Paid, In-App Purchase, or Subscriptions: Your Guide to App Monetization Strategies

app monetization strategiesHow will you create cash flow from your mobile app? The logistics of your revenue generation model need to be outlined from the outset. Anticipated features, functionality, and your target audience can in many cases guide you to the right app monetization model – but you need to think through your app’s revenue potential early in the discovery and design phases. Here are three common app monetization strategies that can get your revenue generation off on the right foot. 

Paid Apps

Why pay for what you can get for free? That’s a question that your business needs to answer for consumers considering your mobile app. Expectations are higher with paid applications. Unless your value proposition differentiates you from the rest of the marketplace or represents your mobile app as a prestige product, buyers will be reluctant to fork over their hard-earned money.

Before we even talk about value propositions, we can get a good sense of the app categories that tend to thrive in the paid app market. If you were to pull up the top paid apps on iTunes or the Google Play store, the lion’s share will surprisingly be mobile games. Though the free-to-play model is saturated with entertainment options, customers will pay for a more complex, unique, or ad-free experience.

Beyond that, apps that make strong impressions are king. As of writing this, the top 10 apps on iTunes or Google Play include:

  • a real-time weather app with highly-accurate predictions and crisp weather pattern visuals
  • an intuitive photo touch-up app capable of making stunning pictures with a few swipes
  • a 3D anatomy reference app that provides comprehensive visuals for healthcare professionals

In each instance, the mobile app provides next-level engagement that justifies the payment. The value propositions of the above examples are that their mobile app experience surpasses the rest of their competitors (this is why marketplace research is key). If you can convey how your app is better than the free competitors, then going the paid route is a great way to monetize your app.

Additionally, if your target buyer is a Millennial, the odds are better that making your finished product a paid app will pay off. A report from comScore finds that 64% of Millennials paid for a mobile app in the last year with 19% having paid for 12 or more apps. Only a fraction of other generations are willing to pay for apps. So, if your application caters to a Millennial audience, then requiring payment up front is one of the app monetization strategies worth considering.

In-App Purchases

Many in-app purchases are meant to provoke the same behavior as impulse buys at the checkout counter. A user is presented with a choice, the choice seems too good to pass up, and the purchase itself is made effortless. Yet unlike an impulse buy, in-app purchases need to enhance the overall experience and not lead to buyer’s remorse. That’s the line that businesses have difficulty walking, but knowing more about in-app purchases can simplify the journey.

When developing a business application, there are two types of in-app purchases that you need to consider: consumable and non-consumable purchases. Consumables are one-offs that need to be repurchased after being used (i.e. game currency or hints), and non-consumables are purchases that permanently enhance services or functionality (upgrades to pro editions, added features, etc.).

The two types of in-app purchases aren’t an either/or situation, but your business does need to map out how and when to implement the appropriate buying triggers. Whether that’s through gamification or a solid freemium preview, you’ll then need to appropriately set up whether a purchase is consumable or non-consumable in the iTunes or Google Play Store.

As far as your target audience goes, Millennials are once again the most likely users to make purchases in your application. Nearly half of Millennials are making five or more in-app purchases annually. Purchase options that successfully speak to that audience and address their needs are going to be better at enhancing the user experience.

Subscriptions

Subscriptions take in-app purchases to the next level. Rather than paying once for an upgraded experience, your user base is committed to making regular payments to continue their subscription. This encourages users to more frequently interact with your app, boosting user retention rates overall.

Plus, this monetization model became more lucrative in recent years, expanding the profit percentage for app owners. For any subscription that lasts more than a year, Apple will only take 15% of the profits rather than their previous 30% cut, a decision that Google Play shortly followed. Combine that with predictions that in-app subscriptions for non-game apps will increase 25% by 2021, and subscriptions are an increasingly appealing mobile app monetization strategy.

The audiences most likely to shell out money for subscriptions are predictable: Millennials and professionals that rely on the features of your app. Companies that can address the pain points of these audiences and create benchmarks to spur them through the conversion process are more likely to keep a consistent base of repeat subscribers.

Which of These App Monetization Strategies Works for You?

Creating a recurring source of revenue is the dream. However, it’s not a given in the marketplace. Over 24% of users abandon a mobile app after one use, prematurely cutting a revenue stream off at the knees. Upfront commitment to the user experience can prevent immediate abandonment, but even then, only 37% of users will use an app more than 11 times.

How can you increase your cash flow as you captivate mobile users? Contact us to identify the right app monetization model for your business.

 

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