App Monetization: A guide on how to monetize an app

The number of smartphone users continues to grow, reaching approximately 7 billion this year. As a result, in order to attract more customers and remain competitive, companies are interested in publishing mobile apps for tech-savvy users: 42% of them have already built mobile apps to deliver their services, and 30% plan to develop apps in the near future.

Although 90% of mobile apps are free, this market is expected to generate more than $935 billion in revenue by 2023. However, there are other steps you can take to make your app more relevant to your business: monetization.

There are different models for monetizing mobile apps, and monetization solutions should be an integral part of the user experience. That's why you need to consider app monetization when you start developing your app. Don't make the same mistake many app publishers make when they start thinking about monetization after the app has been released.

What do we need to know about monetizing an app?

Before we get into how apps make money, let's quickly explain what it means to monetize an app and why you need to do it.

Monetizing an app is essentially any way to make money using an app. With app monetization, you have the opportunity to leverage your user base in a way that makes money - it's as simple as that. Especially for app developers, this is an extremely important way to generate revenue without the need for money. It's also very effective considering the amount of time users spend on mobile apps every day.

Ultimately, the strategies for profiting from apps will vary by app type, with some app promotion strategies fitting certain models better than others. However, for free apps, we often see several methods of monetization deployed successfully.

To learn more about game monetization, you can check "How to monetize your game in mobile app business?" of our previous articles.


Click "Learn More" to drive your apps & games business with ASO World app promotion service now.

How to monetize your app?

1. Free app + additional monetization options

This is one of the most commonly used models, and as we commented before, it's where the app can be downloaded for free but once the user is loyal to the app, they have to pay for additional content. In the freemium model we can find.

Per use: limited use, you pay more

Provide limited usage for a certain period of time or storage and users need to pay for more time or storage. A good example is Dropbox, where they offer you 2GB of storage and then you need to pay to access Dropbox Plus with 1TB of capacity.


Free Trial: Free for a limited time, you pay to continue using it
This model provides all the features of the app for a limited time so that users can try it out, and when that time is up, users need to pay to continue using the app. For example, Netflix allows its users to access its content for free for a month, and then you have to pay.


Features: access to basic services, you pay for access to more services
This is the most common scenario for viral mobile games: you download the app for free, start playing with a limited number of characters, capacities, levels, etc., and you need to pay to access additional items.


User experience: ads are popping up and you need to pay to get rid of them
The source of revenue for many free apps is in-app additions, and users need to pay to get rid of them in the app. This model is popular in video or music streaming services such as Spotify: with a free account, you can hear ads between songs, while with a premium account that you pay monthly, you can enjoy the service without any ads.


Multiple model combinations
Some of these models are usually used together. For example, this is the case with Spotify, where you can use premium content to access content without ads and also access exclusive content and other features that are not allowed with a free account.

The downside of the freemium model is that the app needs to have enough content in the free version to entice the end user to get it from the app store, but also be able to offer more content so that someone is willing to pay for it. For this reason, utility apps (e.g. weather apps) are usually not ideal for the freemium model. Also, in order to generate significant revenue as a freemium app, the app needs to have enough reach and sticky users to attract enough people to use the paid version (or additional features).

2. Paid apps

Unlike free apps, paid apps are clear in terms of monetization. According to the app business, initially, most mobile apps were paid, which was the only monetization model. Then advertising and inbound purchases emerged and this model shrank significantly from about 90% in 2011 to over 44% in 2019. Today there are several categories that could use a paid model: utilities, productivity, photos and videos, and navigation.

In this model, the app owner gets paid every time she or he downloads her or his app. Today, there are almost 38,000 apps in the Google Play store that cost less than $1. Another 2,396 Android apps  ranking are priced between $9 and $10. But to be honest, the main drawback of this approach is that it turns away many potential users who wouldn't buy the app, so today it's mostly part of the freemium model.

3. In-app ads

The number one source of revenue for app developers comes from in-app advertising revenue. The vast majority of free apps rely on this source of revenue to survive in the marketplace.

There are three types of advertising revenue to consider when monetizing an app.

• Cost per thousand displays (CPM)
• Cost per click (CPC)
• Cost per action (CPA)

CPM is preferred by developers of free apps because it does not require users to click on the ad in order for the developer to earn revenue. The payout is lower, but less disruptive to the user experience.

Native Ads
These are usually applied to features of the app that look like regular posts in your feed. You can often notice such models in Facebook or Instagram. This format is convenient for a reason. First, it doesn't affect the user experience in a way that abandons the app. Second, because native ads are integrated into the app and look organic, they have a higher level of engagement.

Insertion Ads
These are full-screen ads that cover the interface of their host app. How does it work? They are usually displayed between activities (when you load a page or open a new tab) or during pauses between game levels and include video, images and text. In order not to harm the user experience, interstitial ads allow you to continue their content by clicking on it or ignore it by closing it (it will be engaged anyway).

4. In-app purchases

In-app purchases are the number one source of revenue for the app industry.

In fact, in-app purchases account for about 47% of the total revenue generated by apps worldwide. If you plan to create a free app, then including an in-app marketplace is one of the best things you can do for your business.

In multiplayer apps, such as Clash of Clans, users are always interested in purchasing in-app items to gain an upper hand over their opponents.

5. Subscriptions

The subscription model requires recurring payments, either on an annual or yearly basis, to access the services, content or improvements of the app. Users first need to download the app, then subscribe and pay regularly. The best way to do this is to acquire users through a free app and then have them pay regularly for access to premium content.

This subscription model is one of the most commonly used models, and in fact, the Apple App Store and Google Play Store make it profitable in their stores by offering auto-renewing subscriptions.

6. Affiliate Marketing

Affiliate marketing is a method of app monetization that involves promoting other companies' products or services within the app in exchange for a commission when users download the app, purchase or engage with the product or service. There are many networks that offer mobile affiliate programs such as Button, Yeahmobi, Mobvista, Apple App Store Affiliates, etc. The different participants of affiliate marketing are:

• Advertisers: Brands or services they want to promote
• Networks: Adding members who will review and select the offers
• Publishers or Affiliate Network Marketers: use the offers to monetize their traffic
• Users: people who subscribe to the offer or perform any other action related to the offer

7. How to use sponsorship to profit from the app

Most app developers will seek investors to provide funding to build their apps and turn them into successful businesses. Approach investors when it comes to profiting from your app by offering free marketing in your product.

Surprisingly, partnering with other app developers or businesses may be a great way to get additional funding for your project. If you choose to work with an established business, they will likely promote your app to their customers and fans, resulting in a much higher download rate.

More and more businesses are beginning to understand the power of ASO mobile marketing and are looking for opportunities. For them, profiting from your app could be the perfect marketing opportunity.

If you are currently running a business, learning how to read app trends is critical to your success. There are many lucrative app trends that you should be aware of and monitor for investment opportunities.

8. Mobile Marketing Automation

If you are offering paid conversions in your app, it's time to use multi-channel messaging to push users down the channel. Some examples of conversions when profiting from an app.

• Encouraging users to purchase a product or service in an e-commerce app
• Convincing users to book a flight, hotel or activity in a travel app
• Alerting users to content available for purchase, such as a new album in a music app
• Convince users to spend money within your app through mobile marketing automation. You can coordinate push notifications with email, in-app messaging, and app inboxes to create an integrated campaign that reaches users outside the app at scale.

How to choose the best monetization strategy for your app

A poll of 1,200 app professionals conducted by App Annie in its 2017 report on monetization revealed that the most popular ways to generate more revenue are in-app purchases and in-app ads, followed by paid downloads. Whether it's an app or a game, it varies. In the case of games, professionals prefer in-app purchases and in-app ads for more revenue, while subscriptions and product commercialization are more popular in apps, but not in games.

After seeing all the different options that exist in the market, you need to know what your goals are in order to choose the best monetization strategy and make money. According to them, choose the most suitable one for your app.