App Monetization: How to Generate Revenue for the Long Haul

There’s an app for that.

Apple coined that phrase back in 2009, and since then, there does seem to be an app for everything. With so many at our fingertips, this also presents various ways to earn money by developing an app monetization strategy. 

App developers and publishers make money from their apps by implementing the right app monetization software. You have options for creating an app monetization strategy; it will likely depend on the type of app you’ve developed and what makes it unique to users.

And since the average person uses nine mobile apps per day and 30 apps per month, there are a lot of opportunities for developers to generate revenue with monetization strategies.

App monetization strategies

If you’re ready to start making money off your mobile app, let’s look at the most commonly used strategies for app monetization. 

In-app purchases 

Offering in-app purchases (IAP) is a method that sells virtual goods, services, and bonuses within free apps.

Typically, in-app monetization can be broken down into two different types.

• In-store revenue: In-app purchases that take place through the app store, where fees apply. 

• Out-of-store revenue: Any revenue generated by directly using the app.

Depending on the app, selling an in-app experience through a purchase can generate a lot of revenue. This includes selling stickers or emoji bundles in a messaging app, tokens to purchase unique clothing in a gaming app, or plugins to unlock new effects for a video editing app. Another popular IAP is used by dating apps, which sells features allowing users to reach more people or boost their profile during a specific time of day.

In-app purchases in Harry Potter: Wizards Unite

Best practices for the in-app purchases strategy

When creating an in-app purchases strategy to monetize mobile apps, consider some of these best practices:

• Offer an enticing reason to upgrade. If you want users to pay for an upgrade, it has to be worth it. Make sure they know you’re offering an improved experience on top of an app they’re already enjoying. Whether it’s an ad-free experience from here on out or premium features and content, the upgrade has to provide value.
• Utilize predictive modeling. Using predictive analytics assists in making quick campaign decisions while predicting how and when users churn.
• Create multiple currencies. With mobile games, there are soft and hard currencies. Soft currency can be earned through completing actions in the game, enticing users to grow and advance by continued app use. Hard currency is what a user can pay for to speed up this progression.
• Avoid the pay-to-win dynamic. To avoid a high churn rate, you don’t want users to think you have to pay for features to win. Maintain the value of in-game currency to keep it accessible for all users.

Subscription and freemium models

This mobile app revenue method focuses on free apps for users to download, but charges a recurring overtime fee. These are sometimes referred to as freemium because only a limited number of features are free. If a user wants to unlock the rest of the available features and functionality, it’ll cost them.

This is a popular method for app developers because monthly subscriptions create a predictable cash flow, especially when watching how many users join the app monthly. 

Subscription model in the Bumble app

App developers often choose these methods because they can provide a steady and reliable income stream with little effect on the user experience. But it’s essential to remember that apps with this method must be unique with a great user interface for users to spend money on a subscription.

Best practices for the subscription and freemium model strategies

If this is the app monetization model you’re leaning towards using, remember these best practices.

• Focus on content. No matter what type of app your business is trying to monetize, the content has to be new, fresh, exciting, and exclusive while also being updated regularly. Offering users unique and new content that can’t be found elsewhere helps persuade them to pay with subscriptions. 
• Start with free trials. App users want to know what they’ll be paying for before they take out their credit cards. Providing a free trial lets them see the value of a product and will hopefully convert them into a paying user.
• Offer discounts. Consider giving a discount to users who pay for a 6 to 12-month subscription at once. Not only is this a win for users who love the app, but it provides you with an upfront cash flow.

In-app advertising

In-app advertising (IAA) is a method that makes the most of an app’s real estate to show ads to users. Essentially, advertising space is sold to ad buyers to display their ads within the app.

This strategy is often used because the vast majority of users don’t make purchases within an app, but having ads within the app can still drive revenue from a large segment of users.

In-app advertising in the Reddit app

Types of in-app advertising formats are:

• Native ads. Made to look like organic content, a native ad may blend into a newsfeed or message board. The goal of a native ad is to fit seamlessly within the app so it doesn’t disrupt the user experience. 
• Interstitial ads. Full-screen ads appear when a phase of the app is complete, like when a user has completed a level. These ads appear to the user base as videos, text, or images.
• Video ads. Clips of video that appear during certain parts of a game or app experience.
• Rewarded video ads. Video ads that offer an in-app benefit for watching from start to finish. These are popular for gaming apps and often include unlocking a new character, outfit, or extra lives.
• Banner ads. Advertisements that are graphics at the top or bottom of a screen with a clear call-to-action (CTA).
• Playable ads. Mini games that are also ads where a user briefly sees a key mechanic or function of another game. These ads have a high conversion rate for mobile games.
• Offerwall ads. Show users different rewards in exchange for actions, like completing a survey, completing a level, or downloading another app.

While this strategy is quick to implement, it can also negatively affect the app experience for users and only generates a large amount of revenue if your app is loved and used by a broad audience.

Best practices for the in-app advertising strategy

Choosing in-app ads for your monetization strategy comes with its own set of best practices. These include:

• Testing out various methods. Since you can choose so many monetization methods for in-app advertising, you may not know which one is best until you try out a few. The correct format and pricing model can significantly impact earned revenue.
• Checking for accessibility. Make sure the type of ad you choose for your app is easy to see on screen sizes. Verifying that the text is large enough and the ad appears as you would like it for all screen sizes ensures it's accessible for all active users.
• Getting creative. Making an ad stand out is important for earning revenue – investing in top designers, incorporating creative elements, and testing each component is a great place to start.

Pay-per-download

The pay-per-download (PPD) strategy works by charging a one-time fee to users to download the app from the app store. While paid downloads work to generate revenue, they don’t have long-term revenue opportunities since it’s a one-time fee.

Pay-per-download Heads Up! app

Best practices for pay-per-download apps

When creating paid apps, generating revenue comes down to whether or not it’s positioned as a market leader in its unique space or industry. Users are more likely to pay upfront for a download if the app provides an exclusive experience or solves a problem or challenge.

It’s also wise to check for free versions or alternatives to your app before establishing a pay-per-download model. You should also take the time to improve app store optimization efforts so your target audience knows they can trust your app once they pay for it.

Benefits to app monetization

Creating an app monetization strategy leads to clear advantages when done correctly. Some are:

• Consistent revenue. When developing a free app, it can be challenging to generate revenue until the app picks up steam and becomes popular. Until then, app monetization software helps create ads until it makes sense to offer a subscription or premium version.
• Cohesive user experience. When an ad is relevant to the app’s content, topic, or purpose, users get a more on-brand experience throughout the ad.
• Generate user data. How your app users interact with ads provides insights into their behavior so developers can improve the ad experience with precision.

App monetization metrics to track

To know if your app monetization strategies are a success or if something needs to be improved, monitor these metrics to better understand how effective your ads are.

• Retention rate is the percentage of users who use the app over a certain period of time. Retention is a high-level metric that helps you understand whether or not your app provides value to its users. As you start running advertisements, retention can also tell you if it's affecting user behavior.
• Average revenue per user (ARPU) measures how much the app is earning, on average, per user. To get this metric, divide your total revenue from the app by the average number of users from the same time period.
• App stickiness metric shows which users engage with your app on a regular basis. The higher your app’s user engagement is, the stickier it is. To measure stickiness, divide your daily active users by monthly active users.

• Lifetime value (LTV) tracks how valuable a user is over the span of time they continue using the app. This helps determine how much money can be invested in ads.

App store fees

Once your app is ready for users, it’s easy to get it listed in app stores, but it’ll cost you. With such steep competition within app stores, getting your app in front of your target audience is difficult. Plus, you have to pay a fee for listing your app on each marketplace.

• Apple App Store: 30% commission for every app download and in-app purchase of digital goods and services. App developers who make less than $1 million per year in sales from the app store may qualify for the App Store Small Business Program which instead charges 15% commission.
• Google Play Store: 15% fee for every paid app download and in-app purchases of digital goods and services up to $1 million in sales. This rate is increased to 30% once this has been met.
• Galaxy Store: 30% commission on purchases made within the app store.
• Amazon App Store: 30% commission on every paid app and in-app purchase of digital goods and services. Video apps are charged 20%. App developers who make less than $1 million per year can qualify for a 20% commission rate with 10% promoted credits for Amazon Web Services.
• Microsoft Store: 15% commission for every paid app download and in-app purchase for digital goods and services. PC games are 12%. Apps, games, and in-app purchases on Xbox are 30%. 

Best app monetization software

Mobile application developers and publishers use app monetization software to earn money by incorporating mobile app advertising. These ads allow developers to offer the app to users for free, while supplementing other revenue sources, like freemium models and paid downloads. This software also creates and formats ad units inside the app to streamline the process of selling ad space through mobile ad networks and exchanges. 

To qualify for inclusion in the app monetization category, a product must:

• Provide users with software development kits (SDKs) to manage and create ad units within mobile apps. These kits must work for apps on Android, iOS, and Windows devices.
• Work with third-party ad networks and exchanges, and/or provide access to its own ad inventory offerings.
• Streamline processes for managing and tracking ads and their performance.
• Track audience demographic information and ad conversion data.

* Below are the top five leading app monetization software solutions from G2’s Fall 2022 Grid® Report. Some reviews may be edited for clarity. 

1. Google AdMob

Google AdMob makes earning revenue through mobile applications easy, thanks to actionable insights, easy-to-use tools, and customizable in-app ads. As one of the largest global ad networks, Google AdMob provides users with automated tools, rebut reporting, and innovative ad formats.

What users like:

“AdMob being a Google product offers the highest fill rates and hence good revenue. There is almost always a 95% fill rate for every request that we send. Easy to integrate the SDK and track revenue on the panel.”

- Google AdMob Review, Nitin T.

What users dislike:

“The only problem with Google AdMob is the poor support. But, considering its users, they take time to respond to our queries. And they can also decrease the minimum threshold to withdraw the money.”

- Google AdMob Review, Mohit P.

2. Unity Ads

Unity Ads makes it easy for users to maximize their revenue and acquire valuable users within mobile apps. With tools and analytics created to drive revenue and growth goals, Unity Ads is made for game publishers, advertisers, or both!

What users like:

“Unity Ads is a great tool for integrating ads in our app. It pays a considerable amount of money for each ad. It’s very easy to integrate ads and requires minimal effort for beginners to get started. Ads are new and watchable, and users like to see them. Many helpful functionalities are provided.”

- Unity Ads Review, Aakash G. 

What users dislike:

“Some ads are too long for users to see. It also hangs or crashes the application sometimes. The dashboard should be improved, and more functionality added.”

- Unity Ads Review, Subham P. 

3. Facebook Audience Network

From iOs and Android apps to mobile websites, Facebook Audience Network streamlines monetization with targeted ads. With Facebook Ads, users can optimize every ad request for more revenue, learn more about app bidding, discover best practices to earn revenue, and find the best ways to test on the platform.

What users like:

“The best part of Facebook Audience Network is that it gives us a detailed overview of the audience that visit our page and come to our web pages, and gives us the option to create different segments for different goals.”

- Facebook Audience Network Review, Deepak Kumar J.

What users dislike:

“I disliked the long learning curve of Facebook Audience Network. Setting up a business account with Facebook was very difficult. Maybe they can make it a bit easier to set. For example, users need to assign assets, assign users, set up payment, etc., and it’s not very easy and takes a while to get around.”

- Facebook Audience Network Review, Nitin T.

4. Google Ad Manager

Google Ad Manager is a comprehensive platform to grow ad revenue, helping users get more value for every impression. It’s simple to manage ads in one integrated and easy-to-use platform, while also taking advantage of reporting tools to help scale and offer a better experience.

What users like:

“I like to use it on any device or platform because Google Ad Manager gives us engaging ad experiences. You can manage all your ad sources in one place and monetize ads wherever consumers watch them. Google Ad Manager also allows you to build orders and line items, effectively summarizing the process of conducting advertising campaigns.“

- Google Ad Manager Review, Salma R.

What users dislike:

“Google Ad Manager has an intricate learning curve which takes some time to figure out and configure. Once you've gotten the initial setup done, however, adding ads is quick and easy.” 

- Google Ad Manager Review, Olaf S.

5. Start.io

Formerly StartApp, Start.io is a mobile marketing and audience platform meant to simplify how users conduct their mobile marketing efforts through audience building and monetization. Mobile app publishers and developers have access to an advanced mobile SDK, a variety of ad formats, and real-time information to assist in the decision-making process.

What users like:

“From a monetization perspective, their SDK is stable, reliable, has a good support team, and pays on time. The advertising platform has a vast reach globally and can deliver ads smoothly across devices and OS versions.”

- Start.io Review, Barak L. 

What users dislike:

“Sometimes it takes longer to implement new product features, but as a start-up company ourselves, we understand that it takes time to do things right, so it's no big deal in the long run.”

- Start.io Review, Carl N.

Put your money where your app is

Monetizing a mobile app is all about finding a way to show visually appealing ads while retaining users for the long haul. There’s a fine line between serving ads to your users and bombarding them with advertisements that aren’t useful. If your strategy leans towards the latter, you’ll likely have a hard time earning revenue – so choose your strategy wisely!

Learn more about ad creation to ensure your ads stand out from the crowd and promote all of your hard work!