How to Make Money from Mobile Apps – The Ultimate Guide

Interested in knowing how to make money from mobile apps?

This blog has covered your answers. Keep reading to know the ways to make money from apps.

By 2032, the mobile app market will be worth $777.4 billion. The accessible mobile app business has always outnumbered the paid sector regarding income and downloads. How do free apps make money? This is a popular question before building an app.

Before we address this question, let’s look at some statistics about Android and iOS mobile apps.

97% of apps in the Google Play app market were free as of 2023.

According to these statistics, most Play Store and App Store apps are free.

But how can app businesses make money from free apps?

Let’s go through this guide to learn the entire monetization approach.

Ways to Make Money with Mobile Apps

Advertising Model

The advertising model is arguably the most popular and straightforward when using free apps to make money. Furthermore, a third-party ad network is used.

Here are the specifics of mobile advertising spending in 2022 and what is anticipated to happen in 2024, based on the most recent Statista study and report.

To display commercials inside their mobile application or choose affiliate marketing and receive payment from outside ad networks is all you need to do. And the best way to make money with apps is supposedly through advertising. You can quickly receive payment from third-party networks and advertisements by simply showcasing your commercials within the mobile application.

The app providers display four primary display adverts to monetize their services. As the app’s owner, you must, however, keep an eye on whether your target audience finds these adverts amusing or blocking them to meet your business objectives.

Interstitial ads:

These are advertisements that show up as full-screen pop-up windows that happen on a set schedule. By using the close button, which is usually found in the upper left or right corner, users can quickly close them. For example, when a user finishes altering a photo and saves it to the gallery, an interstitial advertisement can appear. 

This kind of advertisement is used well by the profitable app Gaana, which improves the app experience without spending money on advertising.

Banner Ads:

Generally modest and discreet, banner ads are positioned at the top or bottom of the app screen and can be in different sizes, letting users freely explore the app.

Rewarded Videos:

Rewarded videos, which offer viewers points, lives, or virtual items in exchange for watching them, are one of the most effective advertising formats for in-app integration. Advertisers find this incentive-based strategy profitable, and it facilitates the efficient dissemination of brand messaging. Since users are rewarded for interacting with these adverts, the main benefit resides in its capacity to attain high retention rates. 

This strategy works exceptionally well in the top-grossing and gaming apps market, where users value freebies. Compared to other ad formats, this advertising typically has a higher effective cost per mille.

In-App Purchases

In-app purchases (IAPs) involve transactions conducted directly within free mobile apps, commonly employed to offer users exclusive content or additional features.

In simpler terms, IAPs empower the selling various virtual items directly from the app. Renowned free gaming apps such as Clash of Clans and PUBG have significantly improved user experiences by incorporating IAPs. According to Forbes, this strategy stands out as the highest revenue generator for publishers, predominantly utilized in gaming apps, owing to the prevalence of digital currency. It proves to be an engaging model for converting free users into paying ones without undue intrusion.

Consumable Items

As the name suggests, consumables are depleted upon purchase and necessitate repurchase for continued benefit. For example, certain game apps monetize by selling additional coins, requiring users to buy them anew once spent.

Non-consumable Items

Conversely, non-consumable in-app purchases are permanent acquisitions that persist indefinitely. This is often observed in apps offering trial and full versions. For instance, a photo editing app might provide five default filters, with the full version unlocked to offer 20 filters and additional photo-editing features.

Subscriptions

Subscription models, while a prevalent app monetization strategy, have recently witnessed widespread adoption, particularly by subscription-based mobile apps like Netflix, Amazon Prime, and Dropbox.

This model resembles in-app purchases but introduces defined ‘subscription periods’ instead of allowing users to make one-time purchases at their discretion. Users can access the app’s premium features during an active subscription period, but this access expires unless the subscription is renewed.

Sponsorship

One effective strategy that can have an impact is sponsorship. This strategy works when the owner of an app successfully secures a sponsor who shares an identical target market. Once the right sponsor is on board, the app can be customized to match their brand and be labelled accordingly.

Sponsorship involves creating an app designed for a group of users, developed before launching the app on behalf of the sponsoring company or brand. For example, this sponsor could be a barber shop or a popular restaurant.

When negotiating a deal, there are two options;

• Revenue Split
• Monthly Sponsorship Fee

This approach has the potential to generate profits. As the app developer, you can benefit from the sponsor’s existing web traffic and loyal customer base, effectively promoting your app and expanding your user community.

Creating a Profitable Mobile App

1. Possess a transparent business model instead of merely a notion: A clear business model explains how your app will make money, even though a well-liked idea can draw downloads. For example, many of these apps struggled to make ends meet after the demonetization of mobile wallets since they had a strong monetization plan.
2. Knowledge of several app monetization strategies is essential: App purchases, freemium business models, in-app advertisements, and subscription services are available options. For instance, in-app advertising might be pretty profitable if you aim to build a sizable user base to demand higher ad pricing.
3. Develop an application that employs cutting-edge technology to tackle real-world issues: Rich apps provide sophisticated fixes for common problems but necessarily ground-breaking concepts. To efficiently implement your idea, make technological investments and build a highly qualified workforce.
4. Consider the Possibility of a Lucrative Exit Strategy: Plan a profitable exit. For illustration, consider the substantial sums internet companies paid to purchase Slack and WhatsApp. Keep your attention on developing a worthwhile app; if the right firm comes along, they might buy it for a high price.
5. Research on Users: To confirm that your app idea can make money, thoroughly analyse users. Observe how users engage with prototypes and use surveys to get user input. Your app will be improved for maximum usefulness and profitability with the help of these insightful user preference research findings.
6. Design and User Experience (UX): Prioritise design and UX. User engagement is increased by an app that strikes a balance between aesthetic appeal and simplicity in design. To create a smooth and pleasurable user experience that promotes repeat usage, invest in a stylish design and optimize the user experience (UX).
7. Know the significance of efficient marketing for the success of apps in discovery and successful app marketing: Ad in pertinent areas, taking advantage of favourable ratings and reviews, and optimizing app store listings are just a few channels you should employ. To raise awareness and money for your app, take the initiative to highlight its features and aim for featured lists.

Things to Consider Before Developing Money-Making Apps

Given below are the key considerations that need to be considered when getting your money-making app developed: 

App purpose

Before adopting any of the monetization strategies, you need to determine your application type. What and how does your application solve any issue?

When focused on how applications can make money, the app’s purpose is crucial. Answer these questions to acquire a complete insight into your app’s purpose. 

• What problem does your app target?
• What app development services do you need to establish a successful app?
• What could be the potential influence of your app monetization on the market? 
• And how will the app help support the customers and their needs?

When you have a plausible response regarding the objective, you can choose a good monetization approach for your application, for instance, subscription models for service and content apps.

Target audience

Another component that helps in establishing how applications can make money is the target audience. If you are building a mobile application for business people, it is crucial to use a monetization approach that does not waste their time. Likewise, when designing an app for kids, giving a few solutions and features for free is good. 

To properly create an online income from app monetization tactics, you must assess your target audience before commencing any plan. 

• Who is the intended audience? 
• What do they require? 
• The amount they will pay? 

Simply put, your users should recognize the true worth of making purchases.

Competitor analysis

Performing Competitive analysis for your mobile app idea also aids in deciding how to make money from an app. The insights aid in understanding what techniques similar apps in the market choose and what earnings they have earned. This eventually assists in decision-making.

The tough competition in the industry and the competitor analysis aren’t simply for an application’s highlights, functionalities, and design. With a good study and understanding of the competition, you may, without much difficulty, uncover the monetization business plan for your program. 

• All you need to do is ask yourself specific questions like how competitors earn. 
• How solid are their models? 
• Is there any loophole that can turn into an opportunity for you? 

Also, a great marketing plan for your mobile app development will help you accelerate your marketing and sales.

Technologies

The set of technologies you integrate into your application increases the user experience. It makes it stand out from the competitors but also contributes to the income from mobile apps. 

Example: A standard commercial mobile app monetization platform approach provides developers only 70% of the revenue spent on a mobile application. Whereas a blockchain-based application architecture gives 85% of the overall app profit share.

Key Metrics to Measure the Effectiveness of Your App Monetization Model

After learning about the different app monetization strategies, let’s discuss how to evaluate your chosen one. Here are the key metrics.

The percentage of app users that stay over time. While user behaviour is complex, the retention rate indicates whether your app provides a worthwhile user experience that leads to loyalty. Implementing in-app advertising methods can also assist in determining if they affect user behaviour.

1. Retention is essential to monetization: the more loyal your users are, the more advertising they will engage with and the more likely they will buy in-app.
2. App stickiness: How often consumers use your app. The more engaged users are, the more enduring the app. Divide your Daily Active Users (DAU) by your Monthly Active Users. 
3. Average revenue per user (ARPU): Measures your average user revenue. Divide overall business revenue by the average user count for the same time period. 
4. LTV: Measures a user’s value over time using an app. The data helps advertisers decide how much to spend on advertising to attract customers and stay profitable. 
5. Funnel conversion rates: Assess user quality from ad exposure to a significant, revenue-generating in-app event following app installation. This data helps apps optimize monetization by spotting user drop-offs in advertising/purchasing. 

Understanding these data helps you test multiple app models more efficiently. You must determine how each ad affects your bottom line.

The End Note

In conclusion, unlocking your mobile app’s earning potential requires a strategic approach beyond conventional models. While AdMob is a prominent monetization tool, diversifying revenue streams is essential for sustained success. Explore alternative methods such as in-app purchases, subscriptions, and partnerships to maximize profitability. As mobile app development evolves, embracing diverse revenue avenues positions developers for a promising future. Developers can capitalize on current trends and navigate the changing landscape by staying adaptable and innovative, ensuring a lucrative and enduring journey in the dynamic realm of mobile applications.