Making a Great App Isn’t Enough: How to Properly Monetize a Mobile App

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Software developers and entrepreneurs are sometimes plagued with the belief that creating an amazing app is all it takes to become successful. In a perfect world, that could be the case; in an “if you build it, they will come” scenario, a sufficiently fantastic app would sell itself, generating its own marketing buzz and attracting people to it. Even further, users would be so happy with the app that they would shower you with money – and even more revenue would come your way through ambiguous, undefined circumstances.

But in reality, these daydreams don’t come true. There are probably hundreds, if not thousands of apps that perform well and serve an important function, what are practically incapable of generating a steady stream of revenue.

If you want to be successful, building a great app is just the start. You also have to find a way to monetize it.

Monetization Strategies

App monetization strategies come in many flavors. Some forms of monetization are more direct, requesting money directly from users so the app continues working properly. Others are more indirect, taking advantage of in-app behaviors to generate income passively.

These are some of the most common choices:

  •       Paid apps. Some developers make their app available for an upfront cost. It’s effective for getting guaranteed revenue for each download. However, this strategy can be limiting; 50 percent of smartphone users have never paid for an app.
  •       Subscriptions. If you provide ongoing services, you can also charge a fixed fee per month for an ongoing subscription. This makes for consistent income, but don’t expect to turn every user into a paying subscriber.
  •       In-app purchases. Extra features, in-app currency, transaction fees, and cosmetic items are just a few examples here.
  •       Advertising. Traditional ads and affiliate links may detract from the user experience slightly, but they’re a tried-and-true app monetization method.
  •       Data monetization. You can also collect detailed data on your user base, then sell that information to third parties as a way to make money. Just make sure you’re clear and upfront with your users, clarifying how you plan to use their information.

How to Monetize an App Effectively

If you want to monetize your mobile app effectively, these are some of your most important strategies:

  •       Know your target audience. Different target audiences are going to have different preferences when it comes to monetization. If you’re targeting children or teenagers, who may not have much spending power, you’re better off monetizing these audiences through advertising or other passive streams. On the other hand, older audiences may be less tolerant of advertising and more than willing to pay a few bucks to get an ad-free experience.
  •       Consider a hybrid approach. There’s nothing wrong with pursuing multiple monetization strategies simultaneously. In fact, it’s often advantageous to do so. Pursuing monetization in many different forms is a way of diversifying your income portfolio, so to speak. If there are any threats to one of your streams of income, you’ll have the others to fall back on. You’ll also be able to compare these different monetization approaches against each other, so you know which ones are most valuable for your brand.
  •       Prioritize user experience (UX). In pursuit of greater revenue generation, many developers lose sight of user experience. They’re willing to compromise the experience of the average user for the sake of getting more money; for example, they might spam annoying pop-up ads to generate a few thousand dollars of extra revenue, interrupting the users experience with the app in the process. This is always a mistake. User experience must come first, or else your user churn rate will be so high the revenue stream dwindles to nothing.
  •       Improve user engagement. More engaging apps tend to be easier to monetize. Active, attentive users are much more likely to make in-app purchases, click advertisements, and continue their subscriptions. Make sure you measure engagement metrics on a periodic basis and make positive changes to your app to encourage it further.
  •       Measure and analyze your monetization strategies. Always take the time to measure and analyze the performance of your different monetization strategies, especially if you’re using more than one approach simultaneously. Only through objective analysis will you be able to determine whether you’re making a profit and whether your income streams are performing optimally.

Monetization is vital if you want to be a successful mobile app developer or entrepreneur in the mobile app space. But don’t put too much pressure on yourself; It’s not something that has to be perfect out of the gates. In fact, most mobile app developers spend significant time experimenting with different monetization strategies, changing their approaches, and tinkering with the formula to get better results. It could be months, or even years, before you find the perfect balance for your app. What’s important is that you make it a priority and you take it seriously – instead of just coasting on a good starting idea.

Nate Nead

Nate Nead

Nate Nead is the CEO & Managing Member of Nead, LLC, a consulting company that provides strategic advisory services across multiple disciplines including finance, marketing and software development. For over a decade Nate had provided strategic guidance on M&A, capital procurement, technology and marketing solutions for some of the most well-known online brands. He and his team advise Fortune 500 and SMB clients alike. The team is based in Seattle, Washington; El Paso, Texas and West Palm Beach, Florida.

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