Apps

Have you ever wondered how apps make money? 

Sure, you pay to use some apps. But what about that free app that’s become a part of your life?  

App developers and publishers put in so much work before their app gets on the app store. You best believe they’re getting financial rewards somehow. 

If you’re dying to know, the following are eight of the most common app monetization strategies. 

Direct Monetization Strategies

This category of strategies refers to all revenue streams that come straight from the app. They are usually the revenue model on which the app was built during development. Some common examples of direct monetization strategies for apps are discussed below.

1. In-app Sales

In-app sales involve the purchase of virtual items or currencies within the app. Photos, utilities, and most notably games and puzzles regularly use this strategy because app lovers strive to progress quickly and improve their game experience. So, publishers profit from selling them clues, items needed to use the apps, or those needed to expand the app’s features. 

Statistics reveal that 21% of non-gaming and 43% of gaming apps generate revenue from in-app sales. Many games allow users to buy coins, access premium games, and buy special items for a great gaming experience.

2. Transaction Commission

Any app that facilitates online transactions in any form can use transaction commissions as a monetization strategy. This strategy is simply about charging a commission on every user transaction. Thus, it is rampant among apps offering marketplace services like e-commerce, ride-hailing, and food delivery. 

Casino apps are also included, as they can charge transaction fees on deposits and withdrawals. For example, real money online casino apps pay players real money for their gambling wins. However, it is not uncommon for these casinos to charge the players a small percentage of their winnings as transaction fees. These charges represent a significant revenue stream for casino apps, as does money obtained from losing bets.

3. Paid-to-Download Model

App companies that believe their app offers immense value charge a fee for users to download them. This method is a straightforward approach to generating revenue from an app because prospects pay upfront to use the app. Publishers using this model also often sell the apps to the users as a package. 

As such, it is a common strategy for utility, productivity, and navigation apps and games with large fan bases. For example, gamers can pay upfront for Minecraft, one of the top-grossing games in app stores, with over 300 million units sold since its release. Since there’s evidence that users love this game and won’t want to miss out on the excitement.

4. VIP Subscriptions

All the strategies above can be extended to VIP subscriptions. App users who want continuous access to exclusive features, content, and services can be charged a weekly, monthly, or annual fee. This fee could be auto-renewable or one-time payments, depending on the user. 

Furthermore, apps can further divide the subscription packages into different tiers to capture a wider market segment. Many apps using the VIP subscription model can divide their offerings into free, basic, and premium packages. 

Nonetheless, this monetization strategy delivers a win-win situation for users and app companies. The company maintains guaranteed income from a stable and loyal customer base while users get uninterrupted services.  

5. Freemium Model 

The word “Freemium” blends the sounds and combines the meanings of “Free” and “Premium.” As such, it is an app monetization strategy that offers users a version of an app with limited functionalities for free. Making Fremium work involves ensuring the app reels the right customers first so they can later pay for premium functionalities and content for an improved experience, as they would in a paid app. 

This sample-before-purchase model enables app developers to establish a positive brand image and a loyal customer base that can generate consistent profit in the long run.

Indirect Monetization Strategies

These strategies tap into profit channels other than the app itself. Instead of making money directly from the app usage, they leverage its audience pool and sell that targeted audience to companies who need their attention. 

The following are some of the most common indirect app monetization strategies. 

6. Paid Advertising

Apps normally gather numerous insights about user behaviors and preferences. These observations make up valuable data that other apps, businesses, and ad networks value in targeting new customers. 

So, apps can maximize profits using customer insights solutions by displaying tailored ads of other companies and ad networks within their app. Full-screen, notification, banner, and rewarded ads are common forms of paid advertising. Audience clicks, and views determine the revenue from paid advertising. 

7. Partnership Deals

Partnership deals involve generating profit from apps by collaborating with other businesses in the same niche to offer players exclusive services, games, or promotions. Like paid advertising, the app generates revenue by leveraging its audience and not the app services itself. 

The collaboration in partnership deals can be co-branding, cross-promotion, content integration, etc. The key part of this strategy is aligning with brands sharing the same target audience so that the app boosts its reach and customer base. 

8. Affiliate Marketing

Affiliate marketing is a special kind of cross-promotion, a partnership deal. This monetization strategy starts as a partnership deal with a business with the same target audience as the app. Then, the app places links to the partner business somewhere. They get compensated financially when an app user purchases a product, downloads an app, or performs a desired action via that link. 

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