App monetization can be achieved in several ways, adding revenue and cash generation, with an eventual goal of profitability.
A monetization strategy applies whether mobile users download paid apps or free apps (using a freemium business model).
This guide describes:
- What app monetization is
- Stats for app monetization
- How to monetize apps
- Monetization strategy
- Tools to monetize apps, and
- Case studies.
Table of Contents
- What is App Monetization?
- App Monetization Competition
- App Monetization Stats
- How to Monetize Apps
- App Store Fees for Apple iOS and Google Play Android Apps
- Strategies Used in App Monetization
- App Monetization Tools
- Case Studies in App Monetization
- Conclusion – App Monetization
What is App Monetization?
App monetization is generating revenue and receiving cash from a mobile app. Ways to monetize apps include developer payments like in-app purchases by customers, in-app advertising, subscriptions, and affiliate payments for retail purchase referrals. Creating and implementing an app monetization strategy as a business model can increase app downloads and revenues.
App Monetization Competition
Creating an app from start to finish is already a challenging goal. You need to come up with fresh ideas, apply, and market them in such a way to reach as many users as possible. In the coming years, however, the competition is going to make attaining these users much harder. This is due largely to a change in the way users search for apps.
Rather than searching through a database of apps such as that found on an iPhone, more users are going by word of mouth. This means that to increase your app monetization you need to be successful in reaching out to the right audience and keeping them engaged. More and more, apps are downloaded based on ads and influencer marketers from social media, friend’s recommendations, and search engines.
Social media ads can be placed through Facebook, Instagram, TikTok, Twitter, and LinkedIn ad networks to attract app users.
You can no longer successfully rely on being the “best” app; advertising and influencers are useful strategies in increasing popularity, downloads, and even revenue. Along with advertising, you can gain more in-app purchases if your goal is to increase your revenue.
Developers need to start thinking in new and creative ways to develop and monetize their apps, to stay above the competition.
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App Monetization Stats
According to Statista, the number of worldwide app downloads in 2020 was 218 billion, up 55% from 140.68 billion downloads in 2016. Worldwide spending on mobile apps (app monetization) increased 148% to $143 billion in 2020 from $57.7 billion in 2016.
Statista presents stats for the 2020 number of available apps in the Apple App Store and the Google Play Store and the revenue that each generates:
|Apple App Store (iOS)||Google Play Store (Android)|
|Number of apps||2.09 million||2.89 million|
|App gross revenue generated||$72.3 billion||$38.6 billion|
In July 2021, Statista reports that free mobile app downloads were 96.9% on Google Play and 93.4% in the Apple App Store. Conversely, only 3.1% of Android and 6.6% of Apple App Store downloads were paid app downloads.
According to Sensor Tower statistics, global app downloads in 2020 totaled 143 billion, with 109 billion downloads on Google Play and 34 billion downloads through the Apple Store. Sensor Tower reported that global consumer spending on in-app purchases, subscriptions, and premium apps was $111 billion in 2020.
Business of Apps reports that games revenue was 71% of total app revenue in 2020, with $47.6 billion of games revenue from iOS and $31.9 billion from Google Play. 65% of total apps revenue from all sources was from iOS mobile devices.
In 2019, consumers spent $1.4 billion on health and fitness apps, according to ZDNet’s article quoting App Annie’s State of Mobile Report.
How to Monetize Apps
Knowing the types of app monetization that are possible is necessary to monetize apps. Deciding on which monetization methods to adopt under an app business model strategy is the next step. The first decision for app developers and app publishers is whether to have paid app downloads or begin with a freemium model.
Types of App Monetization
Apps can be monetized through the following revenue sources:
- Paid app downloads
- In-app purchases
- In-app advertising
- Product sales through the app
- NFTs (non-fungible tokens)
- Customer data monetization
- Affiliate revenue
According to Statista, the app monetization methods generating the most money are a subscription model, freemium model with in-app purchases, and advertising.
And NFTs are generating new app revenue streams. The prices of non-fungible tokens sold can be very high, rapidly contributing to app monetization.
Paid Apps for App Monetizing
The pricing of paid apps offered through an app store search or word-of-mouth recommendations can be an important component of monetizing mobile apps. Mobile users may decide to buy an ad-free version of the app for a premium rather than freemium price. Or the paid app may offer premium features, enticing users to pay.
Subscription Model for App Monetization
Some mobile apps provide information or use a subscription model.
An example is Apple News, available on the iPhone, which lets subscribers read premium article content with a subscription. Premium articles are gated to non-subscribers. Non-subscribers use the free version of Apple News to read other articles and headlines only for premium subscriber content. When they click on a premium article, Apple issues a call to action (CTA) to receive 30-days free, then the paid subscription will start billing automatically.
In-app Purchases for App Monetization
Some apps require in-app purchases to buy tokens to play mobile games or access premium features.
In-app Advertising for App Monetization
A metric for in-app advertising, like web advertising, is measured as CPM, or cost per thousand impressions, also called ad views.
Types of in-app mobile advertising to generate revenue include:
- Display ads
- Interstitial ads
- Banner ads (the initial form of web advertising)
- Video ads
- Native ads
In-app advertising can use display ads with images that include:
- Banner ads
- Video ads
- Native ads
Social media ads are also display ads.
Google Ads sells display ads with display campaigns through the Google Display Network as one of its offerings. These display ads can be used as in-app mobile advertising.
Interstitial ads are interactive ads best offered on “linear” apps at natural points between content. Interstitial ads can be implemented with AdMob, according to Google support. AdMob guidance and best practices for interstitial ads include some advice like using the latest SDKs (software development kits) for Android and iOS to get the “latest ad formats, features, and bug fixes.”
Banner ads are the initial ad formats used on the web, with a message inside a rectangle on top. Newer advertising methods are more effective in producing app revenue and offer a better app experience.
Video ads include YouTube videos and videos produced as ads using other methods.
Native ads are designed to look like content or feeds in apps like LinkedIn and Facebook. Users may click on the ads thinking it’s part of the regular content.
Product Sales for App Monetization
Apps can be an eCommerce store to sell products to app users.
NFTs Revenue Stream to Monetize Apps
Selling NFTs (non-fungible tokens) using the Ethereum blockchain through a mobile app can bring a new revenue stream. NFTs are unique items with proof of ownership transferred from seller to buyer.
Customer data monetization
Customer data may be monetized to generate revenue and can be used internally to analyze customer needs. If you decide to use customer data, comply with GDPR requirements and other privacy regulations.
App developers can accept external company sponsors to monetize app events and sponsor advertising.
Affiliate Program & App Monetization
While many associate affiliate programs with retail websites, these are also beneficial toward app monetization. Rather than paying for traffic that lands on a specific product or website, it gives developer payments when people use the app. There are specific types of apps for which this should be utilized, as well as pros and cons.
Types of Apps for an Affiliate Program
Though this type of affiliate marketing could be used for a variety of apps, it is best for those that have businesses pay the developer. This is often going to happen when the business is going to lose money, such as empty seats at a concert, or empty hotel rooms for the day. The business then gives the developer payments to put discounted tickets on their app. Users search it and get last-minute deals.
Pros of Affiliate Payment
– Business and User Benefit: the business and user benefit from the affiliate program. The business fills their empty seat, and the user saves money.
– Ad-Free App: Since the business pays you, the developer, to market their unused ticket, your app then does not need any advertisements to make money.
– Unlimited Success: You are not bound by traditional means to make a profit. As long as you can find businesses and good deals, people will be there to purchase.
Cons of Affiliate Payment
– High Competition: The affiliate program is almost a guaranteed way to have a successful app. This, in turn, means that a lot of developers are going to create similar apps. You need to figure out how to make yours stand out.
– Less Control: As you go forward, you will find that there is less control over the commission you are making. Normally, you would have a set monthly income based on average clicks and advertisements. With this sort of app monetization, it can quickly change, depending on supply and demand.
There are many methods to successfully monetize your app. An affiliate program may not work for every app, but those for which it does will find it extremely beneficial.
App Store Fees for Apple iOS and Google Play Android Apps
Both Apple App Store for iOS and Google Play for Android take a percentage of app revenue as fees, including paid app downloads and in-app purchases, from app developers.
The Apple App Store commission is 30% for large app users. Effective January 2021, the Apple Store cut its fees to 15% for small app developers with less than $1 million in annual net sales for all their apps on the Apple platform. This new lower-fee program is called App Store Small Business Program.
For subscriptions, in general, Apple’s App Store charges a 30% fee the first year, then 15% for all app developers, regardless of size. However, Apple made two changes to its subscriptions policy in August 2021 for some app developers.
Apple will reduce its first-year fees for publisher apps from 30% to 15% if they provide content to Apple News, effective August 26, 2021.
On August 26, 2021, Apple changed its subscription fees policy for non-game apps. Reader apps can direct users with emails provided to the app or other communications to initiate subscriptions directly with the app developer through a website, without paying Apple any App Store fee.
Google Play receives fees of 30% from large Android app developers for paid app downloads and in-app purchases. Beginning July 31, 2021, Google Play is matching Apple’s 50% fee reduction to 15% for app developers with up to $1 million in revenue per year.
Strategies Used in App Monetization
Many people attempt to develop apps as a quick way to make a lot of money. Unfortunately, most people do not succeed, because they are not choosing the right app monetization strategies. These tips may help create a better payout from your app.
You should have data available that lets you track your users. It can tell you how often your app has been downloaded, what platforms, and the average length of use, among other statistics. You can also see when and how people are spending money. This tells you where your app is succeeding and where it fails. You should then be making changes to the failed aspects to increase spending.
Set the Value
Your developer and you have put hours, days, months, and possibly more, creating your app. Along with the idea, you need design, formatting, testing, etc. Though your app is worth millions to you, your users are not going to agree. Often, many people are turned off if they need to pay even a dollar. This means you need to ensure your price is not too high. Ask people what they would expect to pay for your app, and take that average into consideration.
There are various platforms available for which you need to customize your writing. If you set your app up for Android, you need to customize it for Mac products, as well. This doubles your consumer base and increases revenue.
Once the money comes in from your app monetization, it will be time to start paying your workers. To make this process easy, choose a company that does developer payments. Your workers will be paid, and you don’t have to stress about percentages or other fees.
Successful App Monetization
When you are going to begin earning money from your app, it is important to know approximately how much money you can actually earn. Very few people become successful millionaires from an app that they created. It can, however, still be a sizable income if you hit the right market.
You may think most of your app monetization will occur through clicks. Downloading the app, though, can also give you higher profits. Earlier this year, the total revenue met on app downloads averaged two to three dollars per download. Some games saw revenue as high as seven dollars when downloaded. If you target the right audience, this can lead to a large profit margin.
In App Purchases
In-app purchases are where the largest revenue will be seen. People want the special benefits, lack of advertisements, or more energy to continue playing. This impatience can be seen in your wallet.
One of the best benefits about apps is that they can be downloaded worldwide. By simply rewriting text in another language, it offers an unlimited customer base. In a variety of countries that were analyzed, the US, UK, and Germany all made approximately one dollar per number of apps downloaded. Japan, however, saw a much higher increase averaging three dollars. Take advantage of monetizing your app so that you can reach customers all over.
Successful app monetization has changed over the years. Rather than relying on clicks, remember to utilize downloads and purchases. Then you can take a larger check to the bank and choose a company that you can trust to disperse your developer payments.
Asia Leads App Monetization Revenue and Developer Payments
Developers across the world are taking the risks of creating apps and hoping they have the next big thing. A report tracking app monetization and revenue results, though, shows Asia is making more than anyone, totaling 41% of the world’s app revenue. The question is why apps are so lucrative there than elsewhere. Statistics and recorded data illustrate how the culture and technology are different in Asia.
According to Statista, Southeast Asia mobile games revenue is forecast to reach $2.42 billion in 2021, up from $890.9 million in 2016.
India and Other Top App Game Installs in June 2021
Sensor Tower reports that India was the top mobile app games downloader in June 2021, with 18% of game installs (840 million installs), followed by the U.S. with 95% and Brazil at 8.3%. The top two mobile games installed in June 2021 were Count Masters by Tap2Play and Bridge Race by Supersonic.
China does not have the same Android platform that the United States and other countries do. Instead, China offers Wandoujia as an alternative. A mere 3.5 percent of technology capable of running Google Play has it installed. This means developers who rely on Google are extremely limited.
Though Asia took in 41 percent of app revenue in 2013, the United States and Europe reached 41 and 23 percent, respectively. Some of the top downloaded gaming apps that help increase developer payments include:
– Angry Birds Go!
– The Hardest Game in History
Developers may want to see what made these particular games so popular, when creating their own. Implementing similarities in strategies or design can help their game sell. In a year, revenue increased 162 percent in Asia and 46 percent in the United States. If you look at country specifics, South Korea showed the most growth, at a whopping 271 percent.
When you look at the statistics, it is obvious that developing apps is still a lucrative venture. If you include Wandoujia and India in your games, you can increase your revenue by appealing to two of the most populated countries. Though there will be multiple forms of payment and currency, there is software you can integrate to take care of it for you.
App Monetization Tools
App developers can use trends for app monetization. These tools do not offer immediate profit, but give you data you need to improve the user experience and customer satisfaction and keep users on the app longer.
In-app customer survey
In-app purchasing can provide a large share of revenue, but you may want to offer the opportunity to complete a survey. While some people may choose to pay, you can allow them to receive the item by submitting answers to questions or offer other rewards. This can be offered throughout the year or for a limited time, but gives you marketing data you need. Your customers can tell you improvements to make, details they love, and any other answers you may want. You can then use this to have your developers edit the app and increase customer use and downloads.
There are now products your developer can add to your app. One of these is a sidebar that can be swept so that clients stay in your app longer. The sidebar can contain links to social media for easy sharing, and payment options for in-app purchases. You can have it link to whatever payout platform you choose for customer ease. If you choose to have an outside company handle your payments, this is where you can use an easy integration like iFrame for seamless payment without leaving the app. The longer your customer stays within the sidebar, the longer they are using your app, so you want to make sure there are a variety of options there for them.
Case Studies in App Monetization
CASE STUDY: Amazon Simplifies App Monetization
Amazon enabled changes to make app monetization simpler for developers. While Amazon is not yet matching the usage levels of Google, Android and Apple, it is showing significant promise. In order to encourage developers to use their services, the online retailer is offering smoother processing through its push notifications program.
Amazon’s push notifications program allows developers to send messages to their clients through SNS or API services. You can push to any smart technology connected to the Internet, such as an iPhone, Android or Kindle. Their SNS allows messages to be sent through a text, email or HTTP point. Amazon made changes to their message delivery, resulting in optimized performance, API usage, and better compatibility. Not only does this make developing programs easier for you, but it is more efficient for your clients. This will lead to higher developer payments.
App monetization is now more efficient with Amazon’s improved features, such as sending up to 1000 messages at once. There used to be a limit set on this that made it difficult and tedious for developers to push messages through. Throttle limits were also deleted, which means users are capped based on their device, rather than Amazon. API is now almost completely compatible with GCM code and, when there are errors, you receive more information. This lets you figure out what the problem is faster, to become more effective.
Amazon is going to grow quickly in the app marketplace. It offers developers the ability to reach their customers inexpensively for the highest app monetization results. If you haven’t taken advantage of their market, free apps are quickly on the rise there. These changes on Amazon make it seamless for you.
CASE STUDY: App Monetization: Angry Birds
There is no question Angry Birds, the game app, is well known and downright addicting. Because of this, the app grossed more than 500 million dollars. In its first week, Angry Birds became one of the most bought and viewed apps on Apple. All of this occurred with a developer payment of 100,000 pounds, creating a large profit. The question is: how did Rovio do this?
The developers knew Rovio was going bankrupt. They knew smart technology, particularly the phone, was about to become a mass media frenzy. They also knew their app needed universal appeal. When the developers started to create the app, it had no language barrier and no luck: the game was about strategy.
Customer Satisfaction and User Experience
Angry Birds was developed with the user in mind. Rovio spent time finding what consumers wanted and put these into their app. The top requests were short loading times and no tutorials, so buyers could delve into playing. This, along with a flashy icon and an expandable title, set the app in motion.
Thinking about app monetization, the developers knew they would start with Apple. This is because the App Store had just opened and was a new, large market. Once Angry Birds made it there, they thought about how the app could reach more people. It meant creating an app that could eventually jump to Android and other technology.
These three factors, along with perseverance, are how Angry Birds became an app monetization legend. It now has a clothing, toy, and gaming line that increase its revenue. While every app won’t be the next Angry Birds, taking these same factors into consideration may help yours.
CASE STUDY: Thought Leadership: Social Apps (Andrew Chen)
App developers use social apps to attract app users, which can add to monetization. Andrew Chen is a partner at Andreessen Horowitz and a thought leadership influencer. According to Andrew Chen, for monetization, today’s social apps use subscriptions, NFTs, eCommerce, and other means (including in-app ads). Interactive media is an important format for modern app developers.
In another post comparing San Francisco and Los Angeles, Chen notes that apps may use non-celebrity influencers to attract product attention. That’s particularly the case in San Francisco rather than Los Angeles and may spread geographically.
Conclusion – App Monetization
Time-tested and new app monetization models or methods pop up all the time for developers to use. By selecting and customizing these options for optimization and adding them to your app, you may find an increase in profit margin and higher customer satisfaction.
App monetization strategies apply to most app categories but some strategies may be useful depending on the type of app.
Use the right app monetization companies. Watching videos or taking courses can help you succeed with app monetization.
The number of app active users, revenue, and retention rate are essential statistics. The better the stats, the higher the valuation of an app development company when it is sold or publicly traded.