Choosing the Right App Monetization Model

If you’re an app developer lucky enough to have millions of VC dollars lying around then choosing the right monetization model may not be top priority. The reality is that there are thousands of app developers that do not, and are looking to find ways to generate revenue from their freemium apps. There are a few monetization options available to developers to help them generate revenue. Whether deciding to offer in-app purchases (IAPs), serve ads through mobile ad networks, or charge users up front for the download, developers’ monetization strategy has a huge impact on their apps’ future. Choosing the right model can directly impact your growth, affecting both revenue and user adoption.

A recent article from VentureBeat outlined the pros and cons of the various monetization models, but primarily discussed the need to focus on the complementary nature of developers’ business models and monetization strategy. Freemium apps drive downloads, but can leave users that elect not to pay with inferior experiences. Ad serving allows for easy monetization, but can be intrusive if the ads aren’t relevant to the developer’s users. IAPs have been the main monetization strategy utilized by top-grossing games such as Candy Crush Saga and Clash of Clans, but require well-designed incentives to purchase that don’t detract from the app experience.

So, which monetization model is right for you? The short answer is the model that best aligns with your business and growth strategy. Let’s take a look at your options:

1. Paid Apps

The most obvious way to make money from your app is by charging for it. The challenge with this model is that it’s kind of the chicken and the egg problem. Many users will not download a paid app unless it is featured, recommended or has stellar reviews. Historically this model dominated the monetization strategy for developers, but as more and more free apps crowd the marketplace, it’s clear alternative strategies (i.e.: #2 and #3) are being adopted.

2. In-app Purchases:

In-app purchases work across both paid and freemium apps and provide the user with the option to buy more coins, gems, fuel, power, candy or carrots to reach higher levels. This has been a very popular model, and great for games, but does require some more work on behalf of the developer. In order for in-app purchases to work, your game must have a virtual currency and the desire to ‘level up’ built into the core of user experience. If your app does not entice users’ to want more, they aren’t going to spend more. Fundamentally, you need to build an app that is addicting and gives users’ options to advance.

3. In-app Advertising:

If you have a free app and are looking to generate some money you can opt to place ads in your app. These could be banner ads, full-screen interstitials, video, value-exchange offers, or rich media. The type, and timing, of these ads are critical components of maintaining your users’ experience. Ideally, ads are placed in-between levels, at natural breaks in the game, or in the store where users can participate in ads to earn virtual currency. The ads with the highest conversions, and that generate more long tail, quality users; typically come from video and rich media ads. These types of ads present a more engaging experience that users often enjoy.

Choosing the right monetization model is key to your app's success. At Aarki, we work closely with our developer partners to find the right model to maximize both revenue and to deliver high quality users. We’d love to hear what monetization strategy you use and how you have been successful in growing your users!

Topics: Industry News