When you first came up with your app idea, chances are you had a monetization strategy in mind. After all, the reason most startups get into the app business is to make money. But there are many ways of monetizing an app. It’s smart to consider all of them before choosing one as your final plan. In this post, we’re exploring seven monetization options for your app.
The most obvious and simplest monetization strategy is to charge a fee to download the app. For some app categories, including productivity and photo editing, the pay-to-download model works well. For other categories, it’s more challenging to get users to purchase. Many people are reluctant to pay for something before they’ve tried it out — which is why the next model we’ll discuss has become popular.
The pay-for-premium model allows users to start with a freemium version of the app that allows them access to basic features for free. Additional features are available in premium versions, which the user must pay for in order to access. As a user engages with the freemium version, the app will tease premium features and try to entice the user to upgrade.
Premium versions are one form of in-app purchases. But there are a variety of other options, including in-app currency for use in games, and ancillary services. The type of app you’re building will dictate what type of in-app purchases make sense for you.
The auto-renewing subscription is the holy grail of monetization strategies. Even though users can cancel at any time, subscriptions allow you to bring in monthly revenue on a more consistent basis than any of the other monetization options. You can offer graduated commitment levels (1-month, 3-month, 1-year, etc.) to give customers flexibility. Providing discounts for longer subscriptions allows you to lock in users for a longer period of time.
In-app ads can take many forms, including banner ads, video ads, and native ads like sponsored articles. You are paid based on the number of times an ad is shown to users or when a user clicks an ad. You can arrange your own deals with individual advertisers, or you can use an advertising network that handles this task for you. (There are many advertising networks to choose from, with some specializing in particular audiences or industries.)
While this strategy has been used effectively by companies like Facebook, there are a couple of downsides. First, people dislike ads. Sometimes, the presence of ads is enough to dissuade people from using an app, especially if they don’t find them relevant. Second, your advertising revenue will be low if you don’t ensure that the ads will be compelling to your users. If you’re using a click-based model, you won’t get paid anything unless a user clicks an ad.
Sponsorships are a form of in-app advertising, but this strategy is worth mentioning separately. With sponsorships, you aren’t paid based on clicks or impressions. Instead, you’re paid a set fee for tiered sponsorships, which offer a variety of benefits at each level. These benefits include advertising within your app, but they may include other benefits as well, such as advertising on your main website or at events.
By partnering with another company, you can offer someone else’s products or services within your app and receive a commission on sales. This strategy is also known as affiliate marketing. Another form of partnership is gathering and selling leads to your partner company.
While these seven strategies are popular ones, they’re by no means the only monetization options for your app. You may iterate a different version of one of these strategies, combine strategies, or come up with a completely new one. Brainstorm different ways to maximize revenue, and survey prospective users to see what they would find most attractive.
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