The Best Mobile App Monetization Strategies For Your Upcoming Project

Statista estimates that 255 billion mobile applications were installed in 2022. In 2025, mobile applications are expected to generate more than 613 billion US dollars in sales, with mobile games claiming the highest revenue share among all app categories. Clearly, consumer spending in this sector is increasing. 

Despite that hundreds of mobile apps are released every day, some of which can be quite innovative, only a small number of them generate a profit. It goes without saying that competition is fierce, and that rates will rise. Each app store category contains thousands of similar products. To stand out, an app must deliver a flawless user experience, an eye-catching UI design, a well-thought-out marketing strategy, and user behavior research. Understanding how to launch an app is crucial in this highly competitive landscape. An effective mobile app business plan and strategic execution can make the difference between success and failure.

We know how to build a terrific mobile app that will interest customers and provide them with value. Nevertheless, we acknowledge that delivering a high-quality product is not enough; it must also be profitable. Now comes the tough part: how can you monetize a mobile app and choose among different monetization strategies? This article will go over the best mobile app monetization strategies for the coming years. You will also discover how to make them work for you and profit. Let’s get this party started with the top 6 Mobile App Monetization Models for increasing revenue!

1. Advertising

According to Statista, in-app advertising spending is expected to reach a new high of $327.1 billion this year, marking an increase of 17.2% compared to 2021. It is expected to reach 399.6 billion by 2024. People now spend hours per day on their smartphones. It’s no surprise that many advertisers try to capture their attention there.

Incorporating mobile app development trends can also enhance the effectiveness of ads, as staying updated with the latest trends can make your app more appealing and engaging for users. Let’s go into detail about the most common methods for incorporating advertisements into your app:

• Banner Ads: Banner ads are easy to integrate into apps, appearing as small rectangles at the top, sides, or bottom of the screen. While they’re cost-effective and widely supported, they can negatively impact user experience. A/B testing can help find the optimal placement for these ads.

• Interstitial Ads: These full-screen ads appear at key moments during user interactions, capturing attention effectively but can annoy users if overused.

• Native Ads: Native ads blend seamlessly with the app’s UX, resulting in less disruption and significantly higher engagement rates compared to traditional ads.

• Affiliate Ads: This model allows partners to advertise within your app, earning you commissions on purchases made through their links. Careful selection of ads is crucial since you only earn from sales.

• Advertising Recommendations: Users generally dislike ads, especially if they are irrelevant or overly intrusive. Ads that disrupt the user experience can lead to app uninstalls. Despite this, if implemented thoughtfully, ads can provide a straightforward monetization strategy.

• Advantages of Ads:

  • Excellent outcomes: In-app ads outperform web banners.
  • Precise targeting: Relevant ads improve user engagement.
  • Implementation simplicity: Easy to integrate across platforms.

• Disadvantages of Ads:

  • Competitor promotion: Your rivals may advertise in your app.
  • Low response rates: Even prominent ads may have limited engagement, with a good CTR around 1.5%.

2. In-App Purchases

Another popular app monetization strategy is in-app purchases. A user does not pay to download your product, but they can purchase real and virtual items such as virtual currency, points, stickers, superweapons, or extra lives in a gaming app. It is estimated that 50% of non-game apps and 79% of gaming apps use it (Business of apps).

At the moment, only 5% of users worldwide make in-app purchases. Despite their small percentage, their revenue is impressive and higher than what businesses earn from other users: Users are spending $380 billion worldwide on in-app purchases. In 2018, Apple announced that iOS engineers had earned $86 billion, the majority of which came from in-app purchases.

When implementing this mobile app monetization strategy, you must address the primary challenge of striking a balance between paid and free items. Don’t give away a lot of cool stuff for free, and remember that the things users buy should have real value so that they will be willing to spend their money and be happy. Moreover, make sure the payment process is as seamless as possible, or else you risk losing profit since users change their minds and stop midway. 

Working closely with your mobile app development team is essential to ensuring a smooth user experience and overcoming the challenges in mobile app development, especially when implementing in-app purchase systems.

Advantages of In-App Purchases

In-app purchases have several undeniable benefits to offer your company:

• Convenience – Users are not required to leave the app if they need to purchase something, even if it is additional game lives.
• Efficiency – This method of monetization will be most beneficial to games and gamified apps. According to Invesp, purchases made within the app account for 48.2% of mobile app earnings.
• Added functionality – If you choose to use this method to earn a profit, your app developers and designers will have plenty of room to experiment with the format and appearance of purchases.

Disadvantages of In-App Purchases

Potential disadvantages include:

• The stigma of pay-to-play/pay-to-use – If users notice that you have some items for sale, they may believe that they must buy them in order to succeed in the game or use the app properly. You must balance your app so that purchases are not the deciding factor for a positive experience.
• Commission from the store – Stores charge commissions for in-app purchases (for example, the App Store and Google Play charge a 30% fee), so you’ll need to balance the price to make a decent profit while not scaring away users.

3. Freemium

The term “Freemium” is a combination of the words “free” and “premium.” With this app monetization method, users can download the app for free and have the option to upgrade to the premium version with additional features.

Some suggestions for using the Freemium model to monetize your app:

• Strive for a happy balance between free and paid features. Users must be able to use the app, at least its basic functions, for free. Of course, if there are too many free features, then they will have no reason to purchase the premium version.
• You can use advertisements in the free version while recommending a “no advertising” feature in the premium version.

This monetization model is used by many popular mobile applications, including Spotify Music, Angry Birds, Evernote, DropBox, MailChimp, and Tinder. Tinder generated approximately $21,37 million on Google Play in June 2019 by offering its Plus and Gold versions. Spotify’s Premium Services segment generated €8.5 billion in sales in FY 2021, accounting for about 88% of overall revenue.

3.1. Advantages of Freemium

What you can expect if you use a freemium monetization model:

• Scalability – Freemium allows a new product to easily scale up and gain more users without incurring additional sales and marketing costs.
• It’s time to put the product to the test – With freemium, your app users will have enough time to test the product before deciding whether or not to pay for additional use.
• Multiple ways to earn revenue – Other monetization strategies, such as ads, can be used in addition to premium features. It will entice users to purchase the premium version.

3.2. Disadvantages of Freemium

The following are some of the potential disadvantages of this strategy:

• Your offer might not be looking very convincing – It’s possible that your users will be unwilling to pay for a premium version. You must consider a feature set that is appealing enough to warrant payment.
• User experience disruption – If you decide to use another monetization method in a free version, users may become annoyed by constant advertisements or purchase offers.
• Delayed Revenue – Because users will begin with a free app and not all will upgrade to a premium version, you will have to wait for app revenue to begin flowing in after you have attracted enough users who are willing to pay.

4. Pay Per Download

For the time being, pay-per-download is regarded as the most straightforward mobile app monetization method. However, there are some challenges for product owners. Because users must pay to install an application and cannot try it for free, their willingness to spend money is quite low. As a result, 90% of installs occur less than 500 times per day.

This method of app monetization is appropriate for you when:

• When your product has some cool, unique functions that set it apart from the competition.
• If you have a strong public relations presence and a high level of brand awareness. Users will be more willing to pay if your company or product is well-known and well-liked, and you are now developing a mobile app.

4.1. Advantages of Pay-Per-Download

The most notable advantage of paid apps is:

• Revenue stability – Pay-per-download ensures that you will be paid when people download your app.

4.2. Disadvantages of Pay-Per-Download

To obtain this single benefit, you must consider the following:

• Brand recognition is required – Users are unwilling to pay for something they do not understand. Pay-per-download will be ineffective if you do not have sufficient recognition among your target audience.
• A compelling offer is necessary – Paid apps should address as many user pain points as possible. Users will choose your competitor if they can find free or cheaper apps that do the same things as your solution.

5. Subscription

This could be one of the most effective app monetization models. Subscription services provide both free and paid content.

This is the most common method of app monetization for drop-in audio chats and streaming services. This model is also used by fitness apps, news portals, cloud services, image and resume creation services like Canva, and world-famous online magazines like the Wall Street Journal, Telegraph, and The New York Times.

According to App Annie Market Forecast, user spending on applications such as news, media, and dating is expected to grow to $34 billion by 2021.

5.1. Advantages of Subscription

Subscriptions are advantageous for the following reasons:

• A consistent source of revenue – You will have a consistent and predictable income flow if you have a certain number of subscribers that is constantly increasing.
• Getting Users – A subscription option will entice free users and keep them in your app long enough for them to subscribe to your app.

5.2. Disadvantages of Subscription

However, a subscription model is not without flaws, which is why:

• Regular updates – Because your users will be paying you weekly (or monthly), they have the right to expect new content from you on a regular basis. Simple bug fixes will not suffice.
• You will still require to release the free version – You will need to show the users what they will be paying for, just as you did with the freemium model. Without a free trial period, your chances of generating app revenue from subscriptions are reduced.

6. Sponsorship/Partnership

One of the most recent methods of monetizing a mobile solution is through sponsorship. To implement this model, you collaborate with a company that compensates you for including their content in the product. This monetization strategy works best if your user base is large. The main challenge here is to find a company whose user base is similar to yours and willing to pay for promotion on your platform.

This monetization strategy is ideal for popular event apps. Businesses and brands—event partners or sponsors—pay to have their content (website links, product lists, etc.) integrated into your application.

Fitness apps can also benefit from this model. Assume you have a fitness app. Collaboration with people (e.g., bloggers) and businesses associated with sports, healthy lifestyles, or healthy nutrition will be appropriate in this case.

This strategy is an effective way to capture user attention and earn money. People are generally loyal to seeing relevant/valuable content and feel less annoyed, which is the main advantage of this strategy.

6.1. Advantages of Sponsorship

Sponsorships are advantageous for the following reasons:

• Specific audience targeting – Sponsorship ads can be used to touch certain audience groups, which may result in a higher conversion rate.
• Enhance brand loyalty – Users may feel more loyal to the brand due to sponsorship ads.
• Create cross-promotion opportunities – Other products or services can be cross-promoted via mobile apps, leading to higher revenue and user acquisition. 

6.2. Disadvantages of Sponsorship

The following are the drawbacks of app monetization through sponsorship:

• Obtaining Sponsors – Finding sponsors for a new project can be difficult. To generate revenue, you will need to find sponsors who are relevant to your product and have a more or less similar target audience.
• Can be irritating for the users – Sponsorship ads are still advertisements. As a result, you must choose wisely what and how to advertise on your app’s screens.

Sum Up

So we have gone through all the most popular mobile app monetization strategies for business. Each method has its advantages and pitfall and is suitable for specific app categories. To optimize efficiency, you may consider using a combination of monetization approaches, as long as they don’t appear too frequently and irritate your users.