In this article, we’ll tell you how to monetize your app, or in other words, how to turn your app idea into money. Learn what options are available and which stumbling blocks you should better avoid on the way to successful app monetization.
- Possibilities of app monetization – how do you earn money with an app?
- Earn money with app advertising
- Revenue through in-app purchases
- Freemium/premium model
- Paid Apps
- Earn money with your own app – the indirect way
- App monetization checklist – which model is the right one?
Possibilities of app monetization – how do you earn money with an app?
This much in advance: there is certainly no shortage of ways to monetize an app. That’s why it’s all the more important to think about which option suits your concept together with an app developer.
In most cases, apps are low-price products. The market is highly competitive because many apps are available very cheaply or even for free. Accordingly, successful apps are often downloaded or used frequently, as this is the only way to generate revenue.
Conversely, good download numbers are no guarantee for high revenues. Even a popular app can turn into a flop if the wrong monetization model is chosen. To make sure this doesn’t happen to you, we’ll give you an insight into the different approaches to app monetization in the next section.
Earn money with app advertising
You are usually paid through a pay-per-click (PPC) system, meaning that the more often an ad is clicked, the more revenue you generate. Banner and video ads are the most common models here.
One of the classics and especially interesting for free apps. With this model, you earn money by having ads placed in your app. The prerequisite for this is that you join a corresponding advertising network that provides you with the ads.
In addition, there are also editorial-looking ads that are not even recognizable as such at first glance.
Pros: Low barrier to entry for users, as the app is free.
Cons: This variant only works in the long term with high traffic numbers, as the PPC prices are often in the low cents range. Therefore, please look for suitable traffic sources to drive your app advertising revenue.
Revenue through in-app purchases
Game apps are often monetized in this way. In principle, the application can be used free of charge. However, users have the option to purchase extensions or bonuses, or to shorten waiting times through in-app purchases.
This variant can be implemented independently of third-party providers. However, there must be an attractive incentive to buy. Finding one is often anything but easy.
In this variant, the app can initially be used free of charge, either in the form of a basic version with limited features or as a time-limited test version.
By upgrading, the user gets access to valuable premium features or can continue to use it after the trial period.
This variant is often combined with the previously presented model: In the premium version, users enjoy a completely ad-free app experience.
In the freemium model, on the other hand, they have to settle for ads and a supposedly poorer user experience. Similar to in-app purchases, a healthy balance must be found here between the two variants. The freemium version should have enough to offer to inspire users. Nevertheless, an upgrade to the premium variant must still be really worthwhile.
Here you never run the risk of your app only being used in the free version, because: These apps can only be used by paying, either as a one-time purchase or in subscription form. The biggest advantage of this strategy is also its biggest disadvantage, because: Users have no opportunity to test the app for free. Therefore, the barrier to entry is particularly high here.
Paywalls are access restrictions. In this model of app monetization, users can use all the app’s features, but only in a limited way.
Certain actions can only be performed in a certain number or over a limited period of time per day. Once this limit is reached, the paywall takes effect, which can only be overcome by payment.
This approach is suitable, for example, for app platforms of online magazines, newspapers or publishers and exists in different variants, such as a hard paywall or in combination with a freemium model.
The advantage: There is a smooth transition between free and premium content. However, please be careful not to scare users away by imposing too hard restrictions.
The Pay-What-You-Want model is considered particularly user-friendly. As the name suggests, users are free to decide how much they want to pay for the app here.
To avoid the risk of a large portion of users shirking payment, you have the option of setting a minimum amount. If you deliver properly in terms of functionality here and convince your users, you can profit a lot from this model.
Donation models are also common in the app sector. The user can, but does not have to pay for the use. If your app is focused on being a non-profit, you will collect sympathy with this variant and ideally generate revenue. However, if you have a specific intention to make money with your app, a donation model is probably not the right one.
Earn money with your own app – the indirect way
Do you want to make money with your own app, but none of the models fit your offering? Then change your perspective. Instead of making money directly with an app, you could go the indirect route and use an app to market your offering. Typical examples are ordering/booking platforms like Lieferando or Booking.com.
App monetization checklist – which model is the right one?
Now that you know the different models for monetizing an app, we would like to conclude by giving you a checklist. This will help you find the right variant for your app idea. The respective model is suitable if the following requirements are met despite or due to monetization:
- Good user experience in all plans (freemium, premium, before and after paywall, etc.).
- There is a clear usage/purchase argument that fits the target group.
- The monetization model is not too daunting.
- There is a comparable, if not better, price/performance ratio as with the competition.
- The intended goals can be realistically achieved with the selected model.
- The expectations of the target group are met.