In-app purchases (IAP) vs ads vs subscriptions. Monetization in mobile apps.

In-app purchases (IAP) vs ads vs subscriptions. Monetization in mobile apps.

Monetization

In today’s mobile app world, apps are usually free. Is it good? I don’t think so, but that’s another topic and users already used to free apps so… if you want to stay competitive, you usually have to make your app free as well.
Now, there is a problem:

How to earn money from apps?

Well, you have few options: in-app purchases, ads and subscriptions. It’s a common question and the answer isn’t really that difficult to find.

Well, I usually say: use ads and ‚something’ (IAP + ads or subscription + ads), but let’s go into details. You should ask yourself a few questions first:

  • What’s your target user? Is it a casual gamer? Entrepreneur? Or maybe a student?
  • What’s the duration of the average session? – daily user engagement
  • How good is retention in your app?
  • How often users use your app. Daily? Or maybe 2 times per month?

Make your decision

Choose in-app purchases if:
  • Your target users have money and are willing to spend it
  • Long term retention is rather high (not necessary, it depends on the app)
  • You have many features to offer
Choose ads if:
  • Users often open the app
  • Users engage with your app, spending a lot of time using it
Choose a subscription model if:
  • Your app can offer fresh content regularly
  • User retention is high
  • The app is high quality

Remember that people don’t like to pay for a subscription and then discover that they still haven’t access to every area of the app. Maybe games are exceptions here… but I would be careful with that. What I mean – be careful mixing IAP and subscriptions. 

Many statistics show that subscriptions and IAP are often the best in terms of revenue. Ads aren’t working in every app. Users have to see many ads if you want to generate some revenue. On the other hand, the good thing with ads is that they are usually easy to implement and users are already used to them, so ads usually don’t affect user retention. 

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