Trends Shaping Mobile App Monetisation
Covid-19 accelerated the pace of mobile adoption in India. Mobile emerged as the primary screen for connected consumers of India. With a majority of people confined to their homes, people interacted with mobile apps like never before. The increase in phone time ultimately resulted in the growth of ad placements by 70%. The rise in ad placements is a testimonial to the fact that an increasing number of marketers/advertisers are using mobile advertising to reach a younger target audience.
The global mobile application market size is projected to reach $407.31 billion by 2026. In a market where 1000 plus apps are developed every day, app monetization seems to be getting diverse and intense. Mobile apps can prove to be a huge opportunity for app publishers if they have the appropriate monetization strategy. Let’s have a look at the trends which stood out in 2020 and the ones that will shine in the times ahead.
Mobile app monetization trends - 2020
For 2020, one of the biggest app monetization trends was in-app advertising.
In-app advertising is the placement of suitable ads inside your app and is one of the most prevalent and sought-after ways of advertising. According to Statista, mobile ad spending amounted to $190 billion in 2019 – and that figure is expected to increase to more than $280 billion by 2022.
A key to in-app advertising is to figure out the right ad format to engage with the target audience. Many traditional in-app advertising options, including pop-ups, banners, or certain types of ads can obstruct the user experience. Native ads get a top spot in the list of ad formats that balance user experience and ad real estate. Since native ads match the look and feel of the format they are placed in, it is observed that consumers look at native ads 52% more frequently than banner ads. We have seen that with the seamless integration of native ads in gaming apps, there has been an increase of 20-40% overall ad revenue.
While in-app advertising largely remained the most preferred strategy for app monetization, it certainly was not the only one.
The Freemium model was also seen as a popular monetization strategy. The freemium model allows the user to download and use the basic functions of a mobile app for free and pay for premium features. While offering a freemium service, the app publisher can show value to the user and convince them that the app is worth their money. Spotify is a well-known example of the freemium model. Anybody can download Spotify and start listening to music with intermittent ads but their premium ad-free service must be paid for monthly.
Similar to the freemium model, paid subscription monetization strategies also registered growth. Subscription apps require users to sign up for a subscription to gain full access to app features and involves the periodic purchase of some content which can vary from eBooks to audiobooks, films, and videos. Subscription strategies have worked best for content-driven apps where users can choose the best permutation of cost and content that suits them. The most successful example of this monetization strategy is Netflix, which offers multiple streaming plans at different costs.
In-app purchases as a monetization strategy remained extremely popular with gaming apps, In-app purchases allow the user to experience the basic functionality of the app, but additionally involve ‘virtual’ sale of goods and services inside the app. 95% of all the Google Play Store apps are free and rely on monetization methods like in-app purchases to generate revenue. Social media app Reddit successfully created an in-app currency called
Reddit Coins, a virtual good you can use to award exemplary posts or comments.
Future trends in mobile app monetization:
In 2021, mobile will continue to be the preferred screen choice and there’ll be an increased focus by brands to shift to this touchpoint. With brands eyeing the opportunity, the onus will now be on publishers to create engaging apps, enhance user experience and explore the untapped potential of the app ecosystem.
Immersive technologies like AR ads will help create interactive and life-like ads with the use of real-time information in the form of text, graphics, audio, and other virtual enhancements. An example of successfully generating revenue with AR advertising is IKEA Place. This is a free app from IKEA that allows users to superimpose IKEA products into their household, giving users more confidence in their purchases before arrival.
Sponsorship as a monetizing strategy will also further evolve as a trend. It involves a partnership with brands/advertisers and requires users to complete certain in-app actions. Sponsorship-based monetization strategy provides the added benefit that it encourages users to continue using the app in return for rewards.
The coming year will also see an increase in low/no inventory apps that create a marketplace for goods/products/services. In this case, the app serves as a mediator between two parties: vendor and buyer. The app transacts payments and charges commission for provided services which can be paid by the vendor, by the buyer, or by both. For instance, Airbnb. Similar to the monetization of the marketplace apps, the payment apps will also witness new iterations of the
‘Buy Now Pay Later’
apps, that monetize through retailers.
With the increasing consumer willingness to pay for an app with better UX, it is imperative to understand that the best monetization strategy for any app is the one that keeps user experience a top priority. While in-app advertising largely remains the most popular monetization tool, publishers should try out different monetizing formats, do A/B tests and monitor data metrics to achieve maximum ROI on any monetization technique.
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