Creating a mobile app to monetize is a great way to generate a passive or even primary income. What’s more, the mobile app development services industry has already helped established businesses leverage mobile users to earn millions of dollars.
Of course, not every app idea is a winner, and not all business mobile apps take home a generous share of iOS and Android market revenue. In other words, not every mobile app is going to earn millions of dollars. Many don’t even earn thousands, let alone hundreds.
While it’s common knowledge for entrepreneurs and businesses alike that making a mobile app does not immediately equate to success, the less common knowledge revolves around the realistic answer to the question how much can you earn through an app?
In this article, we’re going to get as realistic as possible about what potential app earnings look like in the current market. So, if you’re thinking about creating an app for your business or as a source of income, keep reading.
How Much Can You Earn Through an app: The Current Market Statistics
The first thing potential new app creators think about is their idea. While it’s important to have a good idea, it’s the “good” part that’s subjective. There’s an app for everything these days which makes for an overly saturated market for most ideas. However, there are 6.648 billion people worldwide that own a smartphone — which is more than enough to generate app utilization trends to guide your idea-making.
For example, a recent survey found that there are upwards of 2.65 million apps in the Google Play Store alone. According to the data in this survey, Android gaming apps are not only trending but are predicted to generate the most interest by 2024, accounting for more than 70% of the Google Play Store’s total app revenue.
Regarding the Apple App Store for iOS users, another recent survey shows that there are currently over 2.18 million apps available on the platform. There has also been a 5% increase in app revenue since the previous quarter of 2022. During the first quarter of 2022, the Apple Store and Google Play Store app downloads combined amounted to roughly 36.8 billion — which is a 2% increase from the last quarter.
As far as general app monetization goes, approximately 8% of apps coming from the United States use the paid app monetization method while 25% rely on in-app advertising. The revenue generated via ads is expected to increase by 4% by the end of 2022. In-app purchases are also expected to increase by 8.4% by the end of the year.
These statistics should tell you a few things.
For starters, you’re looking at a competitive marketplace. This means there are several things you’ll need to think about before you start developing an app (which we’ll get to in just a moment).
It also tells you that games are taking the lead in revenue generation and will continue to do so over the next few years. If creating a game isn’t what you’re going for, that’s okay — as long as you’re providing value to your target audience, there’s potential for success.
What to Think About Before Developing an App to Monetize
Now let’s talk about the things you’ll need to consider before starting down the app creation and monetization road. You can think of this as the “pre-planning” phase, which can make or break the aforementioned potential for success.
Essentially, before you start looking for an app developer, you need to do some research. If you can get technical guidance from a reputable app development company or industry experts, even better. The goal is to gain as much insight as possible so you can create a plan based on reasonable goals.
Having said that, here’s what you need to think about before developing your app:
What’s Your App’s Purpose?
The biggest and most important part of app monetization is choosing a monetization model that suits the type of app you create best. Therefore, you need to figure out exactly what type of app you’re going to create and how it can provide value to your target user base.
Ask yourself the following questions:
- What’s the idea behind your app?
- How does it solve your user base’s problem?
- How does it make users’ lives easier?
- Is it the type of app you want people to use every day, week, or multiple times throughout the month?
- How will your app be different from your competitors’ apps?
By figuring out what your app will bring to the table and what will help it stand out from the others, you’ll not only be able to provide more value over your competitors but you’ll also be able to zero in on the most practical monetization strategy.
For example, if you’re developing a gaming app, you may want to combine in-app purchases, programmatic advertising, and subscription services to generate revenue. If you’re leveraging your app for an eCommerce business, you may want to use a different combination of methods.
Who Is Your Target User Base?
Another incredibly important factor in figuring out how your app can be monetized is by researching your target audience. If you’re creating an app to benefit business professionals, you don’t want to waste their time with in-app advertising but instead use a subscription model and offer in-app purchases.
If you’re building a gaming app, you have the luxury of using in-app advertising among several other monetization options at once.
Essentially, you want to really get to know as many details as possible about your target audience. Who are they? What are their needs? What is their income level?
You want to speak to them directly and effectively, which means ensuring that the purpose, design, and monetization strategy painstakingly caters to them.
What Are Your Competitors Doing?
You also need to research your competitors and perform a competitive analysis. This will also help you figure out the best ways to maximize our potential app earnings as you’ll gain insights into what’s working for your competitors as well as what isn’t working.
Usually, the best way to compete in an oversaturated market is by targeting your competitor’s weak spots and capitalizing on those to bring your target users something they’re lacking. The deeper you dig, the more you’ll uncover — which includes the holes in their monetization strategies, which you can use to strengthen yours.
Here’s what you’ll want to zero in on:
- What are your competitors currently earning?
- What monetization strategy or combination of monetization strategies are they using?
- Are those monetization methods working?
- What are they getting wrong?
The more you can learn from your competitors, the better.
What’s Your Marketing Plan?
You need a marketing plan that will allow you to generate ample interest among your audience so that when your app goes live, people will be excited — and ready — to download it.
Coming up with a marketing plan takes a lot of work, but if you do it right, you’ll be able to maximize your initial sales. A solid marketing strategy will take your users through the entire funnel, from acquisition to retention. Much of it comes from researching your target audience — especially learning where they like to spend time and the times during the day they spend in this “place” most.
6 Mobile App Monetization Models to Consider
After you’ve thoroughly outlined the above, you’ll need to think about the potential app monetization strategies out there and which ones will suit your app and user base best.
The following are the six most commonly used app monetization models you can choose from — or combine:
1. The In-App Advertising Model
With in-app advertising, the app itself is usually free to download and use while you sit back and earn a passive income based on the impressions and interactions that take place between the users and the advertisements displayed throughout your app. It’s one of the most effective ways of monetizing an app and therefore considered one of the most profitable.
The in-app advertising model can include varying ad formats, such as:
- Banner ads
- Video ads
- Native ads
- Text ads
- Interstitial ads
The average revenue app owners typically generate per ad impression can range from $0.10 to $10, depending on the type of ads being displayed. Of course, it also depends on your advertising partners and how much money they’re willing to invest in their advertising campaigns.
What’s more, in-app advertising helps app owners achieve quicker results while serving as a great extension for engagement with their own user base. Of course, you need to ensure that the ads being served on your app are relevant to your users and don’t disrupt the user experience — otherwise, you’ll see a decline in your app’s usage.
2. In-App Purchases + the Freemium Model
Many app owners — especially those leveraging their apps for business — like to avoid using in-app advertising as the method tends to hinder the user experience. Imagine your customers trying to make a quick product purchase and advertisements keep getting in the way. It would be a disaster!
With the freemium model, users can download your app and use it without ads and without having to pay to download it. However, the only part that’s free is the standard or most basic version of the app. If users want access to more content, features, or virtual items, they would have to make an in-app purchase to do so.
Of course, the freemium model also works well in combination with in-app advertising, especially in gaming apps. If users want an “ad-free” experience, they can pay to upgrade to the next version while also continuing to make in-app purchases for other features, such as extra lives.
For example, the gaming app Clash of the Clans earned almost $1 million per day on in-app purchases for the first seven months of 2018.
The in-app purchase + freemium model gives users the opportunity to try your app before financially committing to it, which can bring on a higher return if things are done right. However, app stores do charge a significant fee for apps that offer in-app purchases.
3. The Subscription Model
The subscription-based model is considered a Software-as-a-Service (SaaS) model, which is another popular app monetization strategy.
App subscriptions can be customizable in that you can ask users to pay a weekly, monthly, or annual fee for specific services that your app provides. If you use any cloud-based services such as Spotify or Pandora, then you’re more than familiar with this method. However, it should be noted that only about 5% of app developers are successful in using subscriptions to generate income from their apps.
The subscription model is often combined with the Freemium model and the in-app advertising model to generate the most profits. Either way, it attracts plenty of users who can choose to download your app and use it for free before subscribing. Should they choose to cancel their subscription, they can still go back to using the basic version with more limited features.
You can also offer a trial period to pique users’ interest in becoming long-term subscribers. The only caveat is that you have to figure out which content you’ll be offering for free and which content passes as payable.
4. The Sponsorship Method
Sponsorship is another excellent method of monetizing a mobile app. The sponsorship model works best for established applications that already have a regular user base as it revolves around partnering with specific brands and displaying only their advertisements. This means your app must revolve around a more specific niche that aligns with your partnering brands.
The sponsorship method can also go two ways regarding the deals you can make with brand partners:
- You can equally divide the revenue generated from your mobile app, or,
- You can set up a monthly sponsorship fee
The Weather Channel app and similar businesses are examples of the type of apps that use this monetization model successfully.
The sponsorship method is great for building awareness around your app idea, especially if it’s business-related. It also puts you in a niche category that classifies you as an expert in your industry while exposing your app to the appropriate audience. However, it requires strong marketing and networking skills to garner the right brand partners.
5. The Crowdfunding Method
Believe it or not, crowdfunding is another popular method in making mobile apps profitable in 2022.
Crowdfunding involves either exchanging your app idea or publishing a Minimum Viable Product (MVP) version for platforms such as KickStarter, Indiegogo, Fundable, or CrowdFunder. These platforms allow you to raise funds to get your app development and marketing off the ground, and it’s one of the easiest ways to finance your app without having to invest a lot or any of your own money.
These crowdfunding platforms also allow you to test your audience to get useful insights into how your app functions and what needs improvement, making your investors your customers at the same time. However, crowdfunding isn’t as easy as it looks as you need to put a lot of effort into pitching your app idea and if your idea fails, it could damage any business relationships you’ve created.
6. The Affiliate Link Model
Last but not least — there’s another version of sponsorship that allows app creators to successfully monetize their creations. It’s called the affiliate link model, and rather than offering advertising rights to one specific brand, this model allows you to negotiate with multiple interested brands.
Essentially, the brands offer you a referral link to use in your application, such as a promotional link or otherwise. When users perform a desired action, such as clicking the link or making a purchase, you get a commission.
This is another monetization method that can be used in combination with others, depending on the purpose your app is serving.
How Freestar Can Help With Your Mobile App Monetization
If you’re new to the app-creation world, it can be overwhelming trying to figure out where to start once you have a plan. However, Freestar has a full-stack app mediation platform that puts the power in your hands when it comes to generating and maximizing ad revenue.
We can take the tedious work of app monetization off your hands so you can focus on improving your current app or creating a new one. Think of it as your own personal Ad Tech team — minus the overhead costs.
Want to learn more about how Freestar helps app owners and publishers generate more revenue? Get started with us today!