Having the right monetization model can mean the difference between a profitable app or a failed venture. It’s no secret that the App market (iOS and Android) is saturated, which is not surprising since the barrier for entry is extremely low - anyone with some development experience can learn to build an Apple or Android app. With that in mind, let's talk about monetization options.
Different App Monetization Options for iOS and Android:
- Freemium - users can use basic features with no upfront cost. However, with an option to upgrade to access more features via a one-time fee or a subscription model. With the Freemium monetization approach you are trying to 1) secure as many downloads as possible and 2) incentivize users to try the app and transition to a premium (paid) version.
- Subscription Model - users pay to access the full version of the app (all content and features). If successful, a Subscription model can be very profitable, and generate predictable long-term revenue. Tinder and Lumosity are great examples.
- In-App Purchases - users can use the app for free with an option to make in-app purchases. This monetization model gained popularity with games and is now used by business App developers as well.
- Advertising - users can download and use the App for free, and developers get paid by providing In-App advertising. If done well, this is a Win-Win model, both for users and developers. However, many App developers go too far and bombard their users with too many Ads.
- Sponsorship - partnering with a sponsor typically means only showing Ads from one (sponsor) company. This is still a relatively new monetization model but can work well if sponsored products or services are relevant to your users.
- Direct Sales - users purchase the App before installing and using it. It is difficult to succeed with Direct Sales unless you are a well-known brand. The main reasons being competition from freemium versions, and reluctance from users to purchase without trying the App.
Which App Monetization Option Is Best?
Obviously, there is no one-size-fits-all monetization strategy. For example, with Games, we find In-App purchases generate the most revenue. However, this is not the case with Business / Productivity Apps which seem to do well with Direct Sales and Freemium + Premium (paid) App versions.
Finally, it is important to note that App monetization strategy should not drive your idea, and market research. If you build an App that users don't want or need it's irrelevant how good your App monetization strategy is, your App venture will fail. On the other hand, if you build something users want or need it will be easy to find the right monetization strategy, and more importantly, generate a profit.
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