The Ultimate Guide to Profitable Mobile App Monetization

Having an idea and turning that idea into something profitable are two very different things. Lots of people want to create an app, but the money-making aspect holds them back. Will you ever see a return on your investment?

I get asked dozens of questions about apps on a daily basis. But “how do you make money with an app” is definitely at the top of the list—which inspired me to create this guide.

Fortunately, there are lots of different ways to monetize an app.

Whether you’re building a new app for the first time or trying to make money with your existing app, I’ll explain everything you need to know about app monetization below.

How to Make Money With an App

Generally speaking, app monetization strategies fall into one of two categories—direct monetization and indirect monetization.

Direct monetization is definitely the most popular. In fact, the vast majority of the app monetization models covered in this guide will fall into that bucket. But before we get into the specifics, I want to quickly clarify the difference between these two app monetization methods.

Direct Monetization

As the name implies, direct monetization is money generated straight from your app.

If an iOS or Android user pays $1 to download your app from the Apple App Store or Google Play Store, the cash comes directly from the app. When someone uses your ecommerce app to buy something from your business, the sale is coming from your app.

Again, this is pretty self-explanatory. But it’s essential to understand how direct monetization works before we dive into indirect monetization.

Indirect Monetization

Indirect monetization isn’t quite as black and white. You can still make money by creating an app, but the actual dollar amount can’t necessarily be tied to the app itself.

The best example of indirect monetization is a standalone product or service that comes with a free app. In this situation, the app is secondary. You’re making money whether the app gets used or not. Having an app makes the product more appealing to prospective customers since it will ultimately improve the user experience.

Indirect monetization is extremely popular for software products. I’ll give you some actual examples of this shortly as we talk about app monetization strategies in greater depth below.

6 App Monetization Models and Strategies

There are six different ways to make money with an app. I’ll explain each one’s advantages and drawbacks to help you figure out the best way to monetize your app.

You’ll also see some real-life examples of apps using these monetization models successfully.

1. Paid Downloads

Charging users a fee to download the app is one of the simplest ways to make money with an app.

Platform	Average Cost
Google Play Store	Less than $5
Apple App Store	$4.37

So how much should you charge? According to a 2020 study from Statista, the majority of paid apps cost less than $1.

As you can see from the graph, most paid apps cost less than $5. This particular study only used data from the Google Play Store.

Statista also determined that the average cost of a paid app in the Apple App Store was $4.37. While this is slightly higher than the distribution of paid apps in the Google Play Store, it still falls in the less than $5 range.

You have the freedom to charge whatever you want for your app. But if you’re going to charge users a download fee, it should be in the range that they’re used to paying.

While pay-to-download is definitely a straightforward app monetization model, it does have its drawbacks. You can’t expect to get nearly as many downloads as you would for a free app. Some people won’t consider installing an app if it’s not free.

With that said, it’s more likely that paid users will be highly engaged.

Anyone who pays for a download will want to get the most out of their investment. If those people are using the app frequently, you could potentially make even more money from them with other app monetization models on our list.

2. In-App Purchases

The in-app purchases monetization model can be used for both free and paid apps alike. You can use this method for physical and virtual products.

Gaming apps love to leverage the in-app purchase methodology for virtual coins or experience upgrades. For example, users playing a mobile gaming app could spend money to unlock a new vehicle, weapon, map, or something along those lines.

Pokemon Go is a great example of a free mobile app that makes money from in-app purchases.

According to Video Games Stats, Pokemon Go has generated more than $3 billion in revenue as a free app.

This revenue comes from roughly one billion downloads. But since people aren’t paying to download the app, how does it make money? In-app purchases. The app sells “PokeCoins.” This virtual currency can be used to pay for upgrades within the app that improve the gaming experience.

But mobile games aren’t the only way to monetize an app with in-app purchases. Ecommerce websites can build an app as a way to increase mobile sales.

If a customer buys a shirt, pair of sneakers, book, watch, or whatever you’re selling online from your app, it falls into this category as well. Using an app to make money is a no-brainer for anyone who already sells physical or digital products online.

3. Subscriptions

Subscriptions are an excellent way to generate recurring revenue with an app. The Apple App Store and Google Play Store both make it easy for you to set up a subscription business model with your app.

Users only need to sign up for a subscription once, and they’ll continue to get charged on a recurring basis until they manually cancel the subscription.

In most cases, subscription apps are billed on a monthly basis. But you can set up annual or quarterly billing cycles as well. It’s common to offer a better monthly rate for longer subscription terms, as shown in the example above.

Subscription apps could be applied to a wide range of industries and potential use cases.

If you’re creating a fitness app, you can charge users a monthly subscription for access to workouts, videos, and training regimens. Even a small business owner, like a local dry cleaner, could leverage the subscription model to offer pick-up and delivery cleaning services.

An excellent subscription-based app, called PepTalks, was recently built using Buildfire’s platform. App users pay a monthly fee to receive motivational words delivered to their devices via push notification on a daily basis. You can read the full PepTalks customer story here to learn how one person took a simple idea and monetized it with an app.

4. Freemium Model

The freemium app model is essentially a mix between subscriptions and in-app purchases. Technically speaking, it could potentially fall into either category, but this is definitely worth mentioning on his own.

To clarify, the term “freemium” comes from combining the words “free” and “premium.” Free + premium = freemium; get it?

So offering your app for free is the first step to using the freemium monetization strategy. Next, you need to offer different versions of your app—free and premium.

The idea here is to offer a free version with basic features and an upgraded version that delivers a better user experience. For example, let’s look at the Pandora mobile app subscription options.

This Internet radio service has multiple plans, including a free version.

Anyone can download the app for free and listen to music for free. However, you’ll be interrupted with ads between songs. There are also some limitations and contingencies in terms of skipping songs, searching for songs, and playing what you want.

The free version is fine, but if you want to get the most out of this app, you’ll need to get a paid subscription.

FAQ

• What are the most common app monetization strategies?
  The most common strategies include in-app purchases, subscriptions, freemium models, advertisements, and product extensions.
• Can free apps generate revenue?
  Yes, free apps can generate revenue through methods like in-app purchases, ads, and subscriptions.
• How do advertisements work in app monetization?
  Advertisements can be displayed in various formats such as video ads, banner ads, and pop-ups, with revenue models like CPC, CPI, and CPM.
• Is it necessary to monetize every app?
  Not every app needs to be monetized, especially internal apps for workforce management, which can save costs in other areas.
• How can I choose the right monetization model for my app?
  Consider the app type, industry, and user engagement data to determine the most profitable monetization model.