With the recent global technology boom, there has been a rapid increase in the number of apps and startups coming up each day. One common issue start-up founders or app developers face is how to make money from their app or website.
Generating revenue is one of the most important parts of running a tech start up. It’s what pays for the servers, lights and salaries but sadly most founders don’t know the best model to generate revenue. Below is a list of popular app monetization models and the types of products they work best with:
This is probably the most popular app monetization model around. It involves displaying adverts to your users in form of texts, links, photos, videos and many more. The 2 major ways to leverage on the ad model include making use of existing ad partners like Facebook audience network, Ad mob, Ad colony e.t.c to get advert content for your app or building your own ad management system. The ad model works well with most mobile or tech products but is most effective when used on products that have a high number of Daily Active users (DAU). To get higher impression rtes or cost per thousand views (CPM), some apps force users (usually free users) to view an ad for a short period of time before they can skip it.
Note: When using this model, it’s always best to design your ads in a way that it blends with the general layout or flow of the app. This is so it doesn’t ruin the user experience.
This is a model where basic or limited services are provided free of charge to users while more advanced features must be paid for. It is a very common monetization model and seems to be an industry favourite. Some products provide as many as 5 plans where the number of advanced features is based on the amount the user pays. This model also helps identify and generate revenue from your power users.
Note: This model is advisable when the amount of money generated from at least 5% (global average of app users who pay for services) of total users is enough to cover operation costs.
3. One time fee
This monetization model involves charging a one-off fee for users to have access to your product. This one-off fee is usually paid at point of download or after a trial period.This model used to be quite popular but has been slowly moved aside by the ad and subscription models. This is because it limits the revenue you can generate from a customer’s life time usage of your product. This model is best for products where you don’t have recurring costs as a result of customer’s usage. Some popular products that use this model include Adobe CS6 and some versions of Microsoft’s Office package.
Note: When using this model, it is best to make the payment process quick and easy.
4. Subscription model
The subscription model is one of the most popular models around. It involves charging users a certain amount from time to time (monthly, annually e.t.c) to use your product.
Note: It is most effective when you use a payment service that can automatically debit the user’s card or bank account. However, I advise sending a notice to the user up to a week before renewing his or her subscription. You don’t want angry customers…
5. In app purchases
This model is not popular with African apps but can be quite effective when implemented properly, especially with gaming apps. It involves the sale of virtual or physical goods to users on the app. The goods for sale can range from things like extra life or power ups in games to branded t-shirts.
Note:For this model, timing is very important. The user should be prompted to make a purchase at the point they seem to need it the most. E.g prompting the user to pay for 5 extra lives in a game after they just lost.
6. Convenience fee
It is the most obvious model choice for fintech products but can also be used in other kinds of products through the in app purchase model. The model allows you make a certain fixed amount or percentage off purchases made through or on your app/website.
Note: This model can be paired with the ads and in-app purchase model (When you don’t own the goods being sold) to generate revenue.
This unconventional model involves asking for donations from users. It is popular with some open source software and free blogs. Users are urged to donate (optional) to keep the service free. This model is best used when you have a major source of income and are just looking to generate additional revenue from your app/website.
Note: To get the best out of this model I suggest making payments very easy and also placing the donation link/button in pages with the highest traffic or activity.
Having a monetization plan is essential for every profit driven business and it is important to have a well defined strategy from the beginning. However, don’t be afraid to change or combine models when it seems like your current model isn’t effective just make sure your decision is driven by valid data.
Not so fun fact: Apple currently takes a transaction fee of 30% off all in-app payments made on an ios device. Goodluck with that…