Mobile App Monetization

No matter what kind of app you’ve got, odds are, you have a lot of competition. It takes more than just a great idea to make a successful app – it takes a great mobile app monetization strategy. That’s why it’s so important to establish various revenue streams and learn how to sustain them from day one. 

Consistently producing, testing, adjusting, and improving your monetization strategy with the right technology solutions can help you maximize revenue while making the app experience more enjoyable and worthwhile for your users. This combination of creation, iteration, and acquisition creates a perfect circle of growth. Today’s most successful publishers are using a mix of monetization strategies (AKA a hybrid monetization model) to optimize the impact of in-app ads. By focusing on customer experience and behavior, they are generating opportunities for entirely new revenue streams.

Mobile app monetization is an umbrella term that describes the strategy and tactics developers employ to generate revenue from their apps. Once upon a time, monetization strategies were limited to in-app ads. Today, there are many ways to make money from your mobile app. Learning what works best for you will take time and investment, but one thing is certain: Considering your app monetization strategy at the earliest stage of planning is essential to growing a successful app-based business.

Why is mobile app monetization important?

Obviously, app monetization is important because you want to grow a successful business – one that is actually profitable. However, having a monetization strategy is a key part of your business planning because users have grown accustomed to free apps. Charging to download may not be the best plan for most apps, so generating revenue after installation is not just a bonus; it’s a requirement for a thriving business.

So while they may not pay to purchase an app outright, today’s mobile-first consumers will spend money to enhance their experience…if they are engaged at the right time and in the right way. Implementing strategies to encourage in-app purchasing and acquire information from user behavior will help you bring in revenue from more than one place.

If maximizing revenue is your goal, using data to understand how users interact with your app and why they continue to use it will make monetization more successful by creating a more respectful and integrated experience. You’ll be able to customize your app for users, making it better for them and you.

Earning consistent revenues from your mobile app can be challenging. Not only do consumers have high expectations, but you’re also constantly competing with millions of other apps for time, attention, and share of wallet from end users. 

Here are some of the most common roadblocks around monetization:App users can be resistant to ads. It seems obvious, but some people don’t like ads, especially when they are unexpected or irrelevant. (We know. We can’t believe it either!) Of course, consider that not every ad solution is created equal: High-quality ads that are targeted based on data make a huge difference and are capable of winning new users.

• High-value users can be hard to find. Similarly, not all app users are equal when it comes to monetization. Some will never spend a penny in-app, while others are more than willing to pay to enhance their app experience. Finding the right users — and keeping them engaged — is crucial.
• Lack of visibility into user experience. You can’t improve your strategy if you’re in the dark about what people are experiencing when they use your app. Understanding user behavior and continuously adjusting how you engage with them is a necessity. When you know more, you can do better.
• Lengthy quality assurance (QA) processes. Testing your strategies to see what works best can take time and money. The slower the QA process, the longer you have to wait for results. Accurate and powerful software solutions can help speed up QA processes so you can keep improving your app—which supports retention, acquisition, and ultimately, monetization.
• Manual workflow messiness. Manually optimizing waterfalls to gain a small revenue increase is time-consuming and cuts into your gains. Incorporating automated processes into your overall monetization strategy frees up time that you can spend improving your app and reaching more users.

There’s a lot of confusing information about mobile app monetization out there. Some websites offer five monetization options, while others offer 10 or more. Clearly, there’s more than one way to generate revenue from an app. In fact, most successful apps don’t rely on any one revenue stream. Rather, they hybridize their monetization strategy (more on that later). For the sake of your sanity, let’s keep it simple. Here are a few high-level, tried-and-true strategies that don’t get too deep into the weeds. 

Paid apps

The paid app monetization model involves paying for an app when users download it or after a short trial period ends. This type of monetization model used to be the standard, but these days, consumers expect most apps to be free. The exceptions are usually apps that have an established brand or offer something that is very hard to get anywhere else. Examples of this include graphic and design apps like Facetune, certain well-known games like Plague Inc., and (ironically) most ad blockers. 

The advantage of paid apps is higher revenue per download. However, it is very difficult to get consumers to pay for your app when they can choose from lots of free apps. App creators know this, which is why 96 percent of Google Play apps are free, and 92 percent of Apple Store apps are free.

Subscriptions

The subscription model entails paying a monthly or yearly fee to gain access to your app or unlock premium features. Subscription apps rely heavily on customer retention and loyalty, which means they need to continuously offer new ways for users to engage with their app and service or add more value over time. 

Subscriptions can be a lucrative advertising model because they create predictable revenues. Similar to paid app models, subscribers become invested since they buy in from day one. Even a small monthly subscription amount can be significant with a large enough user base. 

The subscription model works well for most app categories, for example:

• Health, fitness, and wellness (Noom, Peloton, Calm)
• Entertainment (Netflix, Spotify)
• News and information ( NYT, Economist)
• Productivity tools and utilities (Dropbox, Nord VPN)
• Premium dating services (Tinder Gold, Bumble Boost)
• Gaming libraries (Xbox Game Pass, Apple Arcade)
• Kids’ entertainment (ABCmouse, Noggin)
• Creative and design (Adobe Creative Cloud, Canva Pro)

In-app purchases

The in-app purchase (IAP) model involves a user paying with real money for virtual goods, services, or upgrades within the app. Free-to-download apps commonly use IAPs to monetize after the app is installed.

In-app purchases are an important source of revenue for app publishers and have become more popular recently, especially in mobile games.

There are two types of in-app purchases: consumable and non-consumable. Consumable IAPs, like virtual currency, are meant to be purchased repeatedly, while non-consumable IAPs—such as a new level in a game, new features in an app, or even a physical product—will stay with the user for good.

This model is also effective for many app categories:

• Gaming – across genres (Genshin Impact, Candy Crush, etc.)
• Social and dating (Tinder, Bumble, Snap, TikTok)
• Health, fitness, and wellness (MyFitnessPal, MyPlate)
• Entertainment and multimedia (Facetune, Smule)
• Education (Duolingo, Khan Academy)
• Productivity and utilities (Todoist, Notion)
• Kids and family (Toca Boca, Epic!)
• Travel and navigation (Tripit, Waze)

Apps in these categories that monetize successfully with IAP typically offer an engaging free version, while encouraging users to spend on additional features, content, or services. (Note that some apps, like Duolingo, offer IAP in addition to both free and subscription versions.) IAP works best for apps that can continually provide value while offering perks – like extra lives or premium content – that users are willing to pay extra for. 

Virtual currency

In this model, users purchase virtual currency with real cash and use it for various purposes within the app. A popular gaming example is Robux, the virtual currency in Roblox. Robux and be used within the game to buy in-game gear, virtual event access, additional features, or even development tools. 

This model works best in games and fantasy sports, but can also be effective in gamified educational experiences like Duolingo. 

Virtual currencies are a smart way to engage users by giving them a sense of progress or rewarding them within the app. Real money is used to purchase virtual currencies (although in-game currency can often be earned, as well), which users can apply to purchase items within the app, access premium content, or gain some other advantage—like additional lives or greater powers in-game. 

Physical products or services

Sounds like shopping, right? That’s because it is. In this model, users pay directly within the app for physical products or services using a credit card, bank account, or other form of currency. Really this can be anything from booking a flight to ordering food to purchasing a car. 

Retail apps in particular are becoming more popular as consumers prove that they’re more comfortable than ever ordering products online. With every passing year, mobile commerce makes up a larger share of e-commerce. By 2028, it will comprise a full 60% of all e-commerce revenue.

In a Google/Ipsos poll, 85% of retailers saw the importance of investing in mobile apps for long-term business success, and 74% believed that it’s key to driving profitability.

In-app advertising

In-app advertising (or IAA) is the most popular form of mobile app monetization. In this model, ads are served to users within an app. Revenue is generated each time a user views an ad, clicks on an ad, or installs an app being advertised. The higher the value of the action, the higher the revenue. For example, an app install resulting from an ad pays the developer more than an ad view (also known as an impression)

Today, in-app ads have become more sophisticated; many offer users a dynamic and relevant experience. You can experiment with different kinds of in-app ad formats to see what integrates best with your app and what your users engage with most.

Banner ads

Banner ads are image-based ads that take up space at the top or bottom of a screen. They are like small digital billboards. They are a traditional form of online advertising that remains common in the mobile ecosystem. These ads are unobtrusive and can work in most app environments.

Interstitial ads

Interstitial ads are full-screen ads that pop up during transitions—such as between levels in a game—and cover the entire app’s interface. They can be very effective and engaging, but they can also be intrusive if used improperly. While they can be rich media, many interstitial ads consist of static images and text. In this instance, the messaging, imagery, and call-to-action need to be targeted and clear in order to drive results. 

Video ads

Video ads can be both entertaining and incredibly effective. Developers can earn significant revenue by incorporating in-app video ads into their monetization strategy. Per a 2024 Statista survey, app developers found this to be the most effective format for acquiring new users. 

Rewarded video ads

As the name implies, rewarded video ads offer app users a reward in exchange for watching a short video ad. For example, the player of a mobile game could receive an extra life or power-up after watching the video. These ads can increase app revenue by as much as 40%, and 70% of app users claim to like the format, and choose to interact with the ads in exchange for an offered reward. 

MREC ads

Medium Rectangle ads, or MRECs, are advertisements that don’t require a full-screen view to display. They’re similar to banner ads in that they can run anywhere an advertiser chooses on an app. This rectangular format is popular because it’s versatile and easy to implement. It’s a frequent choice for brand advertisers, who may want to use the same creatives across screens. 

Native ads

Native ads blend seamlessly into the app’s interface. When implemented properly, native ads should be relevant to the app user and feel like they are meant to be there. They are the least jarring to the user experience. (In-feed social media ads are a great example of native ads.)

Playable ads

Playable ads allow users to try a sample of your app for a short period before installing it and gaining access to the full experience. They are considered the most popular mobile ad format and offer the most effective way to engage users. They’re effective too, with some advertisers reporting a 700% lift in conversions from playable ads. 

Offerwall ads

Offerwall ads display multiple rewards or incentives to users in exchange for a specific action, such as watching a video, downloading an app, completing a form, or making a purchase. Examples of incentives include an extra life in a game, in-app currency, a discount, premium features, or an ad-free experience – really, whatever you decide to offer!  The offerwall format looks almost like a store within the app, showcasing each offer. Since they are initiated by the user, they aren’t as disruptive to the experience as traditional ads, and users might even enjoy them. 

Lock screen ads

Run ads outside of your native app on a user’s lock screen.

Of course, mobile app monetization is never a “set and forget” endeavor. You may not get your strategy right the first time, but there are ways to optimize revenue while simplifying your day-to-day workload. Consider the following: 

• Monitor ad performance: If you know which ads are converting, which aren’t, and why, you can optimize your ads to maximize returns. Once you understand which ads resonate with your audience and drive the most conversions, you can run more of those ads.
• A/B testing: A/B tests allow you to test different iterations of your app, enabling you to experiment with ad placements and formats. Developers can also test to adjust levers including ad frequency, network partners, pricing, and more. 
• Automation: Who doesn’t love a good automation? Many monetization solutions, including MAX, allow you to automate tasks, reducing the amount of time you need to dedicate to optimizing your monetization strategy. 
• Analytics: Data plays a crucial role in measuring the success and effectiveness of your efforts. Be sure to regularly review your analytics to understand which efforts are driving success.
• In-app bidding: With in-app advertising today, ad inventory is offered in a real-time auction, where advertisers compete for each impression. Like header bidding in digital display, in-app bidding increases demand, ensuring developers get the best possible CPM. 

Using the right combination of in-app ad formats and getting them in front of the right users will ensure the effectiveness of your monetization efforts. By taking the time to refine and optimize your strategy, you will be able to develop: 

• More ways to earn money
• High-value, long-term engagement
• Improved user experiences

Successful monetization demands a continual balance between what you need and what your users need. Be thoughtful and strategic when deciding how to maximize profits and make decisions from a user-first perspective. 

Failure to put your users first risks severely disrupting or outright ruining their experience with your app. This can lead to user churn and a devastating negative impact on your revenue returns.

Integrating monetization strategies that enhance the user experience is key to driving more revenue. Every advertisement, opportunity for an in-app purchase, or subscription offer must be designed with the user in mind. Preventing bad ads must also be a priority. Perform periodic ad reviews to protect the user experience. The more detailed the review, the better. 

Today’s highest-earning apps don’t limit themselves to only one way of making money. To succeed, your app has to appeal to every type of user possible and optimize each individual experience according to their behavior. Taking a hybrid approach is the smart way to make the most of these opportunities. 

A hybrid monetization strategy combines multiple app monetization models to generate diverse revenue streams from your app users. The most successful apps use a hybrid monetization strategy because it entices high-value users with in-app purchases while providing an opportunity for others to improve their app experience by watching and engaging with creative ad content. In a recent interview with PocketGamer, AppLovin’s Daniel Tchernahovsky noted: 

[Hybrid monetization] is probably one of the key drivers of growth for the industry as a whole. For many games that don’t have ads today, by creating ad opportunities within their apps, they can allow other games to grow as well, and that grows the entire pie.

…I’ve talked to many founders and developers at these IAP businesses who still have this idea of ads muddying the quality [of the game]. The truth is users want to engage with them. It’s not like you’re forcing an interstitial onto them. Most of these games actually are going in the rewarded direction.

Of course, having the right number of ads in critical. Too many ads will turn users off. The goal is to maximize lifetime value (LTV) by combining the right mix of monetization models. (You can listen to the full interview with Tchernahovsky here.)

Daniel Tchernahovsky

Of course, having the right number of ads is critical. Too many ads will turn users off. The goal is to maximize lifetime value (LTV) by combining the right mix of monetization models. (You can listen to the full interview with Tchernahovsky here.)

Optimizing your strategy for better results

Mobile app monetization isn’t a “one-and-done” activity—it’s an ongoing process you’ll need to focus on throughout the life of your app. Pay attention to these important metrics as you look to optimize your monetization model:

• Retention Rate: The retention rate tells you the percentage of users who install your app and continue to use it. This rate is calculated on a specific day from the day it was downloaded (Day 0). It’s a great high-level metric for identifying whether your app provides a valuable user experience that translates into long-term loyalty. 
• App Stickiness: App stickiness measures how engaged users are with your app. This metric is calculated by dividing your Daily Active Users (DAU) by your Monthly Active Users (MAU). 
• Average Revenue Per Daily Active User (ARPDAU): ARPDAU measures the revenue your users generate daily. It is a common and important metric for determining your app’s ongoing performance. Measure it by dividing total revenue by daily active users (the average number of users in a 24-hour period).
• Lifetime Value (LTV): Lifetime value determines how valuable a user is over the entire time they use your app. Predicting a user’s lifetime value successfully maximizes the effectiveness of ad spending and ensures that you continue to pursue the most valuable users.
• Funnel Conversion Rate: Funnel Conversion Rates determine the quality of users going down the marketing funnel. They’re the clearest way to understand the full customer journey and help optimize your strategies at each stage.  
• CPM: Cost-per-mille and its sister KPI, eCPM, are usually associated with the buy side, referring to the cost of ad impressions. However, when it comes to monetization, they’re important because they help app business owners determine how much revenue they’ll generate for ad impressions sold. 
• Session length: Exactly what it sounds like, session length measures the amount of time users spend engaging with your app. Longer session lengths indicate that users enjoy an app or find it useful – a great reason for brands to buy advertising there.

As the mobile app market continues to grow, launching a successful app requires more strategic thinking than ever. If you’re trying to maximize revenue and grow your user base, you probably can’t rely on traditional tactics alone. Advanced monetization strategies are required to appeal to high-value users and to learn from those less inclined to spend. 

Optimizing user experience and harnessing the data collected from them creates a cycle of growth that will keep your app ahead of the pack. Here are a few trends that will continue to gain popularity:

• IAPs and IAAs will become more integrated
• Premium apps will integrate ad-serving technology to broaden their monetization strategy with additional revenue streams
• Subscriptions will remain a viable option
• Hybrid monetization will be the standard
• Meta layer monetization will add new revenue streams 
• VR/AR will open up a whole new revenue stream and opportunities

A strong mobile app monetization strategy, which is likely to include hybridization, creates a flywheel of growth that contributes to the mobile app ecosystem as a whole – and ultimately helps your own apps become even more successful. 

Mobile app monetization can feel daunting, but even small changes to how you interact with your users can help grow your app’s revenue and user base. Finding the right approach will take time and resources, but getting it right is worth it, and you’ll see the difference add up.