Mobile App Monetization Models for Startups

September 30, 2020 White Papers

One of the most frequent cases of fail, when a startup founder with a disruptive mobile app idea tries to grow business and resolve problems with IT solutions, not knowing how to monetize their idea. Every time Intetics is approached by a startup with a mobile application development request, we begin by asking questions to better understand how to build a great solution. When the operating system is defined, it is important to think of your monetization model early on, so that you can pitch your mobile startup to investors by showing your vision through figures, such as stats and projections presented by key app performance metrics. Developers monetize their products in many different ways, and you too can find a model that is right for your audience and product.

 

One of the strategically important is to decide whether the application should be Android-based or iOS-based. The choice of platform defines the target audience, needs, customer acquisition approach, and much more. According to Statista, the global mobile app sales revenue between the Apple App Store and Google Play distributes the following way.

When the operating system is defined, it is important to think of your monetization model early on, so that you can pitch your mobile startup to investors by showing your vision through figures, such as stats and projections presented by key app performance metrics. Developers monetize their products in many different ways, and you too can find a model that is right for your audience and product.

This White Paper will introduce you to 11 major mobile app monetization models based on the wide Intetics portfolio of projects, startup needs, and common cases. As you read, remember that you can build your business upon one model, as well as a combination of models you might find suitable for your product and audience.

11 Revenue Generation Models

Navigate Your App Monetization Options With Ease

Here is a basic outline of the revenue generation models to be discussed in this White Paper. When reviewing monetization models based on your company’s offerings, consider:

  • Advertising: There is no “if” — this model is suitable in almost every situation. Just make sure you choose the right ad format.
  • Paid Apps: If your app is a utility, productivity, photo, video or navigation tool, etc.
  • In-App Purchases: If you can quickly build a large user base and offer wow-level, free experience.
  • User Subscription & SaaS: If you can provide value for users on an ongoing basis.
  • Sponsorship: If there are major brands interested in promoting themselves to your audience.
  • Affiliate Deals: If you plan to work with businesses that offer high-demand products or services.
  • Transaction Fees: If your app is designed to operate as a mobile marketplace.
  • mCommerce: If you plan to sell your own products and/or provide services within a unique ecosystem.
  • Crowdfunding: If you can run a successful campaign and/or you are affiliated with an already popular brand.
  • Donations: If what you do is highly important for your target audience.
  • Mob App merchandise & e-commerce: If your app is based on a brand that has a loyal fan base.

1. Advertising

Good to be implemented to all Apps

Advertising provides the most revenue for gaming and non-gaming apps alike. That should come as no surprise because through this model users can interact with your app for free, which means that you can grow 
a large user base and get more people to see relevant offers from a variety of advertisers.

Absolute Market Insights provides another interesting observation-and-projection perspective. According to its research, the market for in-app advertising was more than $66 billion in 2018. The forecast for 2027 indicates it is likely to reach approximately $472 billion, increasing at an estimated CAGR of 24.4% throughout the forecast period.

As for the diversity of industries that can be successfully marketed through in-app ads, consider this recent study by Drum and Smaato. Although 10% of in-game ads are placed in mobile games, the white paper says most in-game advertisers are digital entertainment platforms, retail stores, FMCG brands, and auto manufacturers.

In-app ads are different in their format and type. Check out the following six varieties.

  1. Interstitial ads: Interstitial ads are designed as natural steps in a user journey through the app. They are most relevant for apps that are built upon linear user experience, such as Uber. It takes several steps to order a cab, and you can insert a full-screen ad as one of these steps. According to an AdColony study, interstitial ads perform slightly better than in-app purchases, with ratings of 3.5 versus 3.4.

    However, this ad type is not considered user-friendly for utility apps like the flashlight. In this case, banner ads are a better choice. Google punishes apps that impair user experience with intrusive overlays by ranking them lower in mobile search results.

  2. Banner ads: Banner ads have been around for decades. Initially used on websites, they expanded to the mobile app layout and remain one of the most efficient ad formats. As users interact with the app, an ad banner stays within their eyesight, allowing them time to consider whether it is something worth clicking or not. In time, the banner switches to another ad.

  3. Video ads: Video is today’s most popular ad format. Hackernoon found recently that video made up 60% of mobile advertising for 2019. According to InMobi, video ads boasted double the click-through rate (CTR) of native ads, and 10 times the CTR of banner ads in Q1 2019. And the trend has been upward lately: In Q1 2019, video ads achieved 3.16% CTR on average, compared with 0.26% in Q1 2018. InMobi also noticed completion rates of about and viewability of 91% in Q2 2019.

    At the same time, video is a format that can be utilized through different ad types. The previously mentioned survey by AdColony indicates that publishers estimate rewarded video ads and interstitial video ads as the most efficient, rating them 4.6 and 3.7, respectively.

  4. Native ads: Native ads are the most creative way of promoting a product or service to app users. Users may not even be aware that they are being targeted by advertising as they come across a native ad. It is typically introduced into UI components in the most unobtrusive way, and it serves a concrete purpose.

    Here is an interesting story that shows how this works. A staff member at Adweek was swiping through Tinder when he matched with a 25-year-old woman named Ava. After a conversation with Ava, he discovered that she was, in fact, a bot promoting Ex Machina, a sci-fi thriller by Alex Garland.

    Another interesting example of native in-app advertising is how brick-and-mortar businesses paid to place PokéStops, important points in the Pokémon Go game, at their locations to drive foot traffic.

  5. Rewarded ads: Rewarded ads encourage users to interact in exchange for rewards such as in-app currency, items, or features. These ads can be presented in various formats including video, a full-screen banner with a CTA, or even a demo version of the product (game or another app). Rewarded advertising is best for gaming apps, as an alternative to in-app purchases. According to Tapjoy, 76% of mobile gamers in the US prefer opt-in rewarded ads, while only 24% are more comfortable with mandatory ads.

  6. Text ads: Just like video, text ads are more a format than an independent advertising model. Some banner ads feature plain text and sponsored posts on Facebook are also based on this medium.
    The average cost per click in one of the two biggest online advertising platforms, Google AdWords, is between $1 and $2.

Learn more about 10 more mobile app monetization models!

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