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How to Monetize Your Apps

by: Kylie Holman

Last week, we talked about what it takes to build a successful app: Building an App That Succeeds – Steps to Avoid Failure.

Monetizing Apps

You have a great app idea and a plan to get it done. Now, you have to figure out how to get paid. We want to tell you about the different ways in which you can actually make money off your app. Revenue from mobile apps is projected to double by 2020, so there is a viable market if you can choose the right strategy. Luckily, you have a few different options depending on what works best for your app and your business.

Revenue Generation

1. In-App Advertising

Advertising remains the most popular method of making money in apps. The ads are simply displayed in the app in a banner or between screens, depending on the app. Some apps will also give users rewards for watching ads, like Duolingo offering Lingots for watching optional ads. This may not be the best option unless you have A LOT of users (millions). It also is the most disliked method by users, so it is key to make the ad as seamless in the user experience as possible.

2. One-Time Purchase

This just means that the app isn’t free and users purchase the app for a one-time fee. Most people don’t go with this option as it doesn’t create recurring revenue. There is also a point of download friction, as the cost can stop people from trying the app altogether. 

How to Monetize Your Apps

3. Freemium Model

Some features are free, but users can pay to access new features or disable things (such as ads). However, users can choose to stick with the free version. You have to provide an incentive for the users to pay to get to the next level.

4. Marketplace Model

This method of monetization is growing in popularity. The app acts as the “middle man” or mediator between two user types. For example, Uber users pay to ride in a car and Uber drivers receive money from providing the ride. Uber makes a percentage of money for facilitating each interaction.

5. In-App Purchases

The user pays for extra features or items in the app. This could be extra lives in a game or filters on a photo editing app. In-app purchases can be either consumable or non-consumable. Consumable purchases have to be bought over and over, like extra health points or game hints. Non-consumable purchases are bought once, like unlimited hints or removing ads. In-app purchases are subject to the 30% cut from Apple and Android. These can not be avoided with a web app payment system, unlike with some other methods mentioned below.

6. Selling Goods, Products, or Services

The goods are delivered outside the app. However, the payment is allowed to be processed in the app without incurring the 30% fee Apple and Android typically take from in-app purchases. You will need a large amount of users and a compelling product to make this strategy more effective through an app rather than a typical e-commerce website.

7. Subscriptions

Users pay a subscription to receive the on-going service. Some subscriptions give access to digital content, like newspapers, while some allow for more functionality or access to tools within the app.

Keep in mind that Apple & Android take 30% of in-app subscription purchases made within the app. We recommend having a separate web app that handles all payment processing for subscriptions to avoid the fee

A good example of this is Netflix. If you buy a Netflix subscription, you can’t pay for it within the app anymore. You have to visit the website in order to subscribe.

8. White Label

We’re starting to see an increased interest in the white label approach. A business develops an app and sells it to another company to be rebranded and resold. This can be a one-time sale or it can include ongoing licensing or royalties.

9. Selling Data

Apps with many users generate large amounts of data about demographics, usage, interests, connections, etc. One possible revenue stream is to work with marketing companies that purchase data sets, to “sell” the data collected in your app. To make this an effective monetization strategy you need to be clear with your users in a Privacy Policy how their data is used, and you need A LOT of users (millions). FourSquare is a good example of an app that uses a data monetization strategy. Millions of users added info about their locations, and now FourSquare sells that data to other developers through an API (applied programming interface). 

There are many ways to generate revenue with mobile apps. Most successful apps utilize several of the strategies listed above. Reference this list to get a high level view of the popular strategies, but keep in mind that it is up to you to dig deeper and learn how to make your choice a success!s, the shift will continue to move towards hybrid.

How to Monetize Your Apps

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