App Monetization: Models and Strategies

Once you have your app developed and ready to launch, the question of how to make money from it becomes a priority. The two main models are: free apps with in-app purchases or paid apps. In this article we will explore both options along with other monetization strategies which can be implemented to complement them.

Free Apps With In-App Purchases

This is the most used model by far. It consists of offering your app for free, but giving users extra content or premium features if they pay for them. Research by EEDAR shows that 77% of consumers are comfortable paying for upgrades within an app (such as extra levels, lives, hints or coins).

There are many ways to implement in-app purchases. For paid apps, you can offer a free trial version with the full content locked and an in-app purchase to unlock it. Another option is to allow users just to buy individual levels instead of having to make the purchase for the entire app (e.g., in strategy games).

In the case of free apps, you can offer a range of different items for purchase such as coins, lives or hints through which users can progress in the game. You could also use advertising to monetize your app, but this is not recommended if you want to keep your user base.

Paid Apps

Apps that require payment from the start might seem like a risky move, but with more than 350,000 apps on iOS and 300,000 on Google Play, it is actually one of the best ways to improve your app’s discoverability. As with any other business model, there are many factors to consider when choosing between paid or free apps:

Revenue Possibilities

A free app will typically generate less revenue than a paid one, but there are may other ways to increase revenue such as in-app purchases or advertising. In the case of paid apps, you have to take into account that users who download your app might not be prepared to pay for it, so you need to offer a free trial or a price that is as low as possible.

Frequency of Purchases

Paid apps should be paid for once, but with in-app purchases and other options the frequency can be higher (e.g., users might pay for coins, lives, hints etc.). Therefore it is important to consider how often users are willing to make an in-app purchase.

Target Audience

Depending on if your app is free or paid, the demographics of users will be different. For example, a game with in-app purchases should aim for younger audiences who are more willing to make in-app purchases than older ones. However, in the case of paid apps, it is important that you target a specific audience who has a high likelihood of paying for your app.

Portability

With paid apps, you have the option of releasing the same app on different platforms and charging a single price for it. This not only makes your monetization strategy more efficient because all users will pay the same amount for an app regardless of which platform they use, but also makes marketing easier because you can make announcements about updates and new content on all the different platforms at once.

With free apps, if you update or add new features it can be very difficult to target users of other platforms (e.g., get them to download the latest version when they are already happy with the current one). You could try putting in-app purchase options into older versions, but this will cause some users to complain about having to pay twice and considering that the revenue received by Apple and Google is a percentage of purchases made on their platforms, you are missing out on extra revenue.

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