App monetization: Ad-supported vs. freemium vs. one-off purchases

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Your app monetization approach is one of the most important decisions for app developers. This article covers some of the most popular approaches to monetize apps.

Freemium: Combining free and premium

The freemium business model is one of the most common approaches to monetize apps. It includes giving your product away for free but having some features restricted to paying users. The premium features may include some more advanced options, content to make a game easier or more personalized (e.g., ‘skins’ for your in-game characters), or the ability to remove ads or nag-screens encouraging you to upgrade.

There can be big variations between how feature-rich the free and upgraded apps are. Some apps are almost entirely feature-rich – allowing large uptake in the apps by a majority of users who do not pay for the item. Other apps are much more restricted – only having some of the most basic features available, but requiring a payment for the majority of functions. In such cases, the freemium model may be more intended as a trial, and not intended to be used without payment. In the case of more feature-rich offerings, the developers may be fine with a majority of users using the free offering – potentially needing widespread adoption  (i.e., benefiting from network effects, where the app or game gets better with a large number of users). 

Ad-supported

Another common approach to app monetization is ad-supported. In such cases, the app is almost always given away for free, with the revenue for the developers largely dependent on how many users are using the app, and for how long they use it. The more time that you have users using your app, the greater your ability to make money from the app.

One-off purchase

Another approach to monetizing your app is as a one-off purchase – often a relatively small charge (potentially a dollar or two), although potentially greater for certain more niche apps – particularly office or productivity apps, where users can justify the one-off purchase.

App subscriptions

Another approach to monetizing apps is subscriptions – a recurring payment potentially every month or year. Subscriptions are a common approach for items that include content (e.g., music, television, magazines) – where users are paying for continued access to the content. 

Combining different approaches

It is important to recognize that there is nothing stopping various different monetization approaches from being combined together – potentially offering an ad-supported offering with the option to make a one-off purchase or recurring subscription payment to upgrade to an ad-free version.

Final thoughts: Evaluate competing options

When deciding the approach to take, it is important to evaluate the various options, considering the competition for similar options, and thus the likelihood that customers would be willing to pay for your app or not. The app market space is very competitive – with thousands of developers each competing for downloads – and unless you can offer significantly greater value than free alternatives, it can be difficult attract customers. 

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