Balancing App Monetization With the User Experience

Developers today need to understand that consumers are finicky, and they must delicately balance the user experience with a monetization strategy so that both company and user win.

Application developers today enter the mobile arena with the hopes of creating the next Clash of Clans, Angry Birds, WhatsApp or even Yo!. But just because they have a great idea for the next game, messenger or fitness app doesn’t mean that success is guaranteed. Developers today need to understand that consumers are finicky, and they must delicately balance the user experience with a monetization strategy so that both company and user win.

While the app economy is hyper competitive, with large developers fighting to increase their share of app revenues, there is a tremendous opportunity for middle-market developers to carve out their piece of the pie. Be it from paid downloads, ad networks and/or in-app purchases, developers must carefully consider the best business model that will cultivate loyalty and long-term customer retention for their apps (then let those dollars keep rolling in).

To that, there are multiple business models that developers must consider (more on these in a minute):

  • Completely free with in-app advertising
  • Freemium/free download with in-app purchases
  • Subscriptions
  • Paid apps

As such, the developer must choose its business model carefully so that UX considerations and revenue generation can be aligned; and knowing when it’s time to pivot and adjust the business model is also critical to lasting success. Projecting where revenue is going to come from is paramount to creating long-term and successful apps.

To choose the business model, developers must consider key factors, including:

  • What category does the app fit in and how are competitors monetizing? It’s not just knowing what category the app fits in, but also as important is its subcategory. Understanding what models work for established and successful apps provides a hint to the best method to use.
  • What is unique about the app versus competitors? How does the app differ from others in its category and, as such, is there a reason to copy or differentiate from what they’re doing from a design perspective?
  • What features would consumers pay for? Some features are ubiquitous across all apps within a category. If those features are already considered table stakes to compete, creating new, unique features can entice a user to lay down their cash.
  • What is the timetable for generating revenue? If the app is well-funded, then the developer may be able to wait longer to generate money. However, developers that work on tighter budgets may need to monetize quicker to support operations and growth. Paid user acquisition and offering in-app enticements to download and use an app can be effective ways of acquiring downloads and moving up app store charts. Developers must understand that the lifetime value of these customers and balancing that with acquisition costs is critical to knowing if this is viable.

Those are a lot of factors to consider, each with their own set of considerations. Your sweat equity and potential livelihood are on the line. If you’re reading this, you’re probably vacillating with the No. 1 question: What is my go-to-market strategy? With that in mind, let’s take a look at the four most popular business models for launching an app and weigh the pros and cons of each:

Completely free with in-app advertising

In this model, consumers can download the app at no cost and play the game without ever spending a dime. The goal with strategy is to quickly generate downloads and then gather information on the users so that publishers pay to insert targeted ads in your app. The longer they play, the more ads they see, and the more money the developer makes. This is why a stellar UX is crucial for apps utilizing this model.