Mobile apps are not just mobile extensions of the visual identity efforts of building brands and maintaining them in the public’s eyes. They are also an important source of revenue for the companies which own them and, as mobile payments become more widespread, they tend to exceed online and card payments in volume.

Of course, not all mobile apps have an explicit sales function attached to them. This policy is an extension of the web world, where free content is available in exchange for looking at ads while watching or reading the content, or signing up for premium features. Apart from these options, various monetization models have appeared in specific connection with mobile apps, the way they are delivered to users and the modalities in which the users interact with it.

Before we move forward with the discussion, it is worthwhile understanding the importance of mobile app monetization in the current business world. A survey conducted by the company Apptentive showed that companies obtain most of their revenue (sales, royalties, etc.) in this manner:

  • 30% from the website
  • 21% from the mobile app
  • 21% in-store
  • 21% other
  • 6% mobile web

21% represents a significant portion of a company’s revenue, and it comes directly from the monetization of their mobile app. Further on, the survey focused on the precise modality of monetizing the mobile app, and the results were as follows:

  • 33% in-app purchases
  • 27% subscriptions
  • 4% ads
  • 4% ads and in-app purchases
  • 4% all of the above
  • 4% in-app purchases and subscriptions
  • 4% ads and subscriptions
  • 20% other

Since we have reached this point in our discussion, it is time to actually present and debate on the most popular monetization models used for mobile apps.

1. Paid Apps

This is the simplest and most direct way of monetizing an app. If people want to download and install your mobile app, they have to pay a one-time fee. Currently, this is not the most popular form of monetizing an app (see the statistics above) for a few good reasons:

  • The company which launches the app must already have sufficient exposure and reputation to convince people that it is worthwhile buying their app;

  • There must be no other similar app available for free, or as a freemium model from your competitors, even if its performances are inferior to yours;

  • The app must satisfy a specific need, becoming the substitute of your usual service which you offer in-store or in other manners.

2. In-App Purchases

This is by far the most successful monetization model for mobile apps. Once people access your app, they can purchase various digital or physical goods. It is the ideal option for ecommerce businesses to offer their customers a convenient way of accessing their offers using the mobile phone.

However, it works for several other business models too, including those which create mobile games where the players need to purchase various items. When building such a mobile app, your organization must be careful to comply with the latest government regulations, which impose a stricter user access, in order to restrict children from making accidental purchases.

3. Freemium

This is another very popular method of monetizing an app. It is based on the principle of providing access to basic features or content, and having gated premium features or content, available in exchange of a one-time fee or a monthly subscription. Freemium apps are so popular because they allow the users to test and familiarize themselves with what the app has to offer before they are incentivized to move on to the paid version.

4. In-App Advertising

Just like the website model, the app owners obtain revenues from the ads displayed within the app as the users interact with it. Just as in the online version of affiliate marketing, the revenues come in the form of cost per click (CPC) or cost per mille (CPM), i.e. cost per 1,000 impressions.

When deciding which monetization model you want to apply for your mobile app, always consider the type of service or benefits it offers users and whether your competition already has a more attractive solution in terms of costs for the end-users.