10 Mobile App Monetization Strategies
Mobile app monetization is the process of generating revenue from an app, its audience, and content once users have downloaded and begun using it.
For the most part, we’re talking about apps and games available for free download in app stores that are monetized through advertising, in-app purchases and subscription models, or agreements with third-party companies – depending on whether the cash flow comes from advertisers, users, or other companies respectively.
In this blog, we’ll share 10 main mobile app monetization strategies you should be using for your mobile apps or games, combined with expert advice by Tappx specialists. Irrespective of the monetization model you choose, remember to work on maximizing your revenue without harming the user experience.
Remember also to work on ASO as a perfect complement to your app monetization efforts in order to leverage your app’s full potential. A solid ASO strategy, such as effectively optimizing your app page elements, will help you cut user acquisition costs, so you can expect a positive impact on ROI.
Advertiser cash flows: In-app advertising
The monetization of free apps through advertising is one of the most widely-used strategies. In fact, according to the Statista market data portal, in-app advertising expenditure will continue growing to reach 306.9 billion euros in 2023. What’s more, 57.55 euros per Internet user is expected to be spent on in-app advertising. This interest comes in response to factors, such as the increasing use of mobile devices, a higher CTR on in-app advertising, the integration of ad formats with the same look and feel as the apps, as well as enhanced audience segmentation, among others.
However, before following the trends and diving into app monetization with in-app advertising, there are two important decisions you must make:
- Choosing the ad format(s)
- Deciding which ad bidding and allocation system to use
Let’s begin with the latter.
1. Bidding system: Waterfall vs parallel bidding
On the one hand, waterfall bidding involves the various sources of demand consulted one by one each time there’s an ad request from your app inventory. If the first one does not fulfill your set goals, the system moves to the next one and, thus, successively until the perfect fit is found and an ad is delivered to you.
- One type of waterfall bidding is through ad mediation, which consists of managing a number of advertising networks through a single platform where your goals are set. These goals include your preferences for each of the networks, as far as demand, fill rate, and eCPM.
- On the other hand, parallel bidding or header bidding works differently as it’s based on a system of real-time bids. Upon integrating your advertising inventory with multiple demand sources or supply-side platforms (SSPs), the header bidding network sends your ad request to all of these sources at the same time and delivers the most profitable offer available at that time in order to get the most out of your inventory.
Besides waterfall bidding or simultaneous parallel bidding with all demand sources, the main differences between mediation and parallel bidding lie in complexity and transparency. While mediation is much simpler to set up and maintain, parallel bidding is more complex, but also more transparent as data on each demand source are provided in real time.
Once you choose between waterfall or parallel bidding, taking into consideration your own particular needs and goals, the next step in monetizing your app with advertising is choosing the formats. Beyond the classical banners, this article will focus on more innovative formats with better returns.
2. Create an effective ad format with rewarded videos
Rewarded video is a win-win advertising format for all parties in the ecosystem.
On the one hand, the user receives a reward such as:
- unblocking an app feature, advancing in a game
- recovering a lost game, or
- a discount in exchange for viewing and interacting with the ad
On the other hand, the publisher gets more time on your app and higher monetization indices for their advertising space. Not only that, the advertiser also gets a higher return on ad spend (ROAS), thanks to an advertising format with higher engagement and audience satisfaction – not to mention a higher likelihood of in-app purchases.
Although it began as a trend in the mobile game sector, rewarded videos are becoming more and more common in all types of verticals. One of the main advantages is the fact that they are opt-in – meaning the user can choose to either view the advertising to get their reward, and are thus more engaged with the content. Or else, they can reject it without any further interruption to continue using the app.
3. Use interstitial ads to boost user engagement
If users’ eyes are more than accustomed to viewing those typical banners in the same sizes – without taking into account the moment of consumption to the point they largely go unnoticed or even create visual fatigue – interstitial ads are the alternative you need. This is a text, image, or video ad format that is displayed full-screen to capture your user’s complete attention at key moments in the game or natural app consumption flow.
One clear example is at the end of a game or a finished task, after having overcome a challenge or achieved a new life. Since the user is already expecting the action to stop, showing an interstitial ad comes naturally without suddenly interrupting the user experience. Moreover, they always have the choice to view it or click on the close (X) button to return to the app content.
Since they’re shown full-screen and at key moments, these ads are almost impossible to ignore. Therefore, interstitial ads get high viewability, engagement, and conversion rates, which are all KPIs that make them attractive to advertisers and, as a result, more profitable for publishers.
4. Ensure a seamless user experience with native ads
The unique thing about native advertising is that it can be perfectly integrated into the app interface, simulating just another entry in the feed with the same look and feel and functional features.
For example, a native ad for a news app or social network, which most often uses this format, would have the same design as a news article or post. You can check other iconic examples of native ads here.
With this organic integration with the content, native ads interrupt the user experience very little and get superior click-through rates (CTRs) than display ads. As already seen with the previous format, this means better performance and, as a result, higher ad conversions and publisher revenue.
Another characteristic to keep in mind is how native ads must match the editorial line and be used following a content marketing strategy, since they are closely related to the app content.
5. Implement in-app purchases to offer users incentives
Another way to monetize your app is by offering users incentives for investing their money in it by either making purchases within the app or directly paying to access the premium version of the product.
In-app purchases are very common, especially in gaming apps. They work rather well when integrated at strategic points in the game to help the user move to higher levels.
The dynamic is usually launching a free app with basic functional features and offering certain paid premium services, such as moving faster to the next level, getting extra lives, or accessing other premium functional features as is common with dating apps.
There are different types of in-app purchases you can use to monetize your app:
- Consumable purchases, which disappear once used, such as coins or game lives
- Non-consumables, which provide permanent access, such as purchasing a new character or unblocking a hidden game level
Users use real money to buy these functional features or digital assets. The purchases are directly charged to the credit card associated with the App Store or Google Play, which normally earn a commission for each one.
6. Get users find value in your app with subscription models
In addition to in-app purchases, another way to get users to pay for using your product is offering it to them through a recurrent paid subscription model and limited access to content.
- You can choose a freemium subscription by offering the app for free download in an initial phase in order to reach a wider user base and then monetize later on with advertising. This successful strategy is used by Spotify, which promotes the full functional features in the free app available only through monthly payment for the premium version. Paying to avoid all the advertising once a user finds the app valuable is the way to monetize it.
- Something similar occurs with news apps that offer headlines and basic information in free versions, yet reserve the complete text and exclusive news for users of paid premium versions.
- Another freemium subscription alternative is a free trial, where access to the content is made available for a limited trial period, yet once that time passes, the user must subscribe to keep using it.
Thanks to subscription models with freemium versions, the entry barriers to the product come down. Thus, the customer acquisition cost (CAC) is better controlled, as the users captured are more willing to pay for your app after having tested it out. It’s also important to adequately implement a pricing strategy by taking into account the market and competition, so it does not become a stopper.
7. Benefit from data licensing
If you don’t want to monetize your app with advertising or make users pay for it, the alternative is to close deals with third-party companies in two ways: data licensing and affiliation.
This is a model that turns the audience into the product by monetizing user data. In other words, if your app gathers data on the audience that may be valuable to other third-party companies, you may consider commercializing them as long as you have express user consent.
One of the most common examples is licensing geolocation data on your audience to companies interested in segmenting their ads according to user location. Targeted ads with higher conversion rates are particularly valuable. This is especially true if, added to the geographic variable, there is other temporary data, such as recurrent visits to a certain place.
For example, a user who often goes to the gym may be interested in purchasing sports clothing. If they often go to event venues, they may be good targets for concert and entertainment ads. Habitual user locations, such as places of residence and work, can also provide a lot of high-value sociodemographic information to brands.
In short, the idea is to profit from the data an app naturally generates through interaction with the user beyond just enhancing the consumption experience and always with their express consent.
8. Affiliates can help with better target segmentation
Affiliate programs are agreements between two apps or an app and a third-party company interested in promoting their products or services in exchange for paying a commission when the user downloads the app or buys the product or service. In this type of operation, not only the publisher or affiliate play a role, but also the advertiser, sometimes the networks that add the affiliate offer, and, of course, the end user.
The major advantages to this strategy are that it provides good target segmentation by simply selecting the type of app for promotion. It also saves users the costs involved with other monetization models.
9. Opt for cross-promotion to advertise your app
Zero waste app monetization strategies
Last but not least, we’ll talk about two profitability strategies that have nothing to do with any type of economic transaction for advertisers, publishers, or even end users. They are the ideal zero cost strategies for use as a complement to any of the ideas mentioned for boosting your app revenue.
As the name indicates, cross-promotion implies exchanging ads between apps that are members of a community. You display an ad for another app on yours in exchange for the other app promoting you. This is completely free. It’s a win-win situation, where instead of money, you earn credits when displaying an ad in your app for future opportunities to promote it.
In fact, more than 1,000 apps are already exchanging ads and growing together 100% free of cost in the Tappx cross-promotion community, which you may join at any time. It’s the ideal strategy for developers just starting out without much of an advertising budget. The added advantage is that you can make an impact on the audiences you’re looking for by choosing the type of app where you want to appear.
10. Maximize your revenue with profit booster sandwich model
The final idea in this list for monetizing apps is a unique formula Tappx calls “the profit booster sandwich.” It’s all about adding an upper layer to your SSP network with an above-average cost per thousand (CPM) floor for the Tappx demand, and applying the cross-promotion layer to the in-app advertising monetization strategy base.
Expert TipThe profit booster sandwich allows you to maximize your revenue when advertisers are willing to pay for that incremental CPM floor with Tappx, monetize your habitual stack of partners when you don’t reach that maximum, or display an ad from the cross-promotion community if there is no demand to fill the free space in your inventory. Therefore, it’s a zero waste or 100% profit approach, where you lose nothing yet achieve a 100% fill rate.
There are various app monetization strategies you can use based on your goals and your product lifecycle. The benefit lies in combining several of them to boost results and evolve them as your business priorities mature along with changes in the context, users, and market. Here’s a recap of the strategies:
- Choose between waterfall and parallel bidding depending on your particular needs and goals
- Use rewarded videos ad format for increasing engagement
- Capture users’ attention at key moments in the game with interstitial ads
- Utilize native advertising to create a seamless user experience and, consequently, high click-through-rates
- Integrate in-app purchases at strategic places in your app/game to enable users to access premium function features
- With subscription models, your targeted users will find more value in your app after having tested it out
- Monetize user data but ensure you have express user consent
- Aim for good target segmentation with affiliate programs
- Cross-promotion is a great zero cost strategy, particularly for developers with a small advertising budget
- Leverage the Tappx profit booster sandwich model as a zero waste approach
Thanks to advertising, in-app purchases, and subscription models, you’re not only monetizing your app and generating revenue, but can also get to know your audience better and enhance the user experience when you optimally integrate ads organically within the consumption context.