Insightful significanceApps
App Monetization in 2022 & Beyond: The Definitive Guide
What is app monetization?
App monetization means nothing but making revenue from your app as your app can do so much big than being just a tool.
It can be a serious source of extra income for your business.
Ways to monetize your app are through the making of freemium or premium models.
Now, let us know what is the difference between the freemium and premium apps?
Contents
APP MONETIZATION
Introduction About Freemium Model
It is a basic version of an app which is available free of charge and also a premium version of it is available for users with some cost with the special features added to it.
So, the users can get more benefits by paying for a freemium version.
It’s important to know that the original app is fully functional and the premium version is just a significant upgrade to it.
APP MONETIZATION
Ways to Achieve Monetization by
Different Freemium model
As earlier, we got through the essential introduction and the difference between the freemium and premium version.
Now let us recognize the various ways you can mold money through the different freemium model,
#1. Ads and sponsored contact
The Ads and sponsored model is where the free product is supported by advertisement.
It is a technique that app developers across nearly all categories have utilized and this monetization method is one of the favorite methods applied by the major social networking apps like Facebook, Twitter, and Instagram.
If we have a look about these three companies revenues through their advertisements:
Facebook ad earned $9.16billion ad revenue at the end of December 2017.
Instagram ad revenue to double to $10.87bn by 2019, says reports.
Below is the Twitter Graph that how much revenue it has grown from 2014 to 2018:
#2. Limited Time Free
Any developer gives away the limited feature of app to the user for free for a limited time with an option to purchase a premium version that offer a full suite of feature.
Tinder Gold
Take an example of Tinder, a dating app it’s available for free and downloadable for all but with a limited version having features but with an upgrade to premium version.
Skype Premium
Another example is Skype. It is a great example of this type of freemium model. The video calling app is free to download and user can make Skype-to-Skype calls without charge.
However, Skype sells a range of other features that unlock greater potential in its app. For instance, if you want to call someone on their mobile phone via Skype, you would be charged with some fixed costs.
#3. Free Trail Period
In the free trial period model, the user is granted access to the full version of an app instead of basic version.
The main purpose of this model is to give users a taste of the app’s premium features exactly same as any car dealer will allow you take ‘A free trail drive’ and if you like driving the car.
You have to buy the car to take at your home for unlimited advantage of driving it.
This allows the users to ‘test drive’ the app before they consider purchasing the full version and also provides a pathway for users to grow familiar to premium features increasing trust and of course, habit.
For Example:
Any software you have downloaded in your PC will be available to you with full version for 15 or 30 days trail as per company rules.
After the end of that limited period when you will open that software it will pop up with ad.
Upgrade to use the software for 1 month, 3 months, 6 months or 1 year paying this much cost.
#4. In app Purchase
In-app purchases model is which offers enhancement for the purchase from within the application.
Let’s take an example of game model in app purchase:
In any game, the users may have the option of upgrading their skill levels or buying currency, characters, tools or weapons.
So, the users add that extra things to their account by paying to the app and enjoy more services.
For Example:
The right screenshot is of the game Angry Birds Rio, if you want cross the levels for the game quickly, you need to buy extra birds and extra powers by paying some bucks to the company.
While the game user enjoys extra, the app company enjoy its amazing revenue through it.
#5. Video Audience Retention
Want to know how the free games are designed to make money?
Watch this video below:
APP MONETIZATION
Who is More Beneficial?
Nowadays, you can see that everyone wants everything cheap or either free of cost. In Google Play or App Store, majority of the people download the free apps only.
Minority of the public checks out the paid section and goes for the premium apps.
For example:
If you want to get some information or tool on the internet, have you given a thought to pay for it?
You Google….Right?
The same is with the Apps.
People prefer free apps and if the people are used to your app and they like the most.
They spend bucks towards your app by either getting subscription or in-app purchases for your app.
If you go with the paid tag from the first, you will distract the users from downloading your app and the user will go downloading the app with some of the competitor of yours giving the same features with freemium model.
So, in this way freemium model is more beneficial than just starting with the paid tag for your app.
APP MONETIZATION
Benefits of Freemium App
Are you already initiating a sum of amount through the freemium app version?
To make more use and benefits of the freemium app purchases from the users, know more below
#1. More Downloads
Why the freemium model has more
downloads?
Come On, the first and the most important thing comes to any person’s mind.
It’s Free.Free.Free!
Any user gives the first preference to free app! And so it has more downloads than any paid app.
#2. Multiple Monetization Strategy
Freemium app is launched with different strategies including models like in app purchase, free trial period, limited time free and via ads and sponsored contact.
So it is considered more beneficial.
As premium model has less number of strategy.
So, it can’t get monetized in more ways.
#3. Majority of Industry
It gets successful in attracting the attention of the majority of the industry through its ‘free’ tag firstly.
Though it is earning a comparative large revenue from its’ premium services offered after from it.
It is just like offering candy to a small kid for free first, if the small kid gets addicted to the taste to the candy.
Obviously, he is going to buy it after for sure.
#4. Lower User Expectations
As the app is already giving the user all for free with basic features needed.
A user will not expect more as it is downloaded free by them.
And, if they expect what they will have to do ahead?
They will have to upgrade to the premium features of the app to enjoy more services.
#5. Positive reviews more likely
In the above screenshot, you can see there are 13,955 something 5 star positive ratings regarding the freemium app.
Yes, there are negative reviews too on the app.
You can see that too in the picture.
But the majority of the people gave positive reviews because the freemium app made their work or motive done without spending money.
May be some of them got upgraded afterwards to their premium services offered. So their work or motive can be done more effectively without any stoppage.
APP MONETIZATION
Dis-Benefits of Freemium App
Along with some benefits there comes a point in every situation where you have to face some disadvantage beside it.
The few, not much, the disadvantage of the freemium apps are as under,
#1. No Guaranteed Revenue
As the app is totally available free for the user and it is monetized through different mediums/models.
The revenue of the app depends on that mediums through which the app is earning.
So, it is not be confirmed how much revenue the app will earn.
It totally depends on the number of users who applied for subscriptions and premium services offered through it and their word of mouth marketing if they really liked the application.
So, it is a first sad thing for freemium app
#2. Ads distract users
There is a huge disadvantage in free apps that it always plays ads in between of the usage to distract the user to the ad provided because revenue is also earned through ads if the user clicks the ad.
But, the ads frustrates most of the user and because of this reason they uninstall the freemium app and also gives negative mouth review.
And some users also gives bad ratings on Google Play and App Store which is considered bag thing for the growth of the app.
So, it a second sad thing about freemium app
#3. Required high engagement to generate revenue
As the freemium app is completely available for free.
It should have a huge number of downloads because half of the percent people just download for the sake of it by keeping the app in their mobile and using it at free time but the rest of the half would download and also apply to the premium services and subscriptions.
APP MONETIZATION
Tricks for Creating Successful
Freemium Model
After a short analysis of the freemium model, let us go through the rollercoaster ride of the tricks for successful freemium model version,
#1. Create a user friendly product and offer more unique than the current market trend
How will the user be attracted to your app? First you need to think and review the other products.
What others are offering? And what they are not?
What they are not offering; if you offer that to the users will it be more beneficial to the users in some way?
If yes, in what and how many ways? You need to figure it out.
And after figuring it out, make the app in that unique way which will be a major tip for making your freemium app successful.
#2. Create a limit to the usage of the app
It’s obvious as freemium model you need to give it free but not beyond the limits.
There should be some limit you need to plan that after this much of usage the user needs to pay for the more unlimited services.
Take an example of BOX, a cloud storage company offers some space free for all users but after that limit they have many different plans of space required for the user and charges accordingly.
Same as BOX, the another example is Drop box.
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APP MONETIZATION
Example of Successful
Freemium Models
Do you know how the successful and unique implementation of the freemium model can help you climb a step ahead?
Be acquainted with the various successful examples to get inspired from,
#1. Tinder, the top grossing freemium app nowadays. Let’s see how it made its place in top in app market?
Tinder, a dating app the top grossing app of the world nowadays was founded in Sept 2012 and was launched by Hatch Labs.
IAC is the parent company of the Tinder which owns much percentage of Tinder.
This was the enough of company information. Now let’s see how and what made them so much grow?
Let’s see step by step to make you understand the perfect example of successful freemium model.
STEP: 1 UNIQUE CONCEPT
What did tinder actually understood before making the app that if everything can go online, why not dating?
Means they thought some unique strategy.
And by thinking this purpose, they launched the tinder app with the unique concept in market which allows people to date following some simple steps in their app.
STEP: 2 UNIQUE FEATURES
They launched some awesome features in which the user gets the information of a date with all their detail like what are their hobbies?
Their likes? Their dislikes? Any many more info about them which the date can describe in their profile ID.
The another unique feature for the app was the user can swipe, like the profile for dating purpose.
STEP: 3 HOW THEY MONETIZED THEIR FREE APP?
See, the user who is seriously looking for a date will look a thousand of profiles and this needs swiping and liking the selected profiles.
So, if the user by mistake skips by swiping right, they can’t go back and swipe left to the last profile.
To return to that last profile, the user has to subscribe to Tinder Plus which costs $9.99 for a month for most of the user’s age and those above 30 ages has to pay something $19.99, a month to enjoy the unlimited liking, swiping, rewinding the swipe, boost the profile.
By the starting of January 2014, Tinder has crossed 10 million users and the application crossed 40 million downloads by the end of December 2014.
By the end of 2014, there were 1 billion swiping of users as per the reports which was considered a major reason for the growth for their application.
This is how they started making money!!!
And after that they never looked back.
STEP: 4 UPGRADING NEW UNIQUE FEATURES BY UNDERSTANDING THE CUSTOMER REQUIREMENT OBSERVING THEIR PROBLEM.
Now, what did they observe? And what they did to solve the problem; user is going through.
The user who is much interested in the specific profile and though a normal same like is given by them as same as likes given by them to the other date profile.
Will it work?
How will the date find out that the user is very much interested in them?
There should be something more special than the rest of the likes given. How will they show it that they really like them much than anyone else?
There should be something more to confess it right?
So, seeing that issue they launched their new Super like feature in October 2015, in which tinder plus users get 5 super likes per day and non-tinder plus users can get 1 super like free for a day.
So these unique features were so much liked by the users and especially for the teenagers and 25-30 age adults who are finding their real date online.
This was the most beneficial for the monetization growth of the application.
Later on, in 2017 they came with another feature naming it ‘Tinder Gold’ subscription.
This is how tinder became the top grossing freemium app of the world using the unique and different strategy and also understanding the customer requirements and going through their problems and solving it.
APP MONETIZATION
Reasons for Failure of
Freemium Models
Are you giving a thought to plan a startup with the freemium models?
There are ways that a lot of obstructions while planning can hinder the project concluding it a failure, know the essentials
#1. Provide a small part. Giving away too much can be risky for your product.
Give away a small part with some limits. And, then after if the customer wants more part, they have to buy the premium services offered.
Because giving away too much of the product to the customer for free of cost is one way to fail with freemium model.
#2. Don’t deliver much value
If you deliver features of low importance to the user and that too with much of value for that specific features in comparison to the other of your competitors are offering at low value and more features.
Obviously, the customer will be diverted to that other product and your product will fail to attract the customer’s attention.
#3. Don’t create a sense of urgency
If you create a sense of urgent payment immediately after the user expires with its free trial usage with the continuously popping up window that shows
‘Upgrade to premium with some money listing’ urgently to enjoy our services.
This can make four things happen from the user:
1. The free user might uninstall or delete your app
2. The user might never open your app and keeps store as a showpiece in mobile.
3. The free user who likes your product and willing to share it with his or her good friend, will not market your product because of this urgency.
4. The final thing that can happen is the free user might convert into real user paying, in which very few cases are happening.
APP MONETIZATION
Introduction About
Premium Model
Premium model is an advanced version of the apps available for free with many special features to hover around with.
Foremost of it what actually premium models are; upgrade yourself,
#1. Only Available if ‘paid’ firstly
First of all, the main reason is premium models are paid apps from first. And the paid apps from the first before its use are less preferable by the consumer.
The user likes to use it first for free and if then they really like it, they will go with premium services in the freemium app model.
That’s the first reason for paid app less preferable than free app.
#2. Positive Reviews are must
For any app whether it is premium or freemium model, reviews play an important part in the growth of the app.
And in premium models, less review are than freemium apps because it is less downloaded and applied by the consumers.
This is the second reason for premium app less preferable than freemium.
#3. Free Marketing By genuine users
If you create a sense of urgent payment immediately after the use ‘Word of mouth’ marketing is a free marketing done by the genuine app users if found it useful with more special features, tools or unique.
In premium app it is less done comparatively because it is downloaded less and few users have experienced the app and found it nice. And, so very less amount of free marketing is done by the genuine users.
Where as in freemium app, the free marketing is done great with a ton of downloads.
This is the third reason for premium app less preferable than freemium.
APP MONETIZATION
Pros of Premium Apps
The ultimate payback you can achieve after upgrading to the premium version of the app is available in the list below,
#1. Every download generates money.
The most beneficial thing about premium app is that it generates money per download.
As the app starts earning from the very first download of it doesn’t have to worry more about its revenue.
Every successful download =
Earnings for the cost of the app kept by the company
#2. Free from ads
The second most beneficial thing is why users prefer download paid apps is that they are free from any kind of unwanted advertisements.
While playing a game, editing some important document or while doing any most important work, you can see ads generally see banner and full-screen ads popping out randomly is seen in freemium app.
But in premium apps, this won’t happen and you will be not distracted from any important work you are doing.
#3. More features
The other most beneficial thing about premium app is it offers more features than the freemium app.
Since users are paying for these apps, they get access to unlocked features. For instance, 360 Antivirus app’s paid version gives more security features that are not available in free version.
#4. Early updates
Premium apps are updated regularly and not just that is the advantage as mentioned above it comes with more features which makes paid apps more powerful and stable than the freemium apps
#5. Growth in loyal users
As the premium apps are bought by the genuine consumers. So, that means they trust your app and therefore they are loyal users.
And gradually there will be an increase in the growth of loyal users
APP MONETIZATION
Cons of Premium Apps
Remember every coin has two sides, so does the premium version of the app comes with the disadvantages assorted below,
#1. Fewer downloads
Obviously, freemium app downloads will affect the downloads of premium apps.
As freemium apps are available with the tag called ‘free’ and people are more attracted to that tag than paying for any premium app from first.
#2. Limited monetization options
Premium apps have limited monetization strategies such as advertising or marketing app spending money, growth of loyal customers whereas the freemium apps are having multiple strategies to achieve monetization.
#3. Higher user expectation
As the user spends money on premium app, they have higher expectations than what they are considering from freemium app.
So, the premium app should either have solution as per the users expectation to keep growing in the market.
Because the user will always have a high demand when they are spending bucks on premium app.
#4. Requires high quality
As mentioned above the user will have high expectations because they are spending money. So, the higher expectation will demand higher quality of the app from the user.
If the app will have low quality, the user will have a lot of complaints and negative reviews for your app which will decrease the app’s growth.
APP MONETIZATION
Example of Successful
Premium Apps
Pocket Casts, the top grossing premium app nowadays.
Let’s see how it made its place in top in app market being premium?
#1. What is pocket cast?
To listen to your favorite podcasts you don’t need to go here and there, the one place for listening to your entire favorite list of podcasts is here – Pocket Cast
#2. What is the main reason for such a huge success of pocket cast? They came up with a unique feature. What is it?
Pocket Casts came up with syncing web player through which now you can access all of your favorite podcasts from the web as well.
#3. How the app is monetized?
This web player works exactly as you’d expect. It shows the podcasts you’ve subscribed to on the mobile app, what you’ve listened to, what’s in progress, and helps you find new podcasts.
All the content is synced up with the mobile app, so it’s easy to start listening right where you left off.
The player itself is bit bare bones at the moment, but it works fine even though there aren’t many advanced features. The one catch is that the web app costs $9, but you can get a free 14 days trial to check it out.
And this is how the pocket cast giving the unique feature of syncing and more extra features became the top paid grossing app.
#4. The Final Wrapping up on Freemium VS Premium Model
Hence, we have shared with you the secret guide making you understanding the whole concept of monetization in freemium and premium apps.
Hope you go through this guide and find a real way for creating your ideal application.
One more thing it doesn’t matter whether you go for creating freemium or premium app.
The thing that matters that are you coming up with some uniqueness understanding the users requirements and applying right strategies to market it.
This is what matters in making your ideal app grow in market.
Thankyou for reading our blog !
Conclusion
Have you experienced any success or failure with mobile app monetization?
Have we missed out on something that you know can really help small companies out there?
Let us know by leaving a quick comment below and share to your friends who wants to build an app.
P.S. — If you need any help regarding building, launching and trying to figure out how to build a sustainable mobile app business or a product, we are not far away. Email me at anil@glorywebs.com
Thank you for reading!
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