Application monetization: 6 profitable business models that work

Developers create applications for different purposes. Someone needs to increase the level of loyalty of the audience to their company, someone wants to get more customers, and someone just wants to earn here and now. Often, mobile applications are an additional marketing channel for a brand, which in many cases starts working almost immediately after launch.

At the same time, some developers create something of their own, because they want to join the market, where some applications (for example, WhatsApp) cost billions of dollars. This area really provides a way to make money, and we in Appodeal offer to get acquainted with the most promising business models for mobile applications. In this article, we describe the time-tested ways to monetize applications that have proven their effectiveness more than once or twice.

How to choose the right business model for your application?

Below we consider the six most popular and profitable ways to monetize. And now let's try to answer a few questions that will help determine the choice.
')
1. What problem and how does your application solve?

2. What makes your application unique, why will people pay for it?

3. What do you think, what other positive aspects does your program have?

4. How well can the mode of monetization chosen by you for this application work?

It is also important to determine the balance between your desire to attract more users with the desire to get money. Some ways to monetize allow you to start earning immediately after the release of the application, while other models provide a gradual set of user audience with monetization after a certain period. How much time do you have? Can you refrain from monetizing the application for some time in order to gain user base?

Remember, the monetization plan must be developed and implemented in the application before the release. Moreover, the monetization methods described below can be combined, it is not necessary to use only one of them.

Free application with ads

This is one of the most common ways to earn income from your program. There are no restrictions on downloading. The goal of the developer is to recruit as many users as possible. Data on their behavior is then analyzed and made available to advertisers willing to pay for advertising.

Facebook mobile application is the perfect example of using such a model. Users don’t pay anything to the social network, but Facebook collects huge amounts of data about its users, then launching targeted ads. In their case, this work model is unusually effective - a social network recently announced a 151% increase in advertising revenue in the second quarter of 2015.



Bottom line : you will earn money by providing advertising space in your application. You can work manually or using automatic optimization (yes, we, of course, hint at Appodeal ).

pros

A free mobile application can very quickly gain a solid base of users who are attracted by the free program.

The market for mobile advertising has already surpassed the market for traditional advertising on radio, in magazines, and in newspapers.

A popular application is able to quickly collect data on user behavior patterns, which can be useful to many advertisers.

The model is effective if targeted advertising is used.

Minuses

This is a very well-known monetization strategy, and many users are annoyed by advertising, which can lead to their outflow.

Mobile advertising is limited to the size of the device screen.

This way of monetization does not work for niche programs that are designed to help the user perform a limited number of functions (advertising may look unnatural).

Freemium

Excellent business model, which we already talked about in Appodeal. Nevertheless, it is worth mentioning this way of monetization again, since it is one of the main ones. As a rule, the Freemium application has a set of basic and additional functions that the user can already purchase for money. The premise of the model is to attract people to the application with the provision of a set of basic functions. Over time, some users want more, and they begin to buy additional features. Here the main thing is to collect a large number of users and interest them with your application for a long time.

A great example now is the game Angry Birds. Rovio provides the app for free, but some features are hidden until payment, including additional levels, bird empowerment, and others. The game is very exciting, so users have been playing it for months and some have already bought additional features for money.





Bottom line : Freemium allows you to attract users with the basic version of the application so that fans of the program can buy additional features for money.

pros

This way to monetize the application allows you to build a user base in a relatively short time, and many of them will work with the program for months.

People who try out the features before buying are likely to become loyal users for a long time.

Very flexible solution, can be used in the vast majority of applications.

Can be combined with the use of the advertising model.

Cons >

If you offer too few basic features, users will leave.

If there are too many basic functions, users will not buy additional ones.

Paid applications

Another very common business model that requires payment for accessing an application. The cost can be very different - from $ 0.99 to $ 999.99 , and the developer receives money from each new user. The key to success is the ability of the developer to present the capabilities of the application in a favorable light, so as to interest the buyer at the very beginning. In the catalog, as a rule, the “killer features” of the program are indicated; this is literally a sentence from which it is impossible (ideally) to refuse.

An example of a successful application that uses this particular business model is Calendar 5, estimated by the developer at $ 4.99. The program is positioned as a smart calendar for corporate tasks and important events. The authors of the application are more able to convince users that Calendar 5 is better than the Android calendar that comes with the default OS.



Bottom line : this business model professes the principle of "pay, then take it"; it is worth using it to those teams that are sure that they can convince users to pay for the program.

pros

Funds are credited to the user's account with each new download of the program.

People who have paid for the application are likely to use it often, because the money has already been spent.

In a paid application, there is usually no advertising that can annoy users.

This model motivates developers to give maximum attention to progress and simplifies the calculation of ROI.

Minuses

It’s pretty hard to sell software because the competition in application directories is very high.

90% of paid programs are downloaded less than 500 times a day.

In-game purchases

Applications monetized under this scheme sell goods - virtual or real. It can be clothes, accessories - the real things that users need. But it can also be virtual goods, for example characters, clothes for them, game currency.

An example is the MeetMe program, a social application with the ability to purchase certain goods and services. For example, to increase the visibility of your profile you need to pay a certain amount. Developers get a good income thanks to a clear sales model for users.



Bottom line : this kind of business model allows you to open another sales channel for your products or services. In addition, it can be a way to make money in the game application - to sell in-game currency and all sorts of bonuses.

pros

A rather flexible business model that can be successfully used by companies operating in the eCommerce- / mCommerce-sphere.

In-game purchases are a great way to sell products or services with minimal risk.

The ability to purchase virtual goods can increase user loyalty.

Margin is usually quite high, because sellers do not incur collateral costs like renting premises for real stores.

Minuses
Usually, application catalogs take away part of the income from the sale of virtual (but not real) goods purchased within the program.

Not long ago, the authorities of the United States and the European Union have obliged Google and Apple to specify more details about the product in applications from the catalog for better protection of users.

Subscription

Another familiar business model that has a lot in common with Freemium. But here we are talking, as a rule, about getting the user access to the content, and not to the capabilities of the program. Usually a subscription (paywall in some cases) involves getting some amount of content for free. If the user wants to get more, you need to pay - usually provides for the payment of full access for a certain time.

Umano is a good example of using just such a business model. The program provides users with access to news podcasts with their limited number for free. If you want to get unlimited access to the materials of the service, the user can pay a subscription.



Bottom line : this model allows the user to try out the program before paying.

pros

Subscription provides a steady flow of funds over a long period of time, and after the expiration of the term it is usually extended automatically if the user has not specified a different payment method.

Most users of this application are quite loyal.

Subscription gives developers motivation to provide the most relevant and interesting content.

Minuses

This business model can be used in a limited number of applications.

Determining when and where to place a paywall can be quite a challenge for a developer.

Sponsorship

Among all the business models presented, this way to monetize the application is the newest. Its essence is that the advertiser rewards the user for performing certain actions within the application. Here brands and agencies are a monetization tool. The developer of the program receives a certain percentage of remuneration provided to the user.

RunKeeper is a great example of such a business model. Here, the user is encouraged to perform certain actions (walk a few steps or drive a certain number of laps on a bicycle). Advertisers pay the user, and the plus for the developer is that the program has no advertising that annoys users.



Bottom line : the application allows you to attract a large number of users both by their functions and premium from the advertiser. In this part of the award goes to the developer of the program.

pros

This is a very flexible business model that can be used in a large number of applications of various types.

Users who receive the award will be very loyal.

The developer of the program receives money, the advertiser provides information about himself to the user audience, while users receive rewards and bonuses.

Minuses

Due to the novelty, this business model has not yet been thoroughly tested by developers and marketers.

Requires a strong sales person in the team and manual persuasion of the sponsors.

Conclusion

Last year, the research agency Developer Economics published an infographic with the characteristics of each of the popular ways to monetize the application.



As it turned out, the most used business model is to show ads in the application, and the most profitable way to monetize is a subscription.

Now the ecosystem of applications is becoming more complex and diverse, so we can expect the emergence of new ways of monetization, some of which will represent a certain combination of the above business models.

The moral is : do not repeat their actions after others, try to combine different models of monetization of the application, adapt them for yourself.