How to Choose an Effective Mobile App Monetization Strategy in 2025?

If you're reading this, you want to turn your existing or build-to-be app into a source of income. If you're considering how to master monetizing apps, you're working on your monetization strategy!

Monetization Strategy Definition

Monetization strategy, simply saying, is your holistic approach to how you plan to generate revenue on your app. You need to decide what methods to apply to your product to earn money, and how much users should pay (if anything). The key lies in striking the right balance between delivering value to users and simultaneously generating revenue to sustain and grow your business. Luckily, you can choose from several app monetization models (or blend!).

Importance of Mobile App Monetization Strategy

A well-defined app monetization strategy is crucial for ensuring the business success. A solid plan allows you to invest more in your business's growth, helping you provide value to your users and gain their loyalty. However, prices must be tailored to your users' needs - too low may not sustain your business despite high demand, while too high may discourage people from purchasing.

For startups

If you're building a new digital product, define your app monetization strategy early in the process. This should be a part of your product discovery phase, where you create a thorough business plan and carefully select a business model that aligns with your project's goals. That will better grasp your app development budget and help you estimate your app's potential earnings.

At TeaCode, we suggested additional monetization solutions for Ruff Pass, a brand-new application that helps dog owners discover dog-friendly locations. We suggested growing partnerships to offer special discounts on dog products and extra offers in locations nearby to boost traffic. We incorporated those solutions in the early stage of crafting the design.

For well-established companies

If you already have a solid digital product on the market, you can verify and redefine the approach at least once a year. Analyse how the current strategy works and whether there is room for improvement. For example, you can offer additional in-app purchases for those who don't want to tie up with a subscription and prefer a pay-as-you-go model or better-tailored tiers for your audience.

Working with Intelligent Health, a British public benefit organisation, we extended their monetization possibilities by expanding user management capabilities and developing a solution that allowed external companies to log in, create and manage their street games.

According to Statista, in March 2024, the most commonly used monetization model was in-app advertising, applied to 31% of apps globally (but "only" 25% in the US). 3% of all apps required upfront payment, and 5% leveraged in-app billing. In January 2025, over 95% of apps on Google Play and Apple Store were offered to download for free (Statista).

These statistics highlight app owners' diverse approaches to balancing free access to their apps and generating revenue through alternative means. Let's now discuss the various options you have!

In-App Purchases Model (IAP)

You can consider offering In-App Purchases (IAP, also called a paid app monetization model) model which allows app creators to make free applications and generate revenue by offering additional features or services for a fee (virtual items, services, and bonuses within the app). In-app purchases can be divided into "In-Store Money" and "Out-of-Store Money".

In-Store Money

In-store money purchase is when people buy things in the app using a store like the Apple Store or Google Play Store. For example, imagine you're playing a popular mobile game like "Fancy Farm Adventure." In the game, you can buy special gems that help you unlock new characters, power-ups, and levels faster. These gems cost real money, and when you decide to buy them, you make an in-store app purchase.

Out-of-Store Money

Out-of-store money is when people spend money directly inside the app, not in any application store. It's like buying things online in a store, ordering meals via a food delivery app, booking tickets on a travel portal like Plannin, or ordering a cab via a taxi app - those are booked and paid for within the app itself.

Out-of-store money transactions can generate more revenue for app makers than in-store purchases, mainly because they avoid additional fees imposed by app stores and are often related to real-world purchases that typically involve higher transaction values.

What kind of apps can apply in-app purchases?

Apps that commonly use in-app purchases include (but it's applicable to many other mobile apps):

• Gaming Apps: It's suitable for mobile games offering in-game currencies, virtual items, cosmetic upgrades, or ad-free experiences to enhance gameplay and accelerate progress (e.g., Candy Crush Saga, Fortnite, Clash of Clans).  
• Entertainment & Streaming Apps: Providing premium content, ad-free viewing, exclusive features, or subscriptions for movies, music, and videos (e.g. Spotify, YouTube).
• Education Apps: Providing access to premium courses, study materials, personalized learning plans, or additional lessons (e.g., Coursera, Duolingo, Busuu).

Benefits of In-App Purchases:

• Enhance User Experience: In-app purchases can add value by offering users ways to speed up progress, level up, or gain access to special features within the app, like in-game currencies.
• Generate Significant Revenue: In-app purchases are a major source of income for mobile apps, contributing to a large percentage of overall app earnings. They constitute 48.2% of mobile app earnings, compared to 14% from ads-based revenue and 37.8% from paid app downloads (Business of Apps).

Disadvantages of In-App Purchases:

• User Resistance due to Privacy/Security Concerns: Some users hesitate to make in-app purchases because they worry about the security of their personal and payment information.
• App Store Fees: App stores often take a percentage of each in-app purchase, reducing app developers' revenue (In-store Money).
• "Pay-to-Win" Perception: If in-app purchases are not balanced well, users might feel pressured to spend money to succeed, leading to a negative perception of the app.
• Pricing Strategy Challenges: Incorrect pricing for different regions or user groups can reduce purchase likelihood and result in lost revenue.

In-App Advertising Model (IAA)

In the In-App Advertising Model (IAA), advertisers purchase advertising space within the app, so they bear the costs, not the users. In this model, finding the right balance and adjusting ad formats to the app type and users is crucial - we all know apps that we uninstalled because in-app advertising was unbearable!

In-App Ad Formats:

• Native ads: Blend seamlessly into the app's content, mimicking the style of organic content (e.g., "sponsored" posts in social media feeds).
• Banner ads: Small, static ads placed at the top or bottom of the app interface; non-intrusive.
• Interstitial ads: Full-screen ads that appear at natural breaks in the app (e.g., between game levels or Instagram stories); attention-grabbing and effective for user acquisition, especially video interstitials.
• Video ads: Short video commercials that can be used in various formats (interstitial, native, rewarded video ads). Video ads are a widespread and effective format in mobile apps. In 2022, 51% of marketers, app developers, and publishers reported full-screen video ads to be the most effective for user acquisition (Statista).
• Incentivized ads: Reward users (e.g., in-game currency, extra lives, discounts) for watching ads or completing actions; common in gaming and shopping apps.
• Playable ads: Mini-game ads primarily for gaming apps, allowing users to try out gameplay before downloading.
• Carousel ads: Display a swipeable series of images or text, conveying more information in a visually engaging format that reduces cognitive load.
• Sponsored lists: Advertisers pay to be featured within curated lists of products or services, appearing as natural and integrated content.

What kind of apps can be used in in-app advertisements?

Below, you'll find some examples of apps that use in-app advertising, categorized by type:

• Social media apps: Facebook, Instagram, X, TikTok, Snapchat. These apps commonly use native ads that blend into the user's feed.
• Content apps: Google News, Apple News, BBC News, CNN, and various online newspaper apps. These apps frequently use banner and interstitial ads to monetize free access to news articles.
• Travel apps: Booking.com, Expedia, Skyscanner, TripAdvisor, Kayak. These apps often display ads for hotels, flights, car rentals, and travel packages but sometimes use native ads as well.

Benefits of In-App Advertisements

Let's take a look at the pros of using in-app advertisements:

• Simple to implement: Setting up and integrating in-app ads into applications is generally relatively straightforward.
• Adaptable and tailored: The wide array of available ad formats allows for customization, ensuring ads fit smoothly within the app's design and minimize user annoyance.
• Monetization for free apps: In-app ads serve as a valuable income source for applications offered to users without upfront costs.
• Well-accepted: Many users accept rewarded video ads as a means to gain additional benefits.

Disadvantages of In-App Advertisements

Here's a quick, to-the-point look at the disadvantages of in-app advertising:

• Ad fatigue & ineffectiveness: Frequent ads can lead users to ignore or tune them out, reducing ad click-through rates and overall campaign performance.
• App abandonment: Overly intrusive or excessive ads can worsen app experience and frustrate users to the point where they stop using the app entirely, leading to user churn (think about all the banner ads or interstitial ads you need to close over and over again!).
• Policy risks: Ads may violate app store rules, leading to penalties for app visibility and store ranking. Policy compliance is key to avoiding these issues.

Subscription Model and Freemium App Monetization Strategy

In the subscription model, users are typically initially granted free access to download the app (or a trial period in the cases of many B2B solutions). After that, they can choose the preferred subscription level and are charged accordingly after the period they choose.

Time-Based Flat Subscription

Time-based flat subscriptions offer flexibility in renewal payments. Users are typically charged a consistent fee for app access, with discounts often increasing for longer subscription periods. While monthly, quarterly, and annual subscriptions are the most common, the ideal length depends on the mobile app itself. For some applications, shorter durations like one-day or 7-day access, or even half-year options, might be more suitable. For example, the ibuk.pl portal.

Benefits:

• Full access, simple payment: Users unlock all features with one straightforward payment.
• Budget-friendly for users: Smaller, recurring payments can be easier for users to manage.
• Consistent revenue stream: Provides developers with predictable income for ongoing mobile app maintenance and improvements.

Disadvantages:

• Subscription cancellations: Users can cancel anytime, leading to potential churn of paying users.
• Lower upfront revenue: Payments are smaller and spread out, meaning less immediate income than one-time purchases.
• Long-term profitability questionable: Lifetime subscriptions might be less profitable in the long run if app users remain subscribed for many years.

Tier-Based Subscription Apps

A single flat subscription fee might not be sufficient for more complex applications. Apps offering a wide range of features and usage levels might discourage individual users or companies that utilize or need it (or might not afford it). In these situations, tier-based subscriptions become a valuable approach. This model allows users to select subscription tiers that match their specific needs, paying for increased usage limits, particular components, or modules as required.

This strategy is employed across various industries but is particularly common in marketing software. Solutions like SurferSEO or HubSpot are prime examples, offering different subscription levels that unlock additional modules, extensions, and higher usage capacities. Importantly, tier-based subscriptions can also incorporate the standard subscription model benefits, like discounts for longer subscription commitments.

Benefits:

• Pay-for-what-you-need: Users only pay for the features they actually use, making it more budget-friendly.
• Steady, predictable income: App creators get a reliable revenue stream from paying users, making it easier to plan for the future.
• Wider audience reach: Tiered pricing opens the mobile app up to individuals and smaller businesses who might not be able to afford a high flat fee.
• Scalable costs & income: As app usage grows, income scales too, allowing for flexible adjustments to meet demand.
• Flexible Pricing: Offering different tiers caters to various user needs and budgets.

Disadvantages:

• Easy to cancel: Users on short-time-based plans can easily cancel, leading to potential user churn.
• Expensive in the long run: When the needs grow, so does the cost. Some users or companies might be forced to find a more cost-effective solution.

Pay-Per-Use (Pay-As-You-Go)

Pay-per-use models are frequently seen in SaaS solutions, particularly those leveraging AI/ML and offering APIs. In these cases, pricing is often structured around the number of requests made or tokens processed, like in the OpenAI Sora or Runway case. It's an ordinary mobile app monetization model for AI media generators.

This pay-per-use approach can be the primary monetization strategy or complement subscription models. It's handy when users occasionally need to exceed their typical usage limits without committing to a higher subscription tier.

Benefits of Pay-Per-Use:

• Low entry cost: Users only pay for what and when they need it, avoiding subscription fees.
• Scalable: Pricing adapts directly to usage levels.

Disadvantages of Pay-Per-Use:

• Unpredictable monthly revenue: Income can fluctuate significantly based on user activity.
• Income instability: Forecasting and maintaining a consistent, stable revenue stream is challenging due to variable user consumption.

Pay-Per-Seat

Another effective monetization strategy is to implement per-seat pricing. This approach, particularly popular in B2B applications, involves charging companies based on the number of app users within their organization who require access to the mobile app. Essentially, businesses pay for each "seat" or user account. This model can be structured with a single pricing tier or, more commonly, with multiple tiers offering varying feature sets and usage limits, similar to tier-based subscriptions.

Well-known examples of apps utilizing per-seat pricing include Notion and ClickUp. Some platforms, like EngageBay or Webflow, refine this further by adjusting subscription costs based on individual user access levels within the organization, offering even more granular control over pricing.

Benefits of Pay-Per-Seat:

• Full feature access: App users typically get access to all or tiered features for a reasonable cost.
• Cost-effective for users: This is especially good for smaller businesses, as they pay only for the number of app users they need.
• Broader market appeal: Attracts businesses of all sizes due to flexible, scalable pricing.
• Win-win for adoption: Encourages broader use and uptake of the service.

Disadvantages of Pay-Per-Seat:

• Infrastructure demands: Requires careful infrastructure planning and cost management to stay profitable.
• Strain from user spikes: Sudden increases in users can overload the system and hurt user experience, requiring rapid infrastructure adjustments.
• Revenue fluctuations: Drops in user numbers can lead to unstable cash flow.

Freemium Model

Many apps that use subscriptions also include a "freemium" option - it's the most popular app monetization strategy. This means they offer a basic version of the app, with limited features or usage, completely free of charge (users are free to download apps, so it's the best way for growing a user base). The idea is to let users try it out and get hooked without paying anything upfront. To get the full experience, though – access to all the features, higher usage limits, or to get rid of ads – users can upgrade to a premium subscription.

Think of Spotify, for instance. You can listen to music for free, but there are limitations like ads and being unable to choose specific songs. But if you want to ditch the in-app ads, skip songs as much as you want, and pick your playlists in any order, you can subscribe to Spotify Premium. This freemium-plus-subscription approach gives users flexibility and gives app creators a reliable income stream.

Benefits of a freemium app monetization model:

• Easy to try (low threshold at no cost!): Encouraging users to try is easier if the app is free.
• Boosts user numbers: A growing app's user base means a broader pool to convert free users to paying customers.
• Word-of-mouth potential: Happy free users can spread the word.
• Flexible monetization: You can make money with ads, in-app purchases, and premium subscriptions – lots of options!

Disadvantages of a freemium app monetization model:

• Basic functionality: Users have limited possibilities and need to pay to unlock premium features.
• Unpredictable income: Not all users pay, so revenue can be less steady.
• Disadvantages of applied monetization models: If you decide to implement ads or in-app purchases, you also gain their disadvantages regarding app experience (e.g. various ad formats).
• Burden for infrastructure: You might need to prepare a solid infrastructure to handle many app users.

What kind of apps can use the freemium model?

The subscription and freemium models suit various apps, especially those offering premium content or enhanced experiences. For example:

• News & entertainment: Upgrade for exclusive access to content (e.g., The New York Times).
• Music streaming: Paid for ad-free, offline access and Hi-Fi quality (e.g., Spotify, Apple Music).
• Dating: Premium subscriptions for unlimited swipes and advanced features (e.g., Tinder, Bumble).

Lifetime Access

A lifetime subscription can be a smart move for apps in their early stages, especially when funding is crucial. This model offers users permanent access for a single, larger payment. Interestingly, I noticed that this one-time fee often works out to be around the same price as a two or three-year subscription. The great thing about lifetime subscriptions is that they can provide a quick cash boost early on, and those who jump on board become loyal users and even advocates for your mobile app. The only thing you need to do is to remember about them and treat them as VIPs, not a legacy burden.

Benefits:

• Big cash boost (early on): It's like a shot in the arm for funding, especially when you're just starting. That one-time, bigger payment from users can help fuel development.
• Happy early birds: Think about those first users who jump on board – they become your biggest fans! Lifetime access can feel like a great deal for them, making them loyal and more likely to spread the word about your app.
• Simple for users to understand: "Pay once, use forever" is pretty straightforward, right? No confusing subscription stuff.

The not-so-good Sides

• Less predictable income (long-term): Lifetime access is more of a one-off thing, making planning for the future trickier.
• Revenue cliffhanger: Once everyone who wants lifetime access has it, that big upfront cash flow kind of...stops. You need to figure out other ways to make money down the road. Here is when the monetization model switch comes: you can offer time-based subscriptions only since then!
• Could lose out later: If your app becomes super popular and people use it for years, you might make less money overall with lifetime access compared to subscriptions.

Paid Apps (Pay-Per-Download - PPD)

Pay-per-download apps use a simple approach: users pay a single fee to download the app and then get full access to everything without further costs.

This approach is one of the oldest app monetization strategies in the app industry. While they offer a clear value proposition, they may face challenges in attracting users compared to free alternatives.

What kind of apps should use the pay-per-download model?

The pay-per-download (PPD) model suits apps with strong brand recognition, unique and distinctive features, and a well-defined value proposition. However, niche or specialised apps that cater to specific needs can also thrive under this model.

Benefits of Pay-Per-Download:

• Simple money: Straightforward and easy-to-understand revenue: as an app publisher, you get paid for each download.
• Steady income (maybe): If your app is awesome and stands out, you could have a pretty reliable income from those download fees.

Disadvantages of Pay-Per-Download:

• Tricky to get users: People can hesitate to pay upfront if they can't try it for free first, so you might have a problem growing your user base. You will need to convince people your app is worth paying for before they even download it, which can be tricky when free options exist.

App Data Monetization Strategy: Turning Data into Dollars (Responsibly!)

App data monetization is all about collecting user data – with their permission, of course! – and then using it to make some money. This could be by using the data to leverage your related services or sell it (anonymously and ethically!) to companies that analyze trends or do market research.

For some apps, especially free ones, data can be the primary way they make money – users get the app for free, and the app gets valuable data. For others, it's just an extra income boost on top of other methods.

Benefits of app data monetization:

• New revenue streams: Turns data you're collecting into a whole new way of making money!
• Free app for users: Keeps your app free for users, which can attract a much bigger audience.
• Business insights boost: You can use the data to offer your own related services!
• Scalability: As your app grows and you collect more data, your potential revenue from data monetization can also increase.

Disadvantages of app data monetization:

• Privacy! This is the BIG one. Users are super sensitive about their data. If you're not crystal clear about what you're collecting and how you're using it, you can lose user trust – and even run into legal trouble. As an app publisher, you have certain legal obligations!
• Data demand swings: What's "hot data" today, might not be tomorrow. The demand for certain types of data can change, which means your data revenue could go up and down, making it less predictable.
• Regulation roadblocks: Data privacy laws are getting stricter all the time (think GDPR). These rules can limit what data you can collect and how you can use it, impacting your data monetization strategy. Staying on top of these regulations is a must!
• Data quality is key: Garbage in, garbage out, right? If your data isn't good quality – accurate, consistent, and well-organized – it won't be worth much to anyone. You need to invest in good data collection and management practices.

Hybrid Monetization Strategy to Generate App Revenue

You don't have to stick to just one way to make money from your app! Hybrid monetization is all about mixing different strategies. Using a few different revenue methods, you can spread out your income and maybe even make more money more predictably than if you just relied on one single approach.

Pros of mixing app monetization approaches

• Super flexible, super profitable: You're not stuck relying on just one income stream. You can pull in money from different places, which is way more stable and can seriously boost your profits.
• Happy users, happy wallet: You can cater to different kinds of users. Some people love free apps with in-app ads, and others are happy to pay to remove them or gain extra features. Hybrid lets you make everyone happy (and paying).
• Ride the market waves: Markets change, user tastes change. If one revenue stream dips, you've got others to fall back on. It's like having a safety net for your app's income.

Cons of blending approaches

• More work, more brainpower: Let's be honest, mixing monetization methods is more complex. You have to code it all, test it all, and ensure it all works smoothly together.
• Don't go too far: You can't just implement every monetization method into your app, as it will become a mess of in-app ads and paywalls. Users will get annoyed and leave. You need to find a balance and still give users a great experience. User value always comes first!

You should consider store fees when figuring out how to make money with your app. Basically, these are percentages that the stores take from your earnings on app sales, in-app purchases, and subscriptions. They use these fees to keep the application store running – things like servers, security, handling payments, and helping customers.

Let's break down the fees for the leading application stores:

• Apple App Store for iOS apps (Statista):
  • Apple takes a 30% cut of the price for paid app downloads and anything users buy within the app that's digital (like extra game content or subscriptions).
  • But, if your app makes less than $1 million a year in the App Store, you might qualify for their Small Business Program. If you do, Apple only takes a 15% commission.
  • Also, if you have subscription-based iOS apps, the fee drops to 15% (or 10% for the UE region) after a user has been subscribed for a year.
• Google Play Store (Statista):
  • Google's fee is 15% on the first $1 million your app makes each year. This covers both paid app downloads and in-app digital purchases.
  • Once you earn over $1 million in a year, the commission goes up to 30%.
  • Google Play might have different fee deals for certain types of apps in special programs.
• Other application stores (Amazon, Microsoft, etc.):
  • Besides Apple and Google, stores like Amazon Appstore and Microsoft Store also have fees. These are usually in the range of 15% to 30%.

Key takeaway! No matter which store you're using, you will have to pay a fee. It's really important to understand these fees and factor them into your plans when you're deciding how to price your app and make money. Don't forget to check the latest info directly from each store, as their rules can change!

Statistics show that the most popular monetization strategies are paid ads. In the USA, one-quarter of apps generate revenue through ads, while the global average stands at 35% of apps, including advertisements (Statista). This means that ads play a significant role in the monetization strategies of many app creators. However, it does not mean that you should follow the majority!

Choosing the right monetization strategy for your app is a critical decision, influenced by various factors such as your app's type, target audience, goals, and market trends. Understanding these factors can help you make informed choices.

Key Factors for Choosing Your App Monetization Model

Choosing the right monetization strategy is one of the most crucial decisions you'll make for your app. It's not just about picking a way to make money (and definitely not doing this because that's what other apps do). It's picking the right way that fits your app, your app users, and your long-term goals. To help you nail this decision, let's expand on the key factors you need to consider:

• App type & functionality: What kind of app is it? (Game, utility, content, dating app etc.) The core purpose and features heavily influence monetization options.
• Target audience: Deeply understand your app users – demographics, income, tech-savviness, willingness to pay for digital content, and their expectations for apps in your category.
• User Experience (UX): How will monetization impact the user's enjoyment? Prioritize a smooth, non-disruptive experience, especially with ads.
• Competitor analysis & market trends: Research successful monetization strategies similar apps use and stay informed about current market trends regarding app monetization.
• Value proposition & pricing: Does your pricing clearly reflect the value users receive? Ensure a fair and perceived value exchange.
• Development & maintenance costs: When choosing a model, factor in the ongoing development costs, updates, and server maintenance. Some models require more upfront or ongoing investment.
• Long-term goals & sustainability: Consider your long-term vision for the app. Does the monetization strategy support sustainable growth and future development?
• Testing & iteration: Plan to test different approaches and be ready to adjust your strategy based on user feedback and data.
• Data & analytics: Implement robust analytics to continuously track user behaviour, engagement, and revenue metrics to optimize your monetization strategy.
• Legal & ethical considerations: This is crucial for data monetization and ad-based models - ensure compliance with privacy regulations and ethical data handling practices.

This expanded list should give you a more comprehensive framework for making that all-important monetization decision!

Efficiently measuring the success of your app's monetization strategy is crucial for profitability and improvement. But how do you know that your app is profitable? What is there to improve? You need to keep an eye on key indicators that will help you measure progress. Below, you'll find just a summary. Check out my article on key metrics and KPIs to learn more about how to measure the success of your app.

Metrics like Average Revenue Per User (ARPU) are crucial in assessing the effectiveness of your monetization methods. Tracking Conversion Rate, Churn Rate, and ad Click-Through Rate (CTR) provides insight into user activity and engagement with monetization features. User engagement metrics such as Daily Active Users (DAU) or Monthly Active Users (MAU) indicate the level of user interaction, influencing monetization. Monitor Cost Per Acquisition (CPA) and Customer Lifetime Value (CLTV/LTV). Never lose sight of Return on Investment (ROI) measuring app revenue. It helps assess the viability of a strategy,

Finally, it is essential to collect user feedback and reviews that will tell you more about user satisfaction and areas for improvement.