App Monetization Models – How to Make Money From Mobile Apps

Did you know that 98% of apps fail to make money? The secret to success lies in choosing the right monetization strategy. By 2025, the mobile app industry is projected to witness substantial growth, with total revenue expected to surpass $613 billion across various segments. App monetization is one of the most prioritized revenue-generating strategies, catalyzing the bedrock for repeat and lucrative business growth for organizations.

With mobile app downloads surpassing 299 billion in 2024, the market is booming. It is clearly an indication of the tremendous viability of mobile apps in helping businesses skyrocket their growth in revenue generation. However, what really matters is identifying your app monetization strategy proactively before considering building an app. Having well-defined app monetization models in place will help you justify your time and money prudently.

What Defines Mobile App Monetization?

It is a process of building revenue growth to support your mobile app. You can involve different app monetization methods to create diversified revenue streams, based on your product’s vertical and target audiences, as well as mapping your user journey.

App monetization doesn’t mean frustrating app users through hard-hitting campaigns and invasive ads. It would be counterproductive, in terms of leading to poor brand reputation and surge in churned users. Therefore, having the right app monetization strategies in place trumps everything when it comes to making money from your apps.

Does Business App Automatically Generate Revenue?

No. That’s highly unlikely. Just because you have created an app doesn’t mean it will generate revenue streams automatically. It’s like starting a new business and believing it would drive financial growth, automatically. Creating an app doesn’t guarantee revenue unless you have a rock-solid monetization strategy.

Here’s what you need to do:

• Identify your target users and pain points
• Choose the right monetization model
• Optimize user experience to drive conversions
• Leverage data analytics to refine your strategy

What Does App Monetization Need?

Well, it requires a rock-solid app monetization strategy, just like what top app development companies adopt in mobile app development or other businesses. Without strategies or models, you won’t leverage your app lucratively, even if you’re aiming to create some of the best apps to make money.

Apps generally make money on models like in-app purchases, advertising, sponsorships, and affiliate links. Now, the dependence on ads or affiliate programs to make money from your apps steps in if you are selling a product, service, or subscriptions. These methods can also help you make money from your apps if they are downloadable free of cost. However, increasing downloads on your apps doesn’t always translate into monetary gains, , especially when you’re focusing on the best apps to make money. Building an app is quite a herculean and expensive task, let alone the hidden development costs (India), in terms of app design, quality assurance, functional services, etc. that you come across in the process. Therefore, ensure that your new mobile app would generate money before you spend a fortune on its development.

Best App Monetization Models to Generate Money Through Mobile Apps

1: In-App Purchase Model

In-app purchase is one of the most intelligent app monetization models that can even help you boost the user experience on your mobile app. You can classify it into consumable and non-consumable models. The first model means limited purchases, such as Pokemon GO. It is a leading AR-based mobile app-game in which users are allowed to purchase Premium items using in—game currency, like PokéCoins, which, in this context is a consumable in-purchase.

On the other hand, non-consumable in-app purchases require a one-time purchase that comes equipped with many features, including upgrades to remove in-app ads. Stay updated with app development trends for the latest insights into these strategies.

Popular Example: Pokémon GO lets users buy PokéCoins to purchase in-game items.

Pros:

• High revenue potential as users willingly pay for extra features.
• Enhances user engagement by offering exciting upgrades.
• Works well for gaming, entertainment, and productivity apps that benefit from additional features.

Cons:

• Requires seamless payment setup to avoid frustrating users.
• Might alienate users if purchases are too aggressive or impact the user experience negatively.
• Can lead to imbalanced gameplay if not implemented fairly, making free users feel disadvantaged.

Tips for Success:

• Ensure secure and hassle-free transactions to build trust.
• Offer special discounts or limited-time offers to boost in-app purchases.
• Provide multiple purchase options, such as small, medium, and large bundles, to cater to different budgets.

This is one of the most profitable strategies, especially for gaming and entertainment apps. It allows users to purchase premium content, virtual currency, or extra features.

2: Freemium Subscription Model

Spotify is arguably the best example of the freemium subscription model. Developed in Sweden, the music app was introduced as a pay-per-song model of iTunes. In the freemium monetization model, users download a free app and later are offered in-app purchases so that they can access many premium features, content, or digital goods. Report suggests that freemium apps drive average conversion rates of 2-5%, hence being one of the best models to generate revenue from your mobile app.

Popular Example: Spotify and Dropbox

Pros:

• This model attracts a large user base since the app is free to download, increasing the chances of conversions.
• Encourages users to upgrade by offering valuable premium features that enhance the user experience.
• Works well for SaaS, music streaming, and productivity apps, ensuring long-term scalability.
• Allows businesses to demonstrate value before asking users to commit to a payment.

Cons:

• Conversion rates from free to paid users are typically low (around 2-5%), requiring strong engagement strategies.
• The cost of acquiring and supporting free users can be high, making profitability challenging.
• Some users may never convert to paying customers and may solely use the free version, limiting revenue potential.
• Requires continuous improvements and feature rollouts to maintain user interest and encourage upgrades.

Tips for Success:

• Use personalized marketing and in-app prompts to encourage upgrades.
• Offer time-limited premium trials to showcase the value of paid features.
• Leverage exclusive content or VIP perks to create a strong incentive for users to upgrade.

In this model, users get a free app but must pay for premium features.

3: Subscription Monetization Models

Consider using both freemium and premium subscription app monetization models to drive stable revenue streams from your applications. This model provides a steady revenue stream through monthly or yearly payments. It’s popular among news, streaming, and SaaS apps. Businesses benefit from a predictable income stream, while users gain continuous access to valuable content or features.

Popular Example: Netflix generates billions via monthly subscriptions.

Pros:

• Provides a predictable and recurring revenue stream, ensuring financial stability.
• Users are more committed, increasing engagement and retention rates.
• Tiered pricing structures can attract different user segments based on affordability and needs.
• Encourages long-term customer relationships, leading to higher lifetime value.

Cons:

• High competition, as users have numerous subscription options available.
• Requires continuous delivery of valuable and exclusive content to retain users and justify recurring payments.
• Churn rate can be a challenge, with users canceling subscriptions if they don’t find enough value.
• Potential difficulty in acquiring new users if they are hesitant to commit to ongoing payments.

Tips for Success:

• Offer free trials or limited-time discounts to encourage users to subscribe.
• Implement personalized recommendations and exclusive perks to keep users engaged.
• Provide multiple subscription tiers to cater to different budget levels and user needs.

4: Premium Subscription Model

Premium or paid mobile applications require users’ sign-up for a fixed payment right upon download. In other words, revenues on paid apps are generated based on the number of downloads of these apps. The premium applications also drive higher user engagement and customer acquisition.

Popular Example: Nova Launcher and Facetune, which provide premium experiences users are willing to pay for.

Pros:

• Instant revenue per download, ensuring upfront earnings.
• Attracts serious users who value quality and commitment to the app.
• No dependency on ads or in-app purchases, leading to a cleaner user experience.
• Works best for highly specialized apps with a dedicated target audience.

Cons:

• Users often hesitate to pay upfront without experiencing the app first.
• Requires strong marketing and brand trust to justify the price.
• Harder to generate continuous revenue compared to subscriptions or freemium models.
• Once purchased, limited opportunities for additional monetization unless offering upgrades or add-ons.

Tips for Success:

• Offer a free trial or a lite version to entice users before they commit to a purchase.
• Focus on clear value propositions, highlighting why your app is worth paying for.
• Leverage positive user reviews and testimonials to build credibility.
• Keep the app regularly updated with new features and improvements to maintain user satisfaction. Users pay a one-time fee to download your app. Works best for niche and high-value apps like productivity tools.

5: In-App Advertising Monetization Model

If you want to make money from your mobile apps, this is one of the easiest app monetization models you can follow. Once a developed app is about to be launched, decide if the app features ads. Based on the impressions on ads or number of times they are clicked, or the type of ads being shown will ultimately determine revenue generation on your mobile apps for your business.

Popular Example: Facebook, Instagram, YouTube and TikTok

Pros:

• No cost barrier for users, making it easier to attract and retain a large audience.
• Works well for high-traffic apps, generating significant revenue through impressions and clicks.
• Provides multiple ad formats, such as banner ads, native ads, interstitial ads, and rewarded video ads, catering to different engagement levels.
• Can be combined with other monetization models to maximize revenue streams.

Cons:

• Excessive ads can negatively impact user experience, leading to decreased engagement and retention.
• Ad blockers can reduce revenue, as users may opt to remove ads entirely.
• Requires a large user base to generate meaningful earnings, making it less viable for niche apps.
• Some users may prefer ad-free experiences, which may require offering a premium, paid version.

Tips for Success:

• Optimize ad placements to minimize disruption while maintaining engagement.
• Use rewarded ads to encourage voluntary interaction while enhancing user satisfaction.
• Leverage programmatic advertising to display relevant, high-quality ads that match user interests.
• Monitor ad performance analytics to refine strategies and maximize revenue without harming the user experience.

Types of In-App Ads:

• Banner Ads (Static ads at the top or bottom)
• Native Ads (Blend into the content)
• Interstitial Ads (Full-screen ads)
• Rewarded Video Ads (Users get rewards for watching ads)

How to Choose the Right App Monetization Model?

Selecting the most effective monetization strategy depends on various factors, including your app’s category, user behavior, and revenue goals. While some models work well for gaming apps, others are better suited for productivity or streaming services.

To maximize revenue without compromising user experience, consider these key aspects:

• User Intent: Are your users willing to pay for premium features, or do they prefer free content with ads?
• Engagement Level: High-engagement apps may benefit from in-app purchases, while content-driven apps might thrive with subscriptions.
• Market Competition: Assess competitors’ monetization strategies to understand what works best in your niche.
• Scalability: Choose a model that allows for revenue growth as your user base expands.

Pro Tip: The most successful apps combine multiple monetization models to create diverse revenue streams. For example, a gaming app may use in-app purchases alongside rewarded ads, while a SaaS app can offer a freemium model with an option for subscriptions.

Also Read: App Development Success Stories and Estimated Cost

Closing Statements

App monetization, if strategized wisely, can churn out great revenue streams for your business. The significance of having a rock-solid strategy for monetizing your app is that it gives a right direction to how to make money from apps.

We have covered some most fundamental aspects for generating revenue from mobile apps. However, we also recommend hiring a mobile app development company so that you can have a futuristic app that you can monetize later for your business benefits. Hiring a reputable software development company has its upsides. For example, you get high-quality products that cost-efficiently serve your business purpose. Besides, you have the opportunity to work with top minds in the field of mobile app development.