App Monetization: How to Generate Income from Apps in 2022

You will learn that there is no such thing as a free lunch in the world of apps.

In 2021, mobile apps were downloaded more than 230 billion times. This is 95% of the free downloads. Statista reports that the industry generated $400 billion in revenue. Apps are a great way to make the world turn. But how can they survive and thrive in business when they're completely free?

We need to understand how apps make money to make sense of these numbers. It also explains how to get started to maximize your income.

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CHAPTER 1: What is app monetization? Why is it important?

It often involves multiple strategies, including placing banner ads at the bottom of your app and leveraging rewarded videos ads. We'll also be discussing integrated advertising methods later in this article.

App monetization is crucial because many strategies can help advertisers and app developers generate revenue. A well-researched plan for app monetization will ensure that you create a positive user experience to retain and grow your users profitably.

​​Flutter Update: App Monetization, Source: Youtube, Flutter 

These two factors make up the user's lifetime value (LTV). It is critical in measuring a marketer's ultimate KPI, return of ad spending (ROAS).

What's the difference between paid and free apps?

There are many benefits to making your app accessible. It can help you increase revenue over the long term because it lowers your risk of using your app. It is easier to use a free app than you would need to commit, and it's also cheaper.

To acquire new users. Although the expectation for paid apps is higher, it's still less important than that for free apps.

CHAPTER 2: Models and strategies for app monetization

Apps were not always accessible. Most popular apps were expensive when app marketplaces opened their doors. Developers were not aware of how to generate revenue, and it was best to ask for a commitment upfront.

App Monetization Strategies: 10 ways to monetize your Mobile Application | Mobile App Sundays EP. 2, Source: Youtube, Emirates Graphic

Developers, marketers, and advertisers began to see the value of data. They realized that in-app ads, in-app purchases, and other diversified monetization models proved to be more profitable. These are the reasons why "free" apps have become the norm.

Gaming apps were particularly hit because they relied heavily on marketing to drive growth and b) user data to drive the joyous return of ad spending and identify the whales (a small percentage of users who generate the most revenue).

In-app purchases (IAP)

You can divide the in-app purchase revenue into two parts:

In-store payments: App purchases made through the app store incur fees (see below for more). Gaming and subscription apps account for the majority of revenue. In-store revenue was $133 million in consumer spending, a 20% increase over 2020.

Revenue outside-of-store: Any revenue generated in the app (eCommerce and travel, food delivery, etc.). This app generates more revenue than in-store.

In-app purchases offer many benefits: The microtransaction economy is thriving. Apps can make a profit selling in-app experiences. This could include selling stickers on messaging apps or plugins that unlock new design options in video editing apps. You can also sell features in dating apps to allow you to connect with more people and boost your social media profile.


Predictive modeling keeps you in the know about performance: To make quick campaign optimization decisions, predictive modeling is a great tool. Machine learning algorithms can predict and stop users from churning. They identify key patterns that your most lucrative users make.

Unity In App Purchases (IAP) Complete Tutorial 2021|Monetize Your Game, Source: Youtube, tutorialsEU

It can also predict which users will complete the first five levels within an hour. This data can promote in-app purchases, and you may tailor your messaging accordingly.

In games, create multiple currencies: You can create both a challenging and soft currency. You can reward specific actions in a game with soft money. This gives you a feeling of growth and advancement. You can earn hard cash in limited amounts by performing complex tasks in the game, but you should buy it with real money. 

Do not be mistaken for a "pay-to-win" game: Splitting game purchases can help keep in-game currency in balance with real-world revenue. To keep the game exciting and accessible, it's essential to ensure that in-game currency is available to everyone. If other players believe a game is a pay to win, an imbalance could lead to higher churn.

Subscriptions and freemium models

Subscriptions rely on the app being available for free and charging a recurring fee. Subscription-based apps often use a freemium approach. They offer limited features for no cost and require users to pay to unlock all the other parts.

Subscriber benefits

Subscriptions can be a very lucrative advertising strategy if they are done well. A monthly subscription can provide predictable cash flow, particularly if the developers have a good sense of churn and retention rates, or, in other words, how many people are joining or leaving the app. Subscribers are similarly invested as users who pay upfront for apps.

Moving Crunchbase From a Freemium to Subscription-Based Model, Source: Youtube, Troy Runsten

Apple App Store also lowers the commission fees for subscriptions that last more than a year. All subscriptions will be charged 15% by Google Play Store starting from Day 1.

Which apps should subscribe to the subscription model?

Subscriptions can work well for apps that offer unique content regularly. This includes video streaming apps and fitness apps.


In-app advertising formats

Banner ads

Banner ads consist of text and graphics placed at the top or bottom of the screen. They also have a call-to-action button.

Video ads

Video ads are videos that appear before another video. A pre-roll video is one example. It seems before your video. These videos often get high engagement and click-through rates.

Rewarded video ads

Rewarded video ads give users in-app benefits for viewing a complete video. This is a very lucrative format for advertising in gaming apps. You can get anything you want, from new characters to extra lives or in-app currency.

Interstitial ads

Interstitial advertisements are full-screen ads that appear in the transitional phases of an app. These rich media ads can include videos, images, and text.

What Is In-app Advertising: Ad Networks, Ad Units & Monetization Tips Included, Source: Youtube, MonetizeMore

Native Ads

Native ads look just like organic content. They are designed to integrate seamlessly into the app without affecting the user experience.

Playable ads

Mini-games that show the critical mechanics of other games are called playable ads. They are engaging and have one of the highest CPM rates in gaming apps.

Advertisement for Offerwall

Offewalls offer rewards for specific actions, such as filling in surveys, downloading apps, playing games, or reaching certain levels in other games.

In-app advertising has many benefits.

Implementation is simple

In-app purchases and advertising are the most lucrative revenue streams in a world full of free apps. Accessibility is a significant reason for this. While not all apps can sell in-app upgrades and purchases, most apps can easily integrate video ads, banner ads, and native ads.

You can integrate without compromising the user experience.

There are many IAA formats that you can use to integrate your ads seamlessly into apps. The ad can be integrated into the normal flow of the app to make it less disruptive for users and more beneficial for the whole app. In-game rewards for viewing video ads are a great option, especially in casual gaming apps.

Key Benefits of Video and VAST for Mobile In-App Advertising, Source: Youtube, InMobi TV


Increase viewability

Advertising revenue can be lost if you don't check for viewability. Mobile display impressions can only be viewed if at least 50% of the pixels are visible to the user. These ads must be displayed for at least one continuous minute after rendering. These requirements should be checked regularly to ensure they pay you.



The paid download model has many benefits.

Paid apps heavily rely on brand recognition, unique content, and trusted reviews, especially when it doesn't offer a free trial. But, once you have a paid app that offers distinct benefits, it can be a reliable source of consistent revenue.

You can track app downloads over time, so revenue is easier to measure. Still, it comes at the expense of not being in a position to upsell your users using other monetization strategies.

A user experience free from interstitial or banner ads will be more enjoyable and less cluttered. Paid app users might have higher expectations of your app but are more likely to be focused on getting the best value from your app. This may increase user retention.


CHAPTER 3: App store platform fees

Although the listing process is simple, getting your app noticed can be difficult. It's essential to make sure your app is optimized for multiple platforms and listed on as many marketplaces as possible. You will need to pay a fee to list your apps on each marketplace.

Here is a list of all fees.

Apple App Store: 30% Commission for each paid app download or in-app purchase of digital goods or services. Apple's AppStore Small Business Program may be available to developers who generate less than $1million per year in AppStore sales. This program charges a 15% commission. Physical products are free of charge. After one year, subscription commissions drop to 15%

Google Play Store: 15% for each paid app download or in-app purchase of digital goods or services exceeding $1 million in sales. Once the threshold has been reached, the rate increases to 30%.

Apple App Store Earnings vs Google Play, Source: Youtube, LaterClips 

Galaxy Store: 30% commission on all app-store purchases

Amazon Appstore: 30% commission for each paid app download. Video apps earn a 20% commission. App store revenue of less than $1,000,000 per year can be eligible for a 20% Commission Rate and 10% Promotion Credits for Amazon Web Services.

Microsoft Store:15% commission for paid app downloads and in-app digital goods and services purchases. 12% commission for PC games. 30% commission on all games and apps. To avoid paying commissions, non-gaming apps can also use their payment methods.

CHAPTER 4: The vital metrics that measure the effectiveness and efficiency of your app monetization strategy

Let's now talk about the different app monetization models. 

Retention Rate: The percentage of users who have used your app for a specific period. Although user behavior has many variables, the retention rate is an excellent metric to determine if your app offers a positive user experience that leads to loyalty. It can be used to identify whether in-app advertising is affecting user behavior.

Retention is crucial as it is the foundation of monetization. The more loyal your users are, the more ads you will show them, and the greater chance that they will purchase in-app.

App stickiness - How many users interact with your app regularly and continuously. Higher user engagement means that your app will be more popular. This can be measured by dividing your Daily Users (DAU) by the Monthly Users (MAU).

ARPU (average user revenue): This helps you determine how much each user is earning on average. 

Game Monetization Strategy Advice | Monetization Strategies | App Monetization | Udacity, Source: Youtube, Udacity 

Lifetime value (LTV): This determines how valuable an app user is over time. Marketers use this information to determine how much advertising money they can spend on customers while remaining profitable.

Conversion rates for the marketing funnel: Help determine the quality of users moving down the marketing channel -- from when they see an advertisement to the completion of a meaningful, revenue-generating event after installing the app. 

These key metrics will allow you to test different models for your app and determine which one is most effective. You must measure the impact of each ad experience on your bottom line.


While 95% of apps can be downloaded for free, the industry generated $400 billion from various monetization sources in 2014. There are five models of app monetization: in-app ads, in-app payments, paid apps, and subscriptions. You can retain and grow your user base profitably by creating a user-friendly strategy for app monetization.

In-app advertising is the most common mobile app monetization model. Start by deciding whether your app will be free or paid to help you choose the best advertising model. To measure the performance of each model, test multiple models and calculate KPIs such as retention rates or ARPU.

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I hope this article will be helpful to you!