5 Mobile App Monetization Models That Work for Startups

In today’s competitive mobile app market, selecting the right monetization strategy can be the difference between success and failure for startups.

With over $935 billion in revenue expected from mobile apps by 2025 (Statista, 2023), startups must tap into proven models to generate income while providing value to users.

This article explores five effective mobile app monetization models tailored for startups.

1. Freemium Model

What is this?

There is a freemium version of the app that comes in free basic form but charges for more advanced features or premium content or additional functionality.

How It Works for Startups:

Free mass access encourages conversion of a small percentage of users into paid customers.

Examples:

Spotify: Ad-supported streaming for free users with an ad-free and offline channel for premium.

Best Practices:

Hook users with good free features. Shine a light on the benefits of the premium upgrade.

2. In-App Purchases (IAPs)

What Is It?

This is the in-app purchase, wherein users can purchase virtual goods, subscriptions, or extra content inside the app.

Why It Works for Startups:

Flexibility for users to pay just for what they want.

The user base's growing audience is what scales the revenue.

Examples:

Candy Crush: Extra lives or boosters bought by players.

Best Practices:

Set reasonable prices to encourage repeated purchases.

In-app purchases should help the user experience and not hinder it.

3. Subscription Model

What is it?

Users pay a subscription fee of either monthly or annual access to premium features or content.

How It Works for Startups:

Predictable, recurring revenue. Develop long-term relationships with customers.

Examples:

Netflix - Subscribers subscribe to get access to contents streamed exclusively for them. Best Practices:

Have multiple offering price points for a subscription like basic, advance, or pro levels to meet the diverse consumer need. Offer free trials.

4. Advertising Model

What Is It?

The advertising model involves displaying ads to users and generating revenue based on impressions, clicks, or installs. The key advantage of this model is that it allows users to access the app for free while generating income through advertisements.

Why It Works for Startups:

Free app access: By using ads as a revenue stream, users can access the app without having to pay upfront, which attracts a larger audience.

Scalable with growth: The more users the app has, the more ad revenue it can generate, making this model scalable as the user base expands.

Examples:

Instagram: Generates revenue through sponsored posts and ads integrated into the platform.

YouTube: Displays ads before or during videos, earning revenue based on user views or clicks.

Best Practices:

Avoid intrusive ads: Ensure ads do not disrupt the user experience or become a hindrance to engagement.

Target ads effectively: Use demographic data and user preferences to display more relevant ads for better engagement.

Provide ad-free options: Offer users the option to pay a small fee to remove ads for an enhanced experience.

5. Affiliate Marketing

What Is It?

Affiliate marketing allows apps to earn a commission by promoting third-party products or services within the app. This can include recommending products, sharing affiliate links, or promoting special offers.

Why It Works for Startups:

Indirect monetization: The affiliate model generates revenue without directly charging users, making it more user-friendly.

Leveraging partnerships: By collaborating with other businesses, startups can gain access to new revenue streams and expand their network.

No inventory or fulfillment: Startups don’t need to handle inventory or logistics, as affiliate marketing is purely based on commissions.

Examples:

Fitness apps: Promote partner brands’ supplements, fitness equipment, or apparel.

Travel apps: Recommend affiliate links for hotel bookings, flights, or car rentals.

Best Practices:

Choose relevant affiliates: Partner with brands that align with your app’s niche and user base to ensure higher conversion rates.

Be transparent with users: Clearly disclose affiliate relationships to users to maintain trust and transparency.

Incorporate product recommendations naturally: Integrate affiliate products in a way that enhances the user experience, not disrupts it.

Final Thoughts

Choosing the right monetization model depends on your app’s target audience, value proposition, and market positioning. Startups should test and adapt these strategies to find the perfect fit.

By implementing effective monetization models, startups can ensure sustainable growth and profitability.

Ready to monetize your app idea? Explore custom mobile app development for startups to build a revenue-generating app today.