Mobile App Monetization Models Revealed

Monetization Do you know how many apps are currently installed on your phone? A number of people will guess a figure between 20 and 30. However, most of the people have over 80 apps installed on their phones. One of the biggest reasons we don’t pay much attention to how many apps we download is that a large number of these apps are free to download and who can resist a free utility, right? But the brains and businesses behind these apps can’t really be offering free services without any financial gains. But if they don’t charge you anything for download or use, how do apps make money? We will find the answer to this question in our blog. But, lets first see why every app needs monetization.


Why Mobile Apps Need Monetization?

According to Statista, approximately 96% of apps available on Google Play and 90.3% apps available on the Apple App Store are free to download. Interestingly, a majority of top-grossing apps in both Android and iOS sections belong to the free to download category.

Look at some of the most downloaded apps of the day – Tinder, Facebook, TikTok, Fortnite – they are all high-end apps whose creation and maintenance definitely involves considerable expenses. To continue their operations, these apps clearly require to first overcome the operational and initial cost of development, and then generate enough revenue to keep future growth on track. This is the reason why all apps need monetization.

In order to achieve goals, app creators depend on one or more app monetization strategies such as in-app purchases, advertising, selling user-related data and many others.

These strategies are based on clearly defined models that show the different ways using which an app can make money and generate profits that exceed the average return on investment. These models are called mobile app monetization models. Let’s find the basic idea behind them to find the answer to the question “How Do Apps Make Money.”

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The Basic Idea behind Mobile App Monetization Models

Mobile app monetization models help developers pinpoint the utility of the mobile app’s services. The monetization model for an app such as Tinder, for instance, will determine the nature and value of the service on offer, the demographics that the service targets and the cost of providing the service.

In Tinder’s case, the primary service that the app offers is dating, the demographic is everybody that’s 18 years of age and older while the cost of offering the service is the money that is spent in the process of the app’s development and maintenance.

Another important area that mobile app monetization models help the developers in is identifying the best source of income to pursue their service. This can vary between running advertisements, offering in-app purchases and free, premium or freemium features. Let’s see some of the best mobile app monetization models that famous apps use:

Top 6 Mobile App Monetization Models

There are several different mobile app monetization models that apps of today utilize to support their operations and make a profit. Not all of these, however, are ideal for startups or small scale-free to download mobile apps.

Here, we’ll look at just the best mobile app monetization models that can be utilized by newbies as well as popular mobile apps.

1.In-App Purchase Model

Gaming apps are one of the biggest benefactors of the in-app purchase monetization model. The idea is straightforward – users who find the game engaging and develop a strong liking to it will be willing to pay for ways to better enjoy and progress in the gameplay.

From virtual goods such as character costumes and capabilities to weapons and easy level-ups– there are a lot of ways to please the users while making a profit.

Pokémon Go, the popular VR game, for example, allows the users to buy in-game currency called ‘Pokecoins’ with real money. The Pokecoins can, in turn, be used for buying additional storage, insignia, attire, and accessories.

2.Advertisement Based Model

Using the app interface for advertising is one of the most obvious and popular mobile app monetization models of all. The idea is pretty much the same as with newspapers and hoardings – the app creators charge interested third parties for displaying their ads on their app.

These ads can be in the form of simple banners that appear in a minimally invasive manner or short video clips that are shown to the users in between the app’s functions.

Instagram – one of the most popular photo editing and social networking app uses this type of model and is marketer’s favorite advertising channel these days. It uses a number of methods to show targeted ads to users as per their preferences. It in turn, generates a huge revenue and also boosts the app engagement rate.

3.Data Selling Model

The data selling model can turn in huge profits for apps that have the capability of engaging and drawing generic as well as contact information from the users. Apps that follow this model sell the data related to the user’s interests and preferences to interested third parties who then utilize this information for the development and marketing of their own products.

An on-demand cab app or a social media app with a “check-in location” feature, for instance, accumulates a wealth of data about the local hotspots. A retail or restaurant chain can use this data to find the prime location for their next outlet and top business owners will be willing to pay the apps handsomely for this data.

Uber, for instance, has a partnership with various urban planners that use data provided by Uber to improve the cities’ traffic and parking management, disaster planning and dozens of other issues. In the past, Uber was in news for selling user’s data to private businesses like Starwood Hotels & Resorts.

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4.Freemium Model

The freemium mobile app monetization model involves offering a set of free features through their app. Once the users get hooked to the free services, the app owners persuade them to upgrade to a premium version of the app that offers advanced versions of the features that users already love.

Consider FaceApp – the freemium app has a limited range of hairstyles and makeup filters while it still displays advanced filters that are available to the Pro users only.