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App Monetisation Strategies: Methods and Real-world Examples

November 8, 2023
2 mins
App Monetisation Strategies: Methods and Real-world Examples

Overview: Unraveling App Monetisation

In today's digital-driven age, mobile applications are not just tools for convenience or entertainment; they've transformed into significant revenue generators. As the numbers suggest, the app market is thriving. It's projected that the total revenue in the app market reached an astounding US$465.40 million in 2022 alone. This upward trajectory is further supported by the anticipated annual growth rate (CAGR) from 2022 to 2027, which stands at 9.60%. If this growth is sustained, by 2027, the market volume could touch an impressive US$712.40 million.

Drilling down into specific revenue streams, the importance of monetisation strategies becomes crystal clear. In-app purchase revenue was forecasted to hit US$197.70 million last year. On the other hand, while paid apps constitute a smaller slice of the revenue pie, they were still projected to bring in a respectable US$19.24 million in 2022. Advertising, an age-old method of monetisation, remains a heavyweight in this domain, with anticipated revenues of US$248.50 million in the previous year.

Given this backdrop, understanding and optimising app monetisation strategies becomes crucial. This article will explore different app monetisation strategies, illustrate them with real-world examples, and highlight the pivotal role of app development in ensuring these revenue goals are met.

The Role of App Development in Monetisation

The success of any app monetisation strategy is deeply intertwined with app development. An app's design, user experience, and functionality play a massive role in its adoption and the effectiveness of its revenue model. For instance, if an app relies on in-app advertising, the placement and relevance of these ads are crucial. Misplaced or intrusive ads can deter users. Similarly, for freemium models, the value proposition between free and premium features must be evident and enticing. All these nuances are determined during the app development phase. Hence, a well-thought-out development process is the backbone of successful monetisation.

1. In-app Advertising

This strategy involves displaying ads within the application's interface. Whether they're banner ads, video commercials, or interactive promotions, these advertisements can cater to a user's specific interests and behaviors. By offering their apps for free, developers entice a larger user base, which in turn attracts advertisers willing to pay for ad placements. Examples include Facebook which serves as an archetype, where the platform remains free for users, but their interactions are interspersed with targeted advertisements.

2. Freemium Model

Under the freemium model, apps provide a set of standard features at no cost, but more advanced features or functionalities come with a price tag. This approach lets users engage with the core application but tempts them with enhanced capabilities available only in the premium version. Music-streaming giant Spotify employs this model, offering ad-supported music for free, while premium users enjoy added benefits like offline listening and an ad-free experience.

3. In-app Purchases

This strategy introduces a micro-transaction system within a free app, where users can purchase virtual goods, additional content, or enhancements. These purchases can range from cosmetic items that change the app's appearance to crucial tools or features that can significantly enhance user experience or progression. The game Candy Crush Saga stands out, offering users the ability to buy power-ups, extra lives, and other in-game assets to advance more efficiently.

4. Subscription Model

In this model, users commit to a recurring fee, often monthly or annually, to continually access the app's content or services. This model is ideal for platforms that consistently update their content or provide ongoing services. Subscriptions guarantee a steady revenue stream and often foster user loyalty. One such business that adopted this model is the streaming service Netflix. It operates under this paradigm, charging users a recurring fee for unfettered access to its vast media library.

5. Paid Apps

In stark contrast to free apps, this strategy requires users to pay upfront before downloading the app. Because of the initial cost, these apps typically need to offer significant value or unique features that set them apart from their free counterparts. The world-renowned game Minecraft is an exemplar, charging users a one-time fee for complete access to its sandbox world.

6. Affiliate Marketing and Referrals

Within the app, creators can embed affiliate links or promote third-party services/products. When users engage with these links, whether through purchases or sign-ups, the app owner garners a commission. This method often relies on partnerships and collaborations with other businesses or services. The browser extension Honey is a testament to this model. It helps users find discounts, and when they use a suggested promo code and finalise a purchase, Honey receives a commission from the associated retailer.

Conclusion: Crafting a Robust Monetisation Strategy

Monetising an app is not a one-size-fits-all endeavour. Businesses need to consider their target audience, the app's core value, and market dynamics when choosing a monetisation strategy. Coupled with meticulous app development, the right strategy can not only drive revenue but also ensure sustained user engagement and growth. As the app landscape continues to evolve, staying updated with emerging monetisation trends and being adaptable will be key to thriving in this digital marketplace.

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