If you’ve listened to at least one app entrepreneurship pep talk in your life, then you’ve heard this: offer value to your users. And as you put in more time to build your app and ask for feedback, the more you hear it: offer value to your users. By the time you have done your research and created your prototype, you’re pretty confident that you are, in fact, offering value to your users. Meanwhile, this niggling thought in the back of your mind keeps getting more and more agitated, asking in an increasingly louder voice: and what’s in it FOR US?
Yes, you build your app to offer value to your users. But you also build your app to provide value to yourself. Beyond the validation of becoming an entrepreneur, making it into the headlines, and leaving your mark in the world, you want to make money to keep the shop open, pay the bills and yes, afford that once-in-a-lifetime fancy vacation on a yacht and a nice pension. Every entrepreneur will tell you that if you’re not making money with your app, you’re not in the game. It becomes harder when you have to decide exactly how you are going to make money out of your app.
To help solve the mysteries of monetisation, we’ve put together a list of the most used strategies out there, to help you decide what would work best for your own app. Let’s get started!
Probably one of the top two monetisation models out there (followed closely by in-app purchases), in-app advertising is something every smartphone owner is familiar with. It consists of adding to the interface of free apps static banner ads, full-screen ads or video ads. While App Annie’s report on app monetisation ranks video ads as the primary source of income for game apps, all other apps are better served by static ads, either banner or full screen.
Nevertheless, keep in mind that the low-hanging fruit of in-app ads come with pits of oversaturation, or worse, annoyance. If you don’t want your users to get annoyed with the ads, time them well in your user experience, don’t exaggerate with their presence and most importantly, tailor their topic to your audience’s interests.
Closely related to in-app advertising, in-app purchases work by allowing users who download free apps to purchase more functionalities or space for their app. This model works well with games, where users can buy extra characters or level-ups, while in commerce apps – any app where you can purchase products or a service – it may translate to a small fee added to each transaction. While users are just as likely to get annoyed with the app if they realise they have to pay for the core functionality of the app, they’re more likely to accept and want in-app purchases if it enriches their experience.
The freemium model has been gaining ground in the last years, especially in the field of services apps. It works by presenting the core value proposition of the app in a limited format, allowing the user to test it for free or keep using it as such. Once the user reaches a certain threshold, they will need to make an upfront payment or regular payments for the whole functionality of the app. Interesting to note in this model is there are different approaches on what to cap, depending on the specifics of your app. Here are just a few examples, but you can mix and combine as you see fit:
- Capping usage. The free app offers limited usage, storage space, content or hours. As a user, you have to pay to remove these ads.
- Capping time of use. the free trial. Especially useful when it’s impossible to cap usage or functionality, you are given free limited access to the fully-featured app. As a user, you have to pay to continue to use the app after the trial period expires.
- Capping functionality. Most frequently met in-game apps, but also some in service apps. While users enjoy basic features in the free app, they start paying once they are looking for extra capabilities, upgrades, services, virtual items, speed-ups or content.
- Capping user experience. The free app is ad-supported, and the user has to pay in-app or for a separate download to get the ad-free experience.
Derived from the Freemium model, app subscriptions work by having users pay a monthly sum for which they get a specific product pack. The more a user pays, the more features they get to use. Moreso, power users get priority with support and have a more significant say in offering feedback and ideas for future updates. This model is especially useful for service apps, where the app becomes a framework for longterm collaboration, instead of a one-time or limited product use.
The paid download monetisation model requires users to make one, up-front payment to use the app. This type of monetisation model is more often used by established app creators, as it requires significant trust from the user’s side. Firstly, users need to trust that the app is good enough to pay for it before trying it out. Secondly, users expect a commitment from the creator’s side to maintain the app and keep it updated for a longer time (some even lifelong!).
Yes, you can hit gold
With the app industry growing exponentially, every entrepreneur worth his salt with a great app up his sleeve can hit gold. What matters is that:
- You offer value for your users
- You choose the monetisation model that suits your business model best.
At the end of the day, whether you go for in-app ads, in-app payments, a freemium model or upfront paid downloads, decide to combine some of these or even come up with your own monetisation model, it’s important to keep in mind that monetisation is a game of numbers. Just like you aren’t able to will gold out of the lead, you can’t make your users pay for your app until they feel they are getting something out of it as well. So keep working on that great app you envision, and the money will follow!