When creating and launching a mobile app, a great idea is only half the battle. At the end of the day, the app needs to be profitable to recoup your capital investment and start earning you money.
There’s good news. Mobile app revenue continues to grow year-over-year, with annual consumer spending reaching a record-breaking $133 billion in 2021. Your job is figuring out how to tap into that $133 billion.
The path to app profitability is paved with sound decision-making. It starts with choosing expert custom app development services – partnering with developers invested in making your product as sticky, engaging and profitable as possible. It also requires you to choose the right revenue model– a bankable monetization strategy that appeals to your users.
In this article, you’ll find three common mobile app revenue models. Other fantastic revenue models exist for mobile apps (data monetization, affiliate marketing, lead generation, brand takeover, etc.), but the models listed here are the most popular. For first-time app entrepreneurs, these are the ones to know.
Free – With in-App Advertising
This is a classic monetization strategy for a reason. By removing the barrier-to-entry (i.e., no cost to download), you can hopefully get your app in as many pockets as possible, building traffic in those tenuous first few months of business. It also helps that 95% of downloaded apps are free – a stat that demonstrates clear consumer preference for free apps.
The trick is attracting enough active users (who regularly engage with your app) to attract third-party and independent ad revenue. It’s an uphill battle in many cases. During the strategy stages of working with a mobile app developer, discuss the feasibility of this monetization strategy. In the meantime, read up on “effective cost per mile” (eCPM), a metric that allows you to calculate ad earnings.
Paid – Low Price-Point
This mass-market, direct revenue model is relatively straightforward among monetization strategies. It is essentially the oldest form of mercantile transaction: You provide a product, and the user pays upfront.
While some apps charge 10s or even 100s of dollars, let’s focus on low-price-point apps between $.99 and $4.99. This is a “Goldilocks” price point, since it’s low enough to attract significant downloads, yet high enough to generate sizeable revenue.
You can coast through the first year of operation on the curiosity factor (users paying to find out what your app does), but after that, you will need a clear value proposition to maintain revenue. Here, again, is why hiring an expert app developer is crucial; your paid app needs to be intuitive, sticky and future-proof.
A portmanteau of “free” and “premium,” freemium straddles the line between the two models above. The app can be free to download (usually a trial version) or low-cost, and typically features in-app purchases. The free trial versions of freemium apps often generate revenue via ad sales. And, obviously, the paid versions generate money via direct revenue. You might also choose to charge for gated features not available in the free version.
Freemium can be a lucrative monetization strategy, provided you work with the right mobile app developers to build a product with compelling value to target users.
Knowing your options is the first step toward shrewd, thoughtful app monetization. As mentioned, partner with a mobile app development company that observes a rigorous strategy process to work out the best model for your idea.