

Paid Downloads

This is the most obvious way to monetize the app. According to this app monetization model, the user pays the entire cost in advance. This approach works great with gaming, entertainment, productivity, navigation, and news apps. However, the more users will need to pay from the very beginning, the less they will be satisfied with advertising or the need to additionally purchase certain functions. You can try to offer both a free and a paid version of the app, with additional content and without ads.

Pros:

• This is the simplest way of app monetization.

Cons:

• The users are reluctant to pay for something they see for the first time, so you need to invest a great part of your budget in marketing.

Tactics to Improve Mobile Monetization

Let’s go through some tips to help you make the above strategies work better.

1. Track User Engagement

If you want to really grow your app in the competitive market, you need to keep your users engaged. User engagement rate is one of the best metrics to measure app monetization, and here’s why:

• It represents user satisfaction. If the user is frequently engaging with the app over a period of time, they are happy with what it offers and are more likely to continue using it. Conversely, if the user engagement rate of your app is low, it means that the user was expecting something different from the app instead. It gives you a perfect opportunity to look into what the user wants, interact with them, and optimize your app accordingly.
• It helps with effective monetization. The more time the user spends in your app, the more likely they are to convert. The user engagement rate gives you valuable insights into how long your users are willing to interact with the app and at what stage you’re losing a conversion. This helps marketers to plan in-app referral campaigns and suggest in-app purchases at the right time with the right message.
• It ensures sustainable growth. When your app satisfies the user’s expectations and has effective monetization strategies in place, it is all set to grow sustainably. The users are more likely to stay on the app and even refer their friends, thus increasing your acquisition at a lower cost. Other applications that focus only on increasing their installs over a period of time experience a dip in acquisition right after. Increasing marketing budgets to consistently acquire new users is practically impossible. To maintain the growth graph, it is important to keep the users as engaged and interested in the app as possible. 

2. Build a Community

Communities are especially important for mobile game apps. According to a survey by Facebook, players are more likely to stay in a game when they have a sense of belonging to it. In simpler words, they are more engaged when they are a part of a community of people like them.

The players give each other the motivation and competition to keep going. This keeps the level of interest in the game at an all-time high. But as soon as the community loses interest in the game, it is bound to rub off on the player as well.

An average gamer is 2.9 times more likely to make an in-app purchase so they can beat their friends! This shows how socially-influenced app users are when it comes to making in-app purchases or interacting with the game.

Players don’t just use the community to keep tabs on what the other is doing, but also to find solutions to where they are stuck. They are also able to monitor which players made a purchase to complete a level in the game and strategize their move accordingly.

As a matter of fact, the top-grossing games have made social engagement a part of their app. Having an opportunity and a platform to connect on, players engage longer and boost their app session length. For example, Godzilab uses activity feed in their app Crush Them All to improve player LTV and retention. Their community managers interacted with players regularly to provide them with customer support, announce upcoming events, features, game tips, and tricks. Activity Feeds further enabled their players to invite others to join their clans, and communicate with each other.

Basically, players’ engagement in the game is a good predictor for mobile game monetization. The longer app sessions allow you to understand how a player interacts with the game, what they expect from it, and how you can make it better. It also opens up an opportunity for you to personalize their in-app experience and purchase journeys.

3. Offer Discounts to Loyal Users

Who doesn’t like getting discounts? There are definitely going to be users who might not be comfortable purchasing your in-app offerings – no matter how contextual their placement is. But these are users who could be driven to conversion by offering special discounts. You can club these discounts with referral campaigns or actions that they need to complete for availing them. When planned strategically, this tactic can help you grow your user base as well.

4. Create a Dynamic Pricing Model

Not every user is the same. They don’t interact with your app in the same way and certainly don’t have the same amount of resources available to them. This is where dynamic pricing comes in. Analyze and understand your user’s behavior – how they interact regularly, where they drop off, and what their previous purchase triggers have been. Create a dynamic pricing model that suits your users. It’s the most efficient way to convert them.

5. Incorporate a Subscription Model

Similar to a freemium model, subscriptions focus on giving access to in-app content rather than its features. Users are able to download the app for free and access all features for a limited period of time, after which they are prompted to subscribe to a paid plan. This tactic is similar to offering a free trial of your product before asking a user to pay for the same. Show value and convert them into paying users.

App Monetization Platforms

Here’s a list of platforms that you can use to monetize your app.

• Google AdMob. This is the largest aggregator of mobile advertising with over a million users. In the settings, you can block the least interesting categories and set the broadcast time. There are opportunities to advertise for free on your own sites, limit the number of impressions, and link your account to the Firebase cloud in order to analyze revenue and optimize future campaigns. The platform supports multiple currencies.
• Unity Ads.  The main specialization of the platform is the promotion and monetization of games powered by Unity through interstitial video ads. The system will show videos to the most loyal audience in order to motivate them to certain actions for a fee. As a result, developers can monetize successfully, and advertisers can attract the right audience. In addition, the creators of Unity Ads say they will provide customers with the highest average user revenue.
• Facebook Audience Network. The network helps reach people not only on Facebook and Instagram but also beyond. As soon as the user clicks on the banner in the client’s project, they receive a percentage of Facebook’s income. Audience Network promotions are different from news feeds, which can be an advantage. Post-click behavior depends on the goal that you choose. It is interesting that placement on this network is cheaper than placement directly on Facebook. This is because the average cost-per-click is reduced, allowing you to purchase more places and increase coverage.
• Chartboost. This mobile game monetization platform offers an SDK that allows developers to monetize on their mobile apps and connect advertisers to global in-app inventory. The platform allows video game developers to create customized interstitial and video ads to promote new games as well as gives direct access to game data derived from Chartboost-enabled games.
• MoPub. This aggregator by Twitter selects the most interesting promotional offers from almost 200 networks and DSP platforms. The service is a useful tool for those who plan to promote their development in the international market. Publishers can choose creative and convenient hours of demonstration and send requests for relevant messages to third-party ad networks. 
• AppLovin. Banner and native ads created by this network support the popular Playable Ads format when users can enjoy a kind of demo project before installing it from the store. There is also Rewarded Video, where the user receives a reward for watching a video. You can choose an automatically generated creative or offer your own, but it must comply with the platform’s rules. The campaign is activated only after topping up an account by at least $100.
• Fyber. Fyber is a service that offers new non-standard models of monetization of games and applications for mobile platforms. The service will be of interest to both publishers and independent developers. Fyber is the European market leader in the monetization of virtual currencies, online games, social networking projects and applications, virtual worlds, and other premium content.
• Tapjoy. The goal of Tapjoy is to help developers of free apps get the most out of every user. This automation and monetization platform uses the most effective mechanisms for processing and analyzing data, user segmentation, and forecasting, allowing you to strengthen interaction and increase revenue from each user.

Wrapping Up

App monetization can be a challenging task for developers and marketers. But having effective strategies and tactics at hand will help you build out the right process. We hope that now you have a better understanding of how app monetization works and will choose a monetization model that will work best for your mobile app. Good luck!