Data Insight: Mobile Monetization 2018Reading Time: 1 minute
Consumer spending on mobile apps has had explosive growth, year after year. From 2017, with a global spending of 81.7 billion US dollars, to 2018 with a 30% increase and is projected to increase by another 47% by 2022.
Paid Vs Free
When apps were first introduced, the industry standard was to use a paid app model for monetization, this was a one time app revenue stream. With the growth of the industry, the monetization strategies became more lucrative and created new monetization methods with multiple touch points to earn a consistent revenue from users.
According to research, 94% of all apps on the market are free compared to only 6% being paid apps. It is even more important to learn what strategies are being used and how effective they are. Here are 4 of the most popular app monetization strategies.
Top 4 Mobile Monetization Models
This is one of the most popular methods for monetization as you are not earning a revenue directly from the user. By selling ad spaces to advertisers, you are now offering your app experience without charging money directly from the user. This alone will make your app more appealing as there are zero costs for the user.
Mobile ad formats vary vastly, from banner ads, native banner, interstitial banner, video banner, interactive banner, icon ad, offer wall, app discovery and rewarded videos. Rewarded video ads are the most preferred from consumers with 46% saying this is their favourite method of in-app advertising.
One thing to keep in mind when choosing an ad format, video viewers retain 95% of what they have seen whereas with text, only 10% of what is seen, is retained. Each ad format has varying CRs, CTRs, eCPMs and user experience benefits. Find more of the industry averages for all these metrics here.
Over-all, mobile advertising accounts for 69.9% of all digital ad spend and a third (33.9%) of US digital ad spend. This is a popular model for gaming apps, as users retention rate at the 7 day mark ranges from 11%-20% and engage 20% more in 2018 compared to 2017. According to a recent report, 32.5% of the largest mobile app providers use in-app ads as their sole source of in-app revenue.
Keep in mind that the ads should not affect the user experience or show irrelevant ads, hyper-targeting through data collection can be a useful strategy to apply advertising more effectively without ruining the users journey. If you take this one step further, with the use of data collection, place ads at opportune moments like after the user has experienced a positive in-app experience or when they get tired of you app, this is a key point to target as the user is looking for new app opportunities, so you can monetize this in-app behavior.
Game Dev Tycoon, is a business simulation game where you start your own game development company in the 80s, made over 48.8K US dollars in the month of September, 2018. This revenue was entirely generated by in-app advertisements and only on Android. This method depends drastically on a high amount of active users and long engagement periods.
2. In-App Purchases
This is one of the most commonly used monetization models where you offer the possibility of paying in-app to unlock content, app features and goods & services. Users will pay 24% more on in-app purchases compared to paid apps.
Mainly gaming apps use in app-purchases as a revenue stream, this is a strategy that is favoured by game developers primarily as digital currency is a popular purchase option. This relies heavily on repetitive use of the app by the users and the perceived value of the content and features that you are offering.
By day 7 of a game being downloaded, 80% of users will not launch it again, but the remaining 20% can be incredibly valuable to the developer. Of this 20%, 5.2% spend more than 20 times the average spend of all users combined. Another point to consider is that iOS users spend on average, 2.5 times more on IAP than Android users. iOS users are also 50% more likely to spend money on IAP compared to Android users.
The main app categories that use this model successfully are retail, gaming or services apps. Remember, this model creates a new sales funnel to guide your user through and must be more enjoyable, convenient and valuable in comparison to other options.
In-App Content Master
Fortnite is a game that uses this model exceptionally well, by offering in-app content that is valuable to the user and making the buying process as simple as possible. In September of 2018, Fornite made over 31.7 million US dollars by heavily enforcing this model.
3. Paid Apps
This is one of the fundamental strategies that has been used for many years before the introduction of in-app purchases and other in-app models. This is when the user pays to download your app and is an effective way to link revenue to app downloads. This is the most unpopular model depending on what type of app your are publishing and only 6% of apps use this model. The average app on the Apple Store is 0.89$, the normal price for Android apps is 0.99$ and utility/game apps prices normally range from 2.99$ – 4.99$. GPS and other apps occasionally price themselves at a much higher price range but this would have to be justified by consumer research and feedback.
If your app has a greater perceived value over alternative free options, then this is a good model to use. Most users would rather opt in for the free alternatives, this means that your app must be unique and offer content and features that are unlike any other. Another point to take into account, is that for the paid model to work, you must have a strong mobile and PR presence to distinguish yourself from competitors and as a unique brand.
Minecraft Offering Unique Game
Minecraft is an app that has successfully used this model, with over 239k downloads across Google Play Store and the App Store in September, 2018. This app has generated over 1.6 million US dollars in this time period. Minecraft is unlike any competitor and is well known through a plethora of user created online content.
This is a great model for services apps like news, streaming and communication apps. Subscriptions is a powerful strategy to ensure a consistent revenue stream. In this strategy, the user will have limited access to the content on your app and must pay for a subscription to unlock the rest of the content.
Apple promotes a subscription model for iOS apps as they changed their revenue split to 85/15 (rather than the usual 70/30 split) for subscription based apps. A study by VisionMobile found that subscription-based apps earned 2-3 times more per user than apps that relied on advertising or a pay-to-download model, while also earning nearly 50% more than apps relying on in-app purchases for revenue.
The key to this model is to ensure that your content is valuable to the user and is updated on a regular basis. Shortening the update cycle will keep your users coming back and spending more time on your app.
Calm Head, Consistent Users
One example of this is HeadSpace, which is a health and wellness app. By paying for a subscription, you gain access to a library of continuously updated and evolving content, ensuring you come back for more on a daily basis and continue to pay for the subscription.
With consumer app spending increasing to 106.4 billion US dollars this year, remember the main strategies and find the right fit for your app and users. The greatest strategies are the ones that incorporate multiple models to create more revenue streams. Normally, advertising and one other model is the combination that most leading apps use.
– Minecraft is a perfect example, with revenue streams across the period of a month from the paid apps model ($1.6M) and in-app advertising ($1.2M).
– Helix Jump game, combined a mix of IAP and in-app advertising to create another variation and the most popular for gaming apps. Over $100.7K was made from IAP and $16.2K from in-app advertising in September, 2018.
– In-app purchases is the most lucrative, but depends heavily on the perceived value of the content and features that the user is receiving, a large and consistent user base that is fully engaged.
– Subscriptions offer a consistent revenue but needs to have a very short update cycle to keep users interested in the content.
– Advertising is the most popular form of monetization and none of the costs go to the user, which is a very strong incentive for them. With the ad placements being optimized, this strategy can be the most effective.
– Paid apps are the least popular option as users would rather find a free alternative then pay for your app. To overcome this, the app must be unique and have a perceived value that warrants paying for the app.
When deciding on a monetization model, keep in mind that it should not drastically affect the user experience. Personalize your approach with one or more monetization models to see the best results.
The worldwide uninstall rate is 28% within the first 30 days of downloading an app. So, make your choice wisely and listen to your users to create the best experience possible.
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