As of January 2024, there were around 1.8 million apps available for download from the Apple App Store and nearly 2.4 million on the Google Play Store. However, the average app only makes $1.79 in revenue.

To stay afloat in today’s competitive market, app developers and publishers must stay up to date on the latest mobile app monetization tactics. In this article, we’ll look at several effective techniques for developers to commercialize their apps.

What Is Mobile App Monetization?

Mobile app monetization is the process of making money from a mobile app. There are several monetization approaches for mobile apps that employ a user base to produce cash, such as in-app advertising, in-app purchases, the freemium model, and more.

While 77% of apps in the Apple App Store were paid apps in 2009, only 10% currently require payment at download. Meanwhile, in the Google Play Store paid apps account for only 3.1% of mobile apps.

With the shift to free apps, app developers have had to think of creative ways to generate app money.

To ensure that an app’s revenue grows while maintaining a great user experience, app developers can employ one of the following app monetization strategies. Alternatively, businesses can use a hybrid app monetization strategy, integrating two or more strategies to earn income.

How to Monetize Your Mobile App Data

1. In-app Advertising 

In-app ads are advertisements that users see while using an app. These are banner ads, interstitial ads, video ads, native ads, and text ads.

This app revenue model is one of the most popular app monetization tactics, and it shows no indication of slowing down, with forecasts predicting that ad revenues obtained from in-app ads would nearly triple by 2025, hitting $226 billion.

Pros of In-app Advertising

• 1. Better Results

In-app ads have been shown to perform up to 11.4 times better than banner ads on mobile websites.

• 2. Better Targeting Capabilities

With in-app advertisements, your viewer chooses to download the app if you advertise relevant apps with a specific targeting audience, making your marketing more effective. 

Cons of In-app Advertising

• 1. Low Engagement

Although the audience is a captive one, the number of clicks can be low. With an average of a 0.1% click-through rate (CTR) on banners, these ads are probably not going to get a great deal of engagement.

• 2. Competitor’s Promotions

Your competitors might end up appearing in the in-app ad so a user watching might end up clicking on the link and installing the app.

2. Use Interstitial Ads to Grow eCPM

With increasingly advanced analytics available to developers, app publishers now have unprecedented access to user activity. These observations have led app developers to shift away from traditional in-app marketing, such as banner ads, in order to combat banner blindness and reduce user boredom.

Interstitial adverts are one of the most efficient forms of in-app advertising. Unlike banner ads, which have size limitations and are persistent and invasive, interstitial advertising occupy the entire mobile screen and appear at natural transition points in the user flow.

This mobile app monetization strategy works most effectively when best practice is followed, with ads implemented at the end of a flow, for example in a gaming app, they should appear at the end of a level.

Pros of Interstitial Ads

• 1. Powerful User Engagement

The level of viewability that interstitial app ads get cannot be matched by banner ads. A full-screen ad is effective as it is almost impossible to ignore.

• 2. High CTR and CPM Rates

Given their higher engagement rates and better CTR, advertisers are often willing to pay higher CPM for interstitial ads. Disadvantages of Interstitial Ads:

Cons of Interstitial Ads

• 1. Penalties for Improper Implementation

Publishers need to implement interstitial ads considering Google’s guidelines and recommendations. Failure to do so can result in a Google penalty. 

• 2. Delayed Loading Time

Given their size, interstitial ads have the potential to cause slower load times. This can impact the overall user experience. 

3. Use Native Ads to Improve CTR

Native advertising are intended to blend effortlessly into their host app, appearing as just another post in the feed. When used effectively, these advertisements cause minimum disturbance to the user experience.

They have also been demonstrated to have one of the greatest engagement rates, with one eMarketer report from 2018 indicating that native advertisements have an 8.8 times higher click-through rate (CTR) than traditional display ads. According to ZipDo data from 2022, the CTR for native advertising was 0.23%, about double that of typical banner ads.

Pros Of Native Ads

• Improved User Experience

Since native ads are non-disruptive and non-intrusive, they result in a better app browsing experience for the end user.

Cons of Native Ads

• Customer Targeting Seems Intricate

For launching hyper-targeted campaigns, advertisers need to pull more customer data, build unique audience segments, and make sure that their content is personalized to each demographic’s interests and behaviors.

4. Freemium Subscriptions Can Drive Conversions

Falling under the broader umbrella of subscription apps, “freemium” is a mobile app monetization model with several advantages. After users download a free app they are then offered in-app purchases that give them exclusive access to premium features, additional content, or digital goods. 

Spotify is perhaps one of the best examples when it comes to the freemium app subscription model. Spotify, a music app that was developed in Sweden in 2006 was started as an alternative to the pay-per-song model of iTunes and the illegal pirating of downloaded music that was proliferating at the time.

Spotify offers many of its premium app features to its free users, however, for a monthly subscription fee, users are able to unlock premium features, including an ad-free version.

Read Also: Data Monetization in Retail: Trends and Opportunities

Spotify is undoubtedly the king of the freemium app model when it comes to conversion. While most freemium apps see average conversion rates of 2-5%, research shows that Spotify converts 24% of users who start with the free version into paying subscribers.

But why is it so successful and how can other developers leverage this app business model to generate app revenue for themselves?

By constantly experimenting, A/B testing, and focusing on their users, Spotify has been able to create a “dynamically changing user interface, behavioral prediction algorithms, and an ever-expanding catalog of music”.

Cons of Freemium Subscriptions

• 1. The Freemium Model Is Scalable

One of the greatest advantages of this monetization method is that it allows a new venture to scale up and attract a user base without the costly overheads of traditional marketing and sales campaigns.

• 2. Try Before They Buy

Freemium subscriptions give users the ability to try out your app before they commit to paying for it.

• 3. Wider User Base

Freemium subscriptions can help you generate revenue from users who would not otherwise be willing to pay for your app.

Cons of Freemium Subscriptions

• 1. Limited Interest in Upsell

There is a potential for decreased revenue if users do not upgrade to the paid app.

• 2. Affects User Experience

There is also the potential for users to become frustrated with the app if they feel like they are constantly being bombarded with ads or upsells.

• 3. Requires Careful Implementation

Freemium subscriptions can sometimes be confusing for users, which can lead to them unsubscribing or simply not using the app.

5. Premium Subscriptions to Deliver Stable Revenue

Premium mobile applications are premium apps that operate on subscription models; nevertheless, users must sign up for a fixed charge immediately after downloading.

This means that revenue is directly related to the quantity of downloads. Paid apps have been proven to increase user engagement and customer acquisition.

Pros of Premium Subscriptions

• 1. Reliable Income Stream

App subscriptions offer a reliable and predictable revenue stream for app developers.

• 2. Ensures Longevity

Premium subscriptions can help to ensure that an app remains accessible and useful for its users over time.

Cons Of Premium Subscriptions:

• 1. Expensive

Premium subscriptions can be expensive for users, especially if they don’t use the app often, leading to a decline in user numbers.

6. Use In-App Purchases to Create Repeat Customers

In-app purchases are another monetization method that is gaining momentum in the digital ecosystem, particularly in the gaming arena. Offering in-app purchases is a great choice for gaming apps, for several reasons.

In-app purchases allow users to use real money to purchase features or items while playing a mobile game. Depending on the game type, this can be anything from free lives, to extra coins, to the ability to unlock hidden or previously unachievable levels.

While the option of in-app purchase can be introduced at any point in the game, the smart way to monetize your app in this way is to analyze user behavior and strategically offer in-app purchases at points throughout the gaming app where users need help.

The process of setting up payment for in-app purchases is also simple. When a user signs up to the Google Play store of the iOS App Store, they have the option to add a credit card to cover any in-app purchases and other app-related costs.

When a user decides to procure an in-app purchase, it is simply charged to their credit card, with app stores taking a commission (usually 30% unless you are a mobile app that is successful enough to be able to negotiate a different commission schedule)..

Types of In-app Purchases

• 1. Consumable

The most common type of in-app purchases in mobile games, consumables refer to items such as in-game currency, bonus health, or power-ups.

As the name suggests, once these in app-purchases have been used they disappear, but can be purchased again at any time. While most games offer a certain amount of these consumables for free, consumables are a great option for users who don’t like the hassle of waiting to gain these items and are happy to pay to save time.

• 2. Non-Consumable

Unlike consumables, when users buy non-consumable in-app purchases they have permanent access to them. Examples here include unlocking hidden levels, bonus characters or cosmetic items.

• 3. Auto-Renewing Subscriptions

In-app subscriptions refer to regular payments users make to access premium content (somewhat akin to the freemium model mentioned above).

In mobile gaming, subscriptions can be set up to last for varying periods of time and to unlock everything from exclusive gameplay items to premium versions of the game.

• 4. Non-Renewing Subscriptions

Non-renewing subscriptions act in the same way as renewable subscriptions, except that mobile users must manually renew their subscriptions.

Pros of In-app Purchases

• 1. Convenience

In-app purchases are convenient for users as they can make purchases without having to leave the app.

• 2. Flexibility

In-app purchases allow developers to offer a wide range of content and features for users to purchase, providing a flexible monetization strategy.

• 3. Effectiveness

In-app purchases have become a major source of revenue for gaming and non-gaming apps alike. Indeed, one survey found that developers found in-app purchases to be the second most effective monetization strategy, behind only rewarded videos.

Cons of In-app Purchases

• 1. May Alienate Users

Users may feel like they are being “nickel and dimed” if they are constantly being asked to make purchases. Moreover, if the developer is not careful with the types of purchases on offer, the game may be dismissed as a “pay-to-win” app.

• 2. May Damage the Brand

There is always the risk that users will make an in-app purchase and then be disappointed with the product, which can lead to negative reviews and decreased downloads.

7. SMS Marketing

While SMS marketing may be considered a little old school when done with style, smarts, and a touch of humor, it can be an effective way to reach out to your users and offer them discounts on in-app purchases or premium subscriptions. In fact, a 2022 survey in the US found that nearly 47% of respondents preferred being contacted by brands via text messages.

It is essential to ensure that the people you are reaching out to have explicitly consented to your use of their data. Think carefully about the length of the message and time you are sending it—nobody wants to read a novel about your app at dinner time.

Pros of SMS Marketing

• 1. Easy to Implement

SMS marketing is easy to implement. Data can be collected via in-app prompts and messages can be sent via mobile marketing automation.

• 2. Effective in Retaining Users

A recent study showed that reaching out to users who haven’t recently engaged with an app via SMS can return a click-through rate (CTR) of up to 36%.

Cons of SMS Marketing

• 1. May Be Perceived as Being Spammy

SMS marketing can be intrusive and disruptive, especially if people are not expecting it.

• 2. Reduced User Data

It can be difficult to track the effectiveness of SMS marketing campaigns, since people may delete messages without reading them.

• 3. Doesn’t Suit All Brands

SMS marketing may not be well-suited for all brands or products, especially if the target audience is not likely to be responsive to text messages.

8. Email Marketing 

While email marketing may not seem like a logical fit for mobile app advertising, it can be an effective way to engage existing app users and turn them into paying users.

Studies reveal that wiith social media channels flooded with users, 79% of millennials in the United States preferred being contacted via email by brands in 2022.

Pros of Email Marketing

• 1. Emails Speed Up the Buying Process

Studies show that email marketing is up to 40 times more effective than social media marketing, with the buying process being three times faster than via social channels.

• 2. Easily implemented

Email marketing is relatively easy, and cheap to implement. A simple in-app subscription gives access to user email addresses, which can then be used to send a variety of marketing emails.

Cons of Email Marketing

• 1. May Devalue the Brand

Email marketing may be considered spammy, especially if users haven’t subscribed to the brand’s emails.

Bottom Line

A mobile application can generate big money independent of the number of users. It is critical to determine which monetization model works best for your platform and then apply it effectively. We have discussed the many monetization options available, their benefits, and essential strategies.

Advertising remains the most popular app monetization approach. If you’re looking for an ad network, we propose Adsterra because it connects you to a network of over 13,000 high-quality advertisers who pay high prices for commercials.