2 and a Half Approaches to Monetizing Free Mobile Apps
App developers are becoming business persons first and app developers second. The very foundations of app development must have monetization baked in or failure is rather imminent. But, with dynamically shifting mobile monetization, how do developers choose which way to monetize free mobile apps besides in-app purchases?
Top mobile app developers have refined advertisements to seamlessly fit in with the user experience. There’s no wonder why they’ve done this – in-app native display ads generated 13.6 billion in 2015. Developers can go beyond simple native display ads, but this makes it tricky to nail down how to use ads in a way that will generate revenue while creating a solid user experience.
With display, banner, video, offerwalls, native, and playable ads, the options are endless on how developers will intertwine this mobile monetization model into their apps. Color Switch uses both banner ads, forced video ads, and rewarded video ads in their app to offer more impression opportunities while providing a decent game play experience. Not only are they generating revenue from their ads, their most popular in-app purchase is removing ads for $2.99. They’re able to generate revenue both by showing and not showing ads. Well played, Color Switch.
It’s much harder to implement advertisements in non-gaming apps in a strategic and non alienating way. After downloading about fifty top apps from different categories, I discovered Scanner for Me using banner ads and Playbuzz utilizing native ads within their news feed. There is definitely money to be made in adding advertisements to your app – but be sure not to sacrifice quality for quantity.
Color Switch uses a combination of rewarded video and native display ads as a great way to monetize free mobile apps.
This might be deemed the 2016 holy grail of mobile app monetization. Apple stated in early 2016 that they would change the revenue share with subscription based apps from 70/30 to 85/15 if the customer renews for a second year. Typical mobile churn rates can be challenging, but subscriptions both increase LTV and motivate developers to create new and engaging features to get them to stick around. Apps that use subscriptions are said to earn 2-3 times more per user than paid apps and 50% more per user than microtransaction based apps – so it’s no wonder why so many developers are switching to this model.
Apps in every category seem to be taking advantage of this trend. One of our clients, Red Rock Apps, switched to subscription-based monetization in 2015 immediately and have been able to grow revenue 40x since since starting with us. Other apps like Headspace and TheSkimm are also taking advantage of auto renew subscriptions ranging anywhere from $2.99 to $12.99 for monthly subscriptions. Netflix, known for subscriptions, hit the #1 Top Grossing app on the US App Store in 2016 by generating an estimated $2.9 million off their iOS app alone. Subscriptions are a highly viable way to monetize free mobile apps in most app store categories.
1/2. Super Mario Run
We’re all aware of Super Mario Run, right? If you aren’t, you probably don’t have a smartphone and I’m not really sure why you started reading this article. But, you might not know that this way of monetizing is called “free to download” and, as far as I know, Super Mario Run is the first mobile app to take on this model of allowing users to play a few levels and be forced to purchase to continue playing.
Super Mario Run features a 2.1 universal rating, which suggests users don’t like the “free to download” model as a way to monetize free mobile apps.
What the ecosystem learned from Super Mario Run is that users will respond adversely to this monetization model. Super Mario Run features a 2.1 universal rating on iOS with three times as many one star reviews than five stars.
Out of the 90 million downloads they’ve made an estimated $30 million – which represents a 3.5% conversion rate. This is disappointingly average for the free-to-play industry – but Super Mario Run has no ongoing sources of revenue unlike microtransaction based mobile games. They knew this going into it, and are really betting on the longtail play of increasing Nintendo Switch and other Mario game sales.
It’s not a half for no reason – it really isn’t a viable option for most mobile app developers to consider especially if they don’t have a ton of brand awareness and IP backing the product. We suggest switching to the most obvious way to monetize free mobile apps – in-app purchases – if you’re planning on a freemium model.
The key to picking how to monetize free mobile apps is knowing what will work in your category and app niche. Subscriptions aren’t for every mobile app and neither are in-app purchases or advertisements. Free to download – well, that’s just not meant for any mobile app.