There are around 6.6 billion smartphone users worldwide. That means that 82% of the world population (8.05 billion) owns a smartphone.

In 2023, it is expected that the annual number of app downloads worldwide will reach 299 billion.

The average Brit checks their phone every 12 minutes throughout the day.

That’s a LOT of people spending a LOT of time on apps.

So how can you capitalise on this and make sure monetise your app in the best way …

Most common ways to monetise an app

1. Paid apps (customer pays for downloading an app)

Charging a fee for app downloads enables you to generate revenue each time someone installs the app. This approach can provide a steady stream of immediate income, especially if you have an existing user base that recognizes and trusts your product.

However, it’s important to note that relying solely on paid app downloads is not feasible for most apps. Many users are hesitant to click the download button when there is a cost involved, and even if they do, there is a higher likelihood that they might uninstall the app shortly afterward.

2. Subscription model/software-as-a-service (customer pays a monthly or yearly fee)

This model is best suited for entertainment and/or cloud-based service providers like Youtube Music, Spotify, Pandora, New York Times, Netflix, Calm, Headspace, etc.

3. Free and freemium apps (basic features are free, customers can pay in-app)

Majority of apps are free/freemium.  Freemium means that your app is free to download and use, but you also offers in-app purchases for those who want to access premium tools/services, or use your app ad-free.

Here are ways you can monetise your free or freemium app:

In-app advertising

In-app advertising is the most popular way to make money from your app.

Advertising is the price users pay to access your app without paying while you (the developer) still get paid.

There are a multitude of different in-app ads that you can have. These are interstitial ads, banner ads, video ads, native ads, text ads, and native ads.

Advertisers use curated information about their audiences to create perfectly targeted ads. You can check out these inbound marketing tips for more on how it’s done.

Data monetisation

If you prefer not to incorporate in-app advertising, exploring data monetisation can be a viable option, particularly if you have a substantial user base.

Every time a user engages with your app, data is generated. By collecting, anonymising, and selling this data to data collectors like advertisers or marketers, you can generate revenue.

Data monetisation is a common practice in various industries and offers a means to monetize your app without inconveniencing your users or compromising the user interface with intrusive ads. Data collectors are often interested in this information as it can provide valuable insights into consumer behavior.

In-app purchases

In-app purchases are simply purchases made inside the app that usually unlock a new feature or give the user some advantage they did not have before. Many people are willing to pay freemium to stop seeing ads.

In-app advertising revenue model is highly considered and found to be profitable.

How much can app developers earn from ads?

The amount of money an app can earn from ads varies significantly and depends on several factors.

To give you a quick ballpark: a small app with only 1000 active users, can make anywhere from $10 up to $200 a day in average revenue from ads.

More stats? The apps in the top 200 on app stores grossed $82,500 a day and those in the top 800 brought in $35,000 a day.

Here are some key factors that can influence how much an app earns from ads:

1. App popularity and user base

Apps with a larger user base typically have a higher potential for ad revenue. The more users an app has, the more ad impressions it can generate, leading to increased earnings.

2. Ad format and placement

The type of ad format used in the app and its placement within the user interface can impact earnings. Ads that are well-integrated and non-intrusive tend to perform better and generate higher revenue.

3. Geographic location

The geographic distribution of an app’s user base can affect ad revenue. Ads served in regions with higher advertiser demand and rates generally result in higher earnings.

4. Ad targeting and user demographics

Advertisers are often willing to pay more for targeted advertising that reaches specific demographics or user segments. Apps that can provide valuable user data for targeted ads may earn more revenue.

5. Ad network and revenue model

The choice of ad network and revenue model can influence earnings. Different ad networks have varying payout rates, and revenue models such as cost per impression (CPM), cost per click (CPC), or cost per action (CPA) can impact earnings.

6. App category

The category of the app can affect ad revenue potential. Certain categories, such as gaming or lifestyle apps, may attract more advertisers and generate higher ad revenue compared to others.

How to choose the best app monetisation strategy for your app?

Choosing the best app monetisation strategy involves considering various factors specific to your app, target audience, and business goals.

Here are some steps to help you select the most suitable monetization strategy:

1. Understand your app and target audience

Begin by thoroughly understanding your app, its purpose, and the needs of your target audience. Consider the nature of your app (e.g., utility, gaming, social), the demographics of your users, and their behavior within the app.

2. Analyse competitor apps

Study similar apps in your niche and analyse their monetisation strategies. Look for successful apps and observe how they monetise effectively. This can provide insights and ideas for your own app.

Look for their pricing structure via in-app purchase, and subscription.

3. Define your main goal (revenue, user acquisition, or retention)

Determine your primary objectives for monetising your app. Identifying your goals will help you align your strategy accordingly.

For example, if your goal is user acquisition then making your ad paid, is not the best strategy. If retention is the goal, it’s best not to bombard users with intrusive ads.

4. Consider the user experience

Prioritise user experience while selecting your monetisation strategy. Intrusive or excessive ads can negatively impact user satisfaction, leading to decreased engagement and retention.

Strike a balance between generating revenue and maintaining a positive user experience.

5. Adapt to user feedback and data

Pay attention to user feedback and reviews regarding your monetization strategy. Address any concerns or complaints promptly and make necessary changes to ensure user satisfaction.

Another huge factor to consider is tracking app metrics and analyzing your user statistics. You need to understand their purchase patterns, average revenue per user, new and returning customers to make sustainable decisions.