In 2020 the number of mobile app downloads reached 218 billion worldwide. With so many people using apps, it comes as no surprise that companies started to think about app monetization strategies and weigh their options of revenue generation.
Even though there might be enough users to implement monetization into an app, many apps struggle to monetize successfully. The truth is, when it comes to mobile app monetization, there is more than one factor at play and more than one option to choose from.
The first rule of app monetization.
The first thing to consider is that monetization should be in the most native form for the users. After all, monetization is a new way of selling things, whether we are talking about selling ad space in your app, or virtual gifts to your users. You don’t want to be another pushy salesman as nobody likes to be sold to. That is why the most successful ways of doing that are usually the less intrusive ones. With app monetization, we need to make sure we sell the right things at the right time to the right audience.
Last year was in many ways a unique year, and it led to the increase of app use globally to 30% on average. This made the entire app experience about users and their happiness. By keeping this in mind, we analyzed recent app monetization trends, picked the most popular models, and focused on the following factors:
Amount of control monetization models offer
The way they affect app performance
Fulfillment of user preferences
Usability for the end-users
Levels of spam and intrusion.
Here is what we discovered.
Now let’s look at each app monetization model and how it benefits app developers and app users.
Advertising is one of the most frequently used monetization models. While it is one of the easiest models to implement, it is perhaps one of the least beneficial for user experience and the only one that can potentially lead to simultaneous revenue gain and loss.
Let’s face it – most people are annoyed with advertising. That explains rising adblocking rates globally. The advertising pops up in the least convenient time, becoming distractive, skipping it sometimes is not an option. All of this makes the experience disturbing. This distraction and inconvenience lead to a low satisfaction level with the overall app experience.
Apps rarely have control over what content their users will see. On top of that, lack of cookies within ad platforms means we can’t be sure how often they will see the same ad. This leads to ad fatigue and can be a sure sign of uninstalls.
Of course, not all ads we see are wrong, and with that comes another risk – if the ad is good enough, it is easy to lead your user away from your app and decrease app session length.
So why apps choose ads to monetize even if it can harm their users’ experience and thus their app’s sustainability in so many ways? For long time ads were the only monetization model that allowed apps to be free for use without sacrificing access to premium features.
The concept of pay-to-download apps is pretty straightforward. Apps set their price, and users pay before download. This model was widely used before, but with the increased competition, it became uncompetitive. We can easily see this in the ratio of paid apps (3.5%) to free ones (96.5%) that come with upgrades and in-app purchases.
While pay-to-download apps can somehow predict and guarantee the number of revenue apps can get, they can also significantly narrow down the pool of users. This can be explained by the “try before you buy” mindset based on the idea that most of the users prefer to know what they are paying for to avoid the wrong purchase. For the same reason we consult online reviews, zoom-in product images, and read product descriptions online – we need to know what we are about to buy.
Pay-to-download apps also became hard to market. According to Insider Intelligence, users become less interested in paying for apps downloads. Even if an app offers fantastic features, the one-time payment gap is still there, so building value becomes harder.
In-app purchases are by far the best way to make revenue. By providing extra content your users potentially need, you keep the overall experience balanced. When done right, users won’t feel pressured to purchase features unless they need them nor feel limited in them.
The options for extra content are limitless and depend primarily on your app type. We can divide them into consumable and non-consumable.
Consumable ones are purchases that happen on a reoccurring basis. We constantly need those to use services easily—for example, in-app currency like coins or tokens.
Non-consumable are one-off purchases. We pay for them once and keep them forever. For example, removing in-app ads, purchasing exclusive characters in games, or getting life-time access to a feature.
At Stipop, we offer stickers that are a great example of non-consumable in-app purchases – each user can purchase sticker packs for a fixed price and use them within your app without any limitations.
Unlike other monetization models, providing in-app purchases like stickers considers the needs of app developers and users at the same time. When it comes to the user-friendly aspect of monetization, stickers have several advantages over other in-app purchases and monetization models.
App owners have complete control over the content their users can access. Only verified high-quality content that can be customized if needed, created by trustworthy artists, and is available for purchase.
Speaking further of customization, brands can use stickers in favor of their brand awareness. By leaving a request in Stipop Studio, you can have your brand stickers created by one of the top sticker artists.
Users can choose from thousands of still and animated stickers based on their personal preferences. Every sticker has no expiration date and can be freely used within your app and sent in messages, attached to comments, for video calls, or as live stream reactions.
Stickers are a rare example of monetization when the user actually uses the product by choice. Users select the stickers based on their taste and thus are more motivated to use them. As a result, users engage with your app more, leading to a higher retention rate.
Most of the in-app purchases tend to be expensive, striving to maximize the revenue. The standard price for a still sticker is $0.75, and the model is based on affordability for every user in your app. This is also a great example of low prices that lead to high satisfaction rates.
Stickers can be still or animated, purchased by unit or sticker pack, or even integrated into a subscription model, which is also widely used across the apps.
Subscriptions are popular due to the complete control over pricing for apps. As they are managed without third parties involved, apps can set any price they find appropriate. They also bring a certain level of financial predictability. Small regular payments are way more attractive for end-users than lump-sum payments ensuring a stable revenue stream.
With this model, apps usually give users a choice of subscription options that are easy to upgrade or downgrade at any time. While it is considered unlimited for users in terms of value for the price, i.e., users can freely use services/features they paid for, it still comes with limitations as pricing options can’t necessarily cover only the features user might need.
With this app monetization model, users are provided with free-of-charge use of limited app features. It works best when combined with in-app purchases to offer a whole in-app experience. A good example of freemium with in-app purchases can be free stickers available through Stipop Sticker API. If users would like to get access to an extended sticker collection, they can purchase premium stickers.
While this model is pretty balanced, the tricky part for apps is selecting which features will be free and available through purchases. If chosen wrong, the users won’t see the benefit of purchasing more features or won’t use the app if most of the features are paid only.
Free trials are somewhat similar to the freemium model. They also give users a chance to test an app free of charge, but unlike freemium, free trials are available for a limited time only, while the former has no time limit. App monetization model like this aligns with our “try before buy” mindset, probably better than any other model. It allows users to weigh the app’s pros and cons before actual payments. If the app features are great, the chance of purchase after the trial is quite high.
When it comes to user experience, it solely depends on the app type. The free trial itself has no power over it. So from the user’s perspective, a free trial is a chance to see will the experience be good or not.
Final thoughts on app monetization
With the variety of currently available app monetization models, keeping your end-user in mind is very important. Their experience in your app affects their willingness to contribute to your revenue. Even the most popular monetization models like ads can harm apps, decreasing the chances of revenue generation.
Choosing the best model for your app is challenging. But it can be truly rewarding if your users feel they can benefit from it as well. With the app industry being user-focused, it is essential to offer users a chance to purchase something they can personally like, value, and use. User-friendly app monetization models that benefit your users and your app at the same time are the future.