Striking the right balance between user experience and monetisation has always been a tricky task for developers. You want to make money, without annoying users with ads or other paid features. Engaged audiences are built on strong content and positive user experiences, so it’s important not to disrupt this with your monetisation strategy.
This post will give you an overview of the monetisation models available – and the pros and cons of each – to help you pick the most effective model for your app.
The Monetisation Models
- Free with in-app advertising
In-app advertising is a source of revenue for the majority of apps these days. The growth of in-app advertising is due to its low barrier to entry. It’s an easy revenue stream to integrate for developers, especially those who aren’t able, or choose not to, invest in building sophisticated freemium products.
In the early days of mobile advertising the focus was very much on impression volume, with publishers trying to show as many ads as possible in order to earn more revenue. However, as the industry has evolved, developers have become more aware of the trade off between impression volume and user experience.
In order to optimise your eCPMs and maximise your revenue, here are some things you should consider:
- Placement. Where you place ads in your user journey is important. They should display at prominent locations, encouraging users to interact with the ad, but they shouldn’t hinder the overall user experience of the product. Balance is key.
- Frequency. How often you show ads throughout your user journey is also crucial. This will vary on the ad unit, but you should definitely consider the effect that the ad frequency has on user experience.
- Content. Content is king these days, so make sure your ads have great content. Your audience are more likely to engage with relevant content, than poorly targeted content which might be perceived as spam. In order to maximise revenue, you may want to blacklist advertisers who show poorly performing ads.
- Ad units. Ad unit innovation has been a hot topic in recent months. Rewarded video ads and native ads have emerged as market leaders for securing higher eCPMs and creating a more user friendly ad experience. Check your analytics, and make sure you focus on ad units that are best received by your audience.
(Examples of mobile native ads across Vinted, The Huffington Post, and Mail Online)
- Free with in-app purchases
In-app purchasing is the freemium business model behind many of the most effective monetisation strategies on the App Store, such as Clash Royale and Game of War. In-app purchases can include virtual goods such as in-game boosts, virtual currency, ad removal or add-ons such as extra lives in a mobile game. This model works best for gaming, retail or service apps.
Virtual goods can lead to deeper levels of engagement because users have invested in the app financially. But if you’re looking to implement this model, transparency is key. Apps haven’t got a good reputation with consumers when it comes to being transparent about their in-app purchases, and struggle to get the right balance between free to play and paid progression.
It’s important that your in-app purchases add real value to users. If they help users advance in the app, it’s likely to create a desire to purchase more and more. The key thing to consider is that your app should be functional without the in-app purchase – add-ons should only enhance/speed up the user journey. A great example of how to strike the right balance is Candy Crush Saga. Around 80% of Candy Crush’s audience get hooked on the game without ever making a purchase. However, those who do make purchases, generate almost $1M in revenue every day.
(Angry Birds lets users purchase in-game currency, also known as ‘Lucky Coins,’ for real money. These Lucky Coins can be used to purchase in-game advances.)
The subscription model commonly focuses on gating access to premium content and features. Users can access a predetermined amount of content for free, but if they want more, they’re prompted to pay a subscription fee. This model is best suited to service-focused or content-heavy apps such as online publications and streaming services.
This model is financially stable because it enables you to earn revenue on a recurring basis, and generally, when users purchase subscriptions, it improves in-app session lengths because they’re loyal, engaged, and financially invested in your app.
With subscriptions, the onus is on the developer to create more content to keep users subscribed and engaged long term, and it can be difficult to determine where and when to place the subscription paywall. You need to decide how much content users should be given for free before having to subscribe. This is key because you want to give users enough content to entice them, but not enough for them to not need to subscribe.
(The subscription based ‘Sweat With Kayla’ app has been in the top 100 grossing apps for 6 months)
In order to get the best out of this model, you should prepare content for your future updates in advance and set up the update schedule for 6 months ahead. This will allow you to offer packages with different subscription periods, show users the clear benefits of buying longer-term subscription packages for your offering.
Choosing the right model
When choosing which model is going to be the best money maker whilst maintaining your user experience, you should consider the following:
- Your Competition. Competitor research should always be a priority. Think about what category your app fits into and how your competitors are monetising. Understanding what model works well for established and successful apps will be a good hint at what’s best. However, if there’s a gap that presents an opportunity, and you can do things differently to accelerate revenue and maintain user experience, then go for it.
- Your App ‘Type’. Certain models lend themselves better to particular types of apps. As mentioned, the subscription model works well for services like music or video streaming, news and entertainment, and other content-heavy apps. If your app isn’t content-heavy and you start charging users a subscription fee, you’ll leave them feeling pretty ripped off. On the other hand, the in-app purchase model is great for free-to-play mobile games and apps centred around products, like retail apps. Users are free to roam the app but if they want to enhance their experience by purchasing extra game lives, they have the option.
- What People Will Pay For. Some features will be inherent across all apps in your category – so don’t monetise those. Choose unique and valuable features that will entice users and improve their user experience – this will be your money maker. Take a step back and think about what will improve the experience for your audience and what they’d be willing to pay for, if anything? For paid apps, users need to understand the value prior to purchase. For free apps, the value proposition needs to be proven through the user experience and usability of the app.
The model you choose is just as important as the app you are building. So, user experience and revenue generation must be aligned. The key is: don’t settle. Make sure you keep testing, experimenting and stay creative. Keeping listening to your users and looking at your data. You must know when to adapt and adjust your model in order to have a successful business.
From our experience, we value user experience first, and revenue second. The reason for this is simple; without users you won’t generate revenue. Maintain loyalty, retain your community, and then you’ll make money.