How Mobile App Monetization Works for Business Owners

Updated on June 13th, 2022
mobile marketing

Mobile apps are powerful for branding purposes, but did you know they can also be enormously profitable if you employ the right monetization strategies?

Though the mobile app monetization market has altered somewhat over the past decade, entrepreneurs and companies may still extract considerable value if they’re willing to put forth the effort.

Coming up with app ideas is the easy part – but can you execute?

The Current State of the Mobile App Monetization Market

Most observers agree the mobile app market is as healthy as it’s ever been. According to data points gathered by digital marketer Olivier Binisti, mobile users spend 90 percent of their time in apps compared to the mobile web. On average, they download 8.8 apps per month. And the average cost per app installation is $1.46 on iOS and $2.33 on Android.

The sobering stat is that roughly one in every four installed apps never gets used, and another 26 percent are abandoned after the first use. The average Android app gets opened by 77 percent of its active users within three days after an install, and 90 percent within the first month.

The contradictions between these numbers suggest there’s massive opportunity in the mobile app market, but businesses and app developers have to be creative about how they approach it. In addition to the marketing and branding side, careful attention must be paid to monetization and its relationship to downloads, usage, user experience, abandonment, and revenue.

How Do Mobile Apps Make Money?

If you’ve never pursued app monetization seriously from a business perspective, then you may be unaware of the state of mobile app revenue these days. According to data gathered by SurveyMonkey Intelligence, there are three major revenue sources for apps.

The percentage of revenue generated by each category breaks down like this: paid-for (59.5 percent), in-app purchases (30.9 percent), and advertising (9.6 percent). Clearly the majority of revenue comes from app purchases, but there’s still plenty of value tucked inside app experiences in the form of additional purchases and advertising. Some apps focus on one revenue stream; others try for two or three.

As SurveyMonkey Intelligence shows, the App Store is certainly the most lucrative for businesses: It brings in 63 percent of app revenue worldwide. But Google Play also still generates billions in revenue each year.

People like to claim that mobile apps are dying a slow death, but the data shows this isn’t true. Gross revenue between the Apple and Google stores was just $8 billion in 2011. This year, that number is expected to go as high as $77 billion.

What’s changing are the ways users pay for their apps. By the end of this year, SurveyMonkey Intelligence notes, in-app purchases could overtake “paid-for” installs as the leading revenue stream.

Four Suggestions to Monetize Your Own App

No entrepreneur or business wants to develop an app unless there’s a potential for generating revenue and expanding the bottom line, whether directly or indirectly. So it’s natural to place your primary focus on monetization when you’re planning strategy and development. Here are four items to chew on.

1. Pros and Cons of Free and Paid Apps

One of the first decisions you’ll have to make is whether you want your app to be free or purchased. This isn’t a choice to make casually. It will have major ramifications on various facets of your company and brand.

Free apps are awesome because there’s no download threshold. Nothing holds a mobile user back from installing your app and at least testing it out. This generally increases the volume of downloads and gives you a chance to engage with more people.

Free apps are also more likely to receive positive reviews because they attract more people. This can get your app ranked at the top of an array of categories. But there’s no guaranteed revenue and loyalty rates tend to be much lower than when users fork over money to download the program.

The biggest benefit of a paid app is that it guarantees some revenue. As soon as a user decides to download it, money comes in. There’s also a better chance of fostering loyalty and driving further purchases. Unfortunately, quite a few people simply won’t consider buying an app.

“Even with lots of great reviews, people are less likely to purchase an app if they can’t try it out first,” AppInstitute explains. “They can, more than likely, find an app that is similar to yours which is free, so why would they bother purchasing yours when they can get the same one for free?”

2. Tiered App Monetization

Who says there has to be a clean cut between free and paid apps? Many businesses are finding value in offering two versions of the same app:

  1. A free or low-cost version
  2. A paid version.

The free app is used as the lead-in,. The hope is that a decent percentage of users will convert to the paid version.

“It’s part of the strategy of giving your customers a taste — a trial period to get a sense of all that your app can do — and then building from there,” developer Rob Fulton says. “You want your customers to integrate this app into their lives and then realize they can’t live without it when it comes time to upgrade.”

Fulton’s final statement is a crucial concept in the process of app monetization. The objective is to make people feel like they need to possess your app in order to be happy, productive, or informed. (This is something popular games and social networking platforms do well.) If you can do this, then monetization will naturally follow with minimal effort.

3. Try Incentivized Advertising

Many firms are able to attract lots of free users, but they can’t seem to monetize them. Even once they’re using the app. If you’re in this situation, incentivized advertising could be what you need.

With incentivized advertising (also known as sponsorship) an app developer partners with advertisers. This provide users with rewards for completing a variety of in-app actions. The advertisers pay to be a part of the incentive system. As the app owner, you earn money by taking a share of the revenue earned from redeemed rewards.

The beauty of incentivized advertising is that it not only generates revenue, but it increases engagement and encourages users to return for more. An excellent example is the T-Mobile Tuesdays app, which gives users a chance to win prizes every Tuesday. The prizes are given out by local businesses and sponsors, and T-Mobile benefits from increased revenue and user engagement.

4. PR and Branding Matter

One big mistake companies often make — especially when they launch their first mobile app — is neglecting to drum up attention. They focus all their time and effort on developing the app and forget the vital role of PR and branding. As a result, they have a great app but few or no users.

For a look at what good mobile app PR looks like, study the Chanukah App from The Saber Team. The app is simple. It’s been consistently rated as one of the top apps of the holiday season in the last few years.

In 2014, Jewish App Review named it the “#1 Hanukah App.” It’s been ranked in the Top 100 Charts in 15 different countries. It’s even been featured on major blogs such as

The app is indeed well designed and highly interactive. Much of its success can be attributed to The Saber Team’s relentless pursuit of an ambitious PR strategy. This same strategy focused on getting the app into the hands of influencers and generating online buzz.

With your first mobile app, you have to make the same level of effort. It can take a lot of strategizing, but the hard work is likely to be worth it.

Long Live the Mobile App

Say what you like about mobile apps, they’re evolving or moving in a new direction. Don’t try to convince leading companies that they’re dying. The ways in which mobile users engage with apps is different from what it was five or ten years ago. that being said they are spending more money than ever.

This strongly indicates there’s still a ton of business value in development and distribution of mobile apps. Whether your business has developed apps in the past or has never been involved with any sort of mobile strategy, the latter half of 2017 may be the perfect time to take a serious dive into attempting to derive revenue from this lucrative channel.

What you’ll likely discover is it creates an additional touch point with your target audience.

Serenity Gibbons

Serenity Gibbons

Local Unit Lead for NAACP in Northern California with a mission is to ensure the political, educational, social, and economic equality of rights of all persons and to eliminate race-based discrimination. I enjoy writing and interviewing people making a difference in the World. Former Assistant Editor NY Times. NYU Alum living in sunny California.

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