The Mobile App Monetization

Great Mobile App

The app is a killer; the users want it; the pool of potential users is massive; the mobile app industry is ascending; and, now is the time to generate real revenue. As discussed in Monetize a Mobile App - The Problem, the odds are stacked against a mobile app’s financial success. This is due to a combination of a less-than-ideal monetization technique and a lack of harmony between the monetization technique and the actual app. Having covered the lack of harmony a bit, we’ll discuss a monetization technique that is simply glowing with potential. Its implementation can even increase harmony within the mobile app.

This technique is the subscription.

The auto-renewing subscription is a revenue model that will ensure revenue is measurable and sustainable for non-retail or otherwise self-earning apps. Users pay a fee, over and over, for an extended period of time. Meaning, each user has the potential to provide regular revenue.

A quick and random example just to illustrate the continuing value of users:

Month 1:

The app gains 1000 users, and 400 of them subscribe to the content at $2.99 per month. This produces a gross revenue of roughly $1200.

Month 2:

The app retains 500 of last month’s users and 250 subscribers. It also gains 3000 new users and 1500 subscribers. Subscribers from the first month have now generated nearly $2000 in the first two months. The gross revenue for Month 2 is about $5200, and the total earnings are at about $7200.

Month 3:

The app retains 450 of Month 1’s users and keeps the 250 subscribers. 1500 of Month 2’s users are retained and 1000 subscribers. In addition to the retention, 10,000 new users and 6000 new subscribers are acquired. Month 1 users have now generated about $2700. Month 2 users have generated about $7500. The total gross revenue for Month 3 is about $25,500. Total earnings are now at $32,700.

This example is fully random and only intended to illustrate the point, which is the following: keeping older users on the books while gaining new users is a magical formula.

Here is subscription documentation from Apple and Google - worth a look.

In describing mobile app subscriptions as a revenue model, we are also showing why they are an awesome monetization technique.

There are a few other significant reasons to implement a subscription model to drive revenue.

First, because users are paying every period for a product in an app, it increases the likelihood that it will be used. User retention and regular use are critical to the success of an app, and a subscription literally drives retention, use, and revenue.

Second, though it may feel a little funny, people often forget or ignore recurring fees that are small. Meaning, a number of subscribers will be retained simply because it is too much trouble to unsubscribe. Sure, it might not feel right, but many of us can find examples of this truth in our own bank statements.

Third, in assessing a mobile app from a business standpoint, we look at the value per user. This factors (among other things) the earnings from each user in addition to the earnings of each user the original user brings to the app. If a subscriber brings five friends into the app as subscribers, and each of those friends bring three more, the value per user will go through the roof. This is especially true due to the fact that the friends were not acquired from paid ads; they were free. We’ll elaborate on this idea in another post. A subscription’s chief contribution to the value of a user is in the monstrous earning potential over their live on the app.

Subscriptions as a monetization technique are probably seeming like an attractive option, but there are some challenges. Let’s run through some of the more immediate of them.

How does an app actually get a user to subscribe for access to content?

The first choice is to on-board users directly into a free trial. When users get used to the full-featured app, they will feel the loss if the trial lapses. Then, the small periodic fee won’t seem like such a big deal - maybe even a great value!

The next idea is to give a faint but highly attractive glimpse of the content that is behind the paywall. There will likely be content that is fully accessible, but it just isn’t quite enough. Without killing the user experience for free users, it is worth exploring an way to point them to the subscription so they can feel the potential value.

What are some ideas for retaining subscribers?

This one really revolves around a single concept: high-quality, new content. Users may not feel good about paying this month’s fee for last month’s content. The point is that the value should either stay the same or increase from period to period. As the value increases, the subscribers will increase.

What is the right cost for a subscription?

Going back the the last statement in the previous question, price is a factor in the value to subscriber dance. Looking at comparable apps is helpful for a starting point, but it’s important to be flexible and experiment. There is an equilibrium price for the value that will maximize revenue. Get it out into users’ hands, study the result, adapt, and find equilibrium.

Of the millions of mobile apps between the App Store and Google Play, very few are enjoying a reasonable piece of pie in the industry. To avoid an app being a crumb on the plate, marry the monetization technique to the app at an early stage, and choose the ideal revenue vehicle. Develop, maintain, and grow a consistent earner by considering subscriptions as a monetization technique.