App Monetization

What is app monetization?

App monetization is a strategy mobile app developers and marketers use to generate revenue and maximize profits from mobile applications. Mobile app monetization involves implementing various strategies and models to earn money from an app’s user base. Common monetization models include in-app purchases (IAP), in-app advertising, and subscriptions.

What is app monetization used for? 

App monetization serves several purposes, including:

    1. Sustainable revenue: Nearly 95% of all iOS apps and 97% of Android apps are free to download. Because of this, brands rely on monetization to create a sustainable source of income to support their app costs. 
    2. Growth and innovation: App monetization allows businesses to reinvest in app development, updates, and customer support, which ultimately provides a better experience to users. 
    3. Enhanced user engagement: Effective monetization strategies can encourage users to spend more time in an app, increasing engagement and retention rates. 

Monetization models

There are various approaches to app monetization. The right one for your brand depends on your app’s functionality and your user base. 

  • In-app purchases (IAP): This model allows users to purchase additional features or content within the app. For instance, a gaming app might allow users to unlock a new level after they make a purchase. 
  • Freemium models: Freemium apps offer a free or “lite” version with optional paid features or services. Fitness apps like MyFitnessPal prompt users to upgrade to the premium version to unlock advanced functionality. 
  • In-app advertising: This method displays third-party ads within the app, with revenue generated per impression or click depending on the cost model. In-app ads are commonly used in freemium versions of apps, incentivizing users to upgrade to paid versions for an ad-free experiences. 
  • Subscriptions: Users pay a subscription fee to access and continuously use an app. Entertainment and music apps like Netflix and Spotify use this model, as do news apps such as The New York Times.    

Teams involved in monetization efforts

App monetization is a cross-functional effort that typically involves multiple teams and stakeholders, including:

  • Product management: Defines app monetization strategies and balances the app functionality and user experience with revenue generation opportunities. 
  • Development: Implements monetization features and functionality within the app. 
  • Marketing: Promotes the app via omni-channel marketing efforts and leads new user acquisition strategies. 
  • Monetization team: Focuses on app revenue growth through advertising and pricing strategies.In some organizations, this is a dedicated team. 
  • Finance: Manages financial aspects of the app, including revenue reporting and tracking, billing, and payments. 

App monetization is a vital aspect of mobile app development, enabling businesses to generate revenue while providing value to users. Understanding the various monetization models and involving the right teams is key to building a successful app monetization strategy.