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. These apps generate revenue through ads, in-app purchases, subscriptions, or partnerships with third-party companies. The revenue source varies, depending on whether it’s derived from advertisers, users, or other businesses.

In this blog, we’ll share 10 main mobile app monetization strategies for mobile apps or games. Irrespective of the monetization model, 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 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. This can result in a positive impact on ROI.

Learn how to optimize your app store product page with this exclusive ASO guide

This is a guest blog written by Tappx.

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

Waterfall bidding, in simple terms, means checking different sources one after the other for each ad request from your app. If the first source doesn’t meet your goals, it goes to the next until it finds the right fit and delivers an ad to you.

• One type of waterfall bidding is through ad mediation. It 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.
• Parallel bidding or header bidding works differently, as it’s based on a system of real-time bids. When you link your advertising inventory to various demand sources or supply-side platforms (SSPs), the header bidding network sends your ad request to all these sources simultaneously. It then provides the most profitable offer available at that moment to optimize your inventory’s performance.

The key distinctions between mediation and parallel bidding lie in complexity and transparency. Mediation is simpler to handle, while parallel bidding is more complex but provides real-time data about each source.

Once you’ve chosen between waterfall and parallel bidding, it’s time to think about the ad formats for monetizing your app. Here, we’ll focus on not just the usual banners but also more creative formats that can give you better results.

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. 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. This means that the user can choose to either view the advertising to get their reward, making them 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

Users often become accustomed to standard banner ads, making them less noticeable and causing visual fatigue. Interstitial ads are the alternative you need. This is a text, image, or video ad format 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 completing a challenge or achieved a new life. Users expect a pause in action, so showing an interstitial ad feels natural and doesn’t disrupt the user experience suddenly. 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. These are all KPIs that make them attractive to advertisers and more profitable for publishers.

4. Ensure a seamless user experience with native ads

Native advertising stands out because it seamlessly integrates into the app interface. It appears like a regular entry in the feed, with matching aesthetics and functional features.

For instance, in a news app or social network, which commonly employs native ads, the ad resembles the design of 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. This means better performance and, as a result, higher ad conversions and publisher revenue.

Another aspect to keep in mind is how native ads must match the editorial line and be used following a content marketing strategy. This us crucial as they are closely related to the app content.

5. Implement in-app purchases to offer users incentives

Another monetization method involves encouraging users to invest money in your app. This can be through in-app purchases or by directly purchasing 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.

Typically, it involves launching a free app with essential features and providing paid premium services. These premium services could include things like moving faster to the next level, gaining extra lives, or using additional premium features, similar to what you find in 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, you can also get users to pay for using your product through a recurrent paid subscription model and limited access to content.

• You have the option to go with a freemium subscription model. This means you can initially offer your app for free to reach a broader audience and later make money through ads. This approach has been quite successful, as seen with Spotify. They provide the full app experience for free; but if you want to avoid ads, you can pay for the premium version. This way, you monetize by offering an ad-free experience to users who find the app valuable.
• 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.

Read these tips on how to implement mobile app retention tactics for subscription apps

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.

TLDR

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.