No Ads, More Cash: How to Monetize Your App Without Them

Asking users for money can be daunting. After all, there’s an app out there that does something similar for free…

Plus, you’re still in beta. So how can you ask someone to pay you right now?

Better to make sure every feature is implemented before you turn on a paywall. For now, you can just show ads so people don’t get annoyed that they are being asked for money… right?

Not exactly.

Ads can sometimes be a great source of revenue for an app with tons of casual users who don’t have an intent to pay—like Facebook.

However, it pays to think twice about whether your app falls into that category.

In today’s market, for an app that solves a problem, like a utility app, charging for a subscription can be a godsend. This is because there is a hidden cost to ads: They make your app look and feel cheaper.

Using in-app purchases is not only a perfectly ethical choice, but it can positively impact your users’ experience in the app—the part you spent most of your time and money building.

Monetization Strategies Without Ads

In-App Purchases

Definition & Mechanics

In-App Purchases, or IAPs for short, have been around as long as most people can remember. They can take several different forms, depending on the type of app you are trying to create:

Consumables: video games might have a consumable “power-up” that you buy and can use once. If you want to “power-up” again, you’d have to buy another one.
Tokens: these went under the radar for a while, but have recently gained some traction again as AI apps relying on expensive APIs have gained popularity. Tokens can allow users to buy in with a lower up-front cost and no auto-renewal, which can reduce the friction to purchasing.

Implementing in-app purchases takes a few steps.

First, you need to decide what you are selling, and whether you are implementing a token system or creating one-off consumables, as described above.

Next, you need to create digital products for your in-app purchases. You can do this in the developer console (App Store Connect & Google Play Console) for the marketplaces your app is hosted in. You will be able to set prices for your products here.

The developer of your app will need to integrate in-app purchases into the code. You can do this in one of two ways:

Implementing client-side purchasing logic and receipt validation through the platform-specific first-party framework, like Apple’s StoreKit
Using a third party tool like RevenueCat or Adapty, which manages the above in exchange for a small percentage of tracked revenue

You will need to create and develop paywalls, which are the screens that get shown to users when they try to access a feature or section of the app that requires them to make a purchase. You can use pre-made paywalls from the third party tools above, such as RevenueCat Paywalls.

Finally, you will want to do extensive testing and verification that your purchases work as intended; this is one of the most sensitive areas of your app and is as close to the “bottom line” as you can get.

Example

An example of an app using a token-based monetization strategy is ReelShort, a now-infamous app that generates a respectable $2 per install in a crowded space (entertainment).

In ReelShort, users are allowed to watch a few episodes of each mini-video series for free, after which they need to purchase tokens to unlock the rest of the episodes in the series.

They can also earn “bonus tokens” by engaging with the app in certain ways – signing up, for example, earns you bonus tokens.

Are these right for me?

To know if non-subscription in-app purchases are your go-to strategy, you should consider the nature of your app and user engagement.

In-app purchases are great for gaming apps and content consumption apps, where users have a strong desire to make microtransactions at certain points during their use of the app. If your app offers distinct pieces of content that can be individually purchased and consumed, such as episodes in a series or boosts in a game or dating app, non-subscription in-app purchases can provide the requisite flexibility.

According to a report by data.ai, mobile games were one of the top categories for in-app purchases, accounting for 72% of consumer spending on apps in 2020. This highlights that non-subscription IAPs are highly effective in apps with frequent and varied use, such as games.

Additionally, if you have an app with high costs associated with specific actions, like an AI video generator, you may consider testing your pricing model with tokens first to ensure you have a healthy margin. Later, you can migrate to subscriptions when your margin is more defined.

Non-subscription in-app purchases can also present a lower up-front cost to users, without a recurring commitment, reducing the barrier to making an initial purchase. This might make users more eager to buy sooner, even though they might end up spending more than they would on a subscription. Younger audiences or those in markets with less disposable income may prefer the flexibility of non-subscription IAPs. Conversely, professional users or those seeking premium, uninterrupted access might lean towards subscription models.

If your app benefits from seasonal boosts in usage, such as during special events or updates, non-subscription IAPs may help to capitalize.

Some notable drawbacks of non-subscription in-app purchases:

They do not encourage retention as much as subscriptions, which auto-renew.
If your users use the app more sporadically, such as a couple of times a month, you may be leaving money on the table. With a subscription, you would still be receiving money for the time they aren’t actively using the app.

Finally, the most effective way to decide can be to analyze your competitors' strategies. If similar apps in your category successfully use non-subscription in-app purchases, it might be an indication that this model resonates with users in your niche.

Subscriptions

Definition & Mechanics

Subscriptions have become a staple in the app industry, offering continuous access to content or services for a recurring fee. Subscriptions have several dimensions:

Duration: subscriptions can be weekly, monthly, or annual, to cater to users with different purchasing intents.
- One user might see an $50 annual subscription as huge savings vs. a $10/month subscription, while another might see it as too much money to spend and prefer the $10/month price.
Trials: A proven strategy is to offer a free trial that shows users the full value of the app for a limited time before they start to be charged. Paid trials are also possible, although rarer, where a user will pay a discounted price for a small period (e.g. $3 for a month, then $99/year).
Tiers: Apps with multiple distinct tiers of service might offer multiple tiers of subscriptions, each providing different levels of access or benefits.

Implementing subscriptions is very similar to implementing in-app purchases.

You need to decide the following:

What’s included in your subscription? What features would it make sense to gate to premium users?
Do you need to offer multiple tiers? This is a rare practice in apps, and may complicate your design decisions. Users like to pay one price and know they can access everything.
Will you offer a free trial? The more aggressive your monetization strategy, the more important it is to offer a free trial to proactively show users value. According to the RevenueCat State of Subscription Apps Report, 71% of apps offered trials in 2023, a significant year-over-year increase on 2022, where only 60% of apps offered trials.

Next, you need to create digital products for your subscriptions. You can do this in the developer console (App Store Connect & Google Play Console) for the marketplaces your app is hosted in. You will be able to set prices for your products here.

As with in-app purchases, the developer of your app will need to integrate in-app purchases into the code. You can do this in one of two ways:

Implementing client-side purchasing logic and receipt validation through the platform-specific first-party framework, like Apple’s StoreKit
Using a third party tool like RevenueCat or Adapty, which manages the above in exchange for a small percentage of tracked revenue

You will need to create and develop paywalls, which are the screens that get shown to users when they try to access a feature or section of the app that requires them to be subscribed. You can use pre-made paywalls from the third party tools above, such as RevenueCat Paywalls.

Finally, as before, you will want to do extensive testing and verification that your purchases work as intended; this is one of the most sensitive areas of your app and is as close to the “bottom line” as you can get.

Examples

Many apps leverage subscriptions to great effect. Some examples are:

CapCut, which makes $2M in monthly revenue through subscriptions worldwide
Tinder, which uses subscriptions in conjunction with consumable in-app purchases to generate $61M in monthly revenue worldwide
SnapChat, which also uses a combination of subscriptions and in-app purchases to generate $20M in monthly revenue worldwide

(Figures from SensorTower.com)

Are these right for me?

In certain categories, subscriptions dominate as a market trend. Most apps in these categories only offer subscriptions:

Business
Education
Health & Fitness
Utilities

In contrast with gaming apps and entertainment apps, where users have a lot of psychologically addictive hooks that get them to want to make purchases almost every time they play, apps in these categories rely on longer-term commitments and value propositions that suit subscriptions better.

For example, a workout app might actually benefit the user by getting them to commit to a subscription, since the user will be more likely to implement positive lifestyle changes as a result of being committed.

If your app provides a professional service, like a video editor for monetized content creators, or a market analysis tool, you will want to strongly consider subscription-based pricing. Apps that become a necessary part of users’ week to week workflows benefit the users via predictable pricing.

In terms of benefits to you, the app owner, subscriptions can lock in significantly more lifetime value upfront from customers. This can matter if you are testing a new marketing strategy and want to quickly know what kind of return you can get on ad spend: you might offer annual subscriptions to see a much more readily available approximation of the lifetime value (LTV) you can get from new users.

A final strength of subscriptions is that they provide frictionless billing, meaning users do not have to make a purchasing decision each time they want to extend their subscription: their card simply gets charged until they cancel. This can both improve the users’ workflow – no one wants to deal with billing every few days; and it can benefit your bottom line, as billing is automatic.

Finally, as above, the most effective way to decide can be to analyze your competitors' strategies. If similar apps in your category successfully use subscriptions, it might be an indication that this model resonates with users in your niche.

Sponsorships & Partnerships

Definition & Mechanics

Sponsorships and partnerships are strategic collaborations where your app partners with other companies to promote their products. You can pick which products to promote, aligning them with your app’s brand and user base. This approach can generate revenue while enhancing user experience by introducing them to complementary products or services.

To implement a partnership, the first step is to identify potential partners: Look for brands that complement your app’s niche and have a similar target audience. For instance, a fitness app might partner with sports apparel brands or nutrition companies.

The second step is to do outreach. Contact potential partners through channels like email or LinkedIn. Introduce your app, highlight user demographics, and explain the mutual benefits of a partnership.

With interested partners, you can proceed to the third step, proposal development: Create a detailed partnership proposal, including information on your app’s user base, engagement metrics, and how the partnership can benefit the brand. Propose various collaboration ideas, such as sponsored content, exclusive discounts, or in-app advertisements.

The fourth step is to negotiate terms: Discuss and finalize the terms of the partnership. This includes the duration of the sponsorship, financial arrangements (fixed fee, revenue share, or per-click payments), and specific promotional activities.

At this point, you are ready to take the fifth step, integrating the promoted content within your app. This could involve creating special sections for sponsored content, integrating brand logos, or developing exclusive features or challenges related to the partner's products.

Once the content is integrated, you and your partners can announce and promote it through your channels if necessary, and then monitor and observe the results of the partnership to see if it’s mutually beneficial and worth extending further.

Examples

One notable example is Strava, a fitness app that partners with athletic brands like Nike and The North Face. These partnerships not only presumably provide Strava with partnership revenue, but also enhance the app’s perceived value in the eyes of users, by offering exclusive content and challenges.

Another example is JustReachOut, a PR tool that leveraged partnerships with SEO communities like Traffic Think Tank to grow its user base by offering webinars and exclusive discounts.

Are these right for me?

If your app falls into one of these categories, it might be more suited to sponsorships and partnerships:

Niche Apps: Apps serving a specific community or interest, such as fitness, cooking, or travel, often find sponsorships and partnerships particularly effective. This is because these apps have a highly targeted user base that brands want to reach.
Large Apps: If your app has a substantial user base, brands might be keen to partner with you to tap into this audience.

Meanwhile, these types of apps may struggle:

General Utility Apps: Apps that serve broad purposes, such as productivity or utility apps, might find it challenging to attract relevant sponsorships that resonate with all users.
Apps with Diverse User Interests: If your app caters to a wide range of interests, finding sponsorships that appeal to your entire user base can be tricky and might dilute the app’s core value.

Crowdfunding

Definition & Mechanics

Crowdfunding is a method where app developers raise funds from a large group of people, typically via the internet, to support the development or enhancement of an app.

It uses the power of social media and online platforms to gather support from a community that believes in the idea.

The process typically involves:

creating a campaign page on a crowdfunding platform,
detailing the project,
setting a funding goal,
and offering rewards or incentives for different levels of contribution.

One pitfall to avoid is setting unrealistic expectations: overpromising on what you can offer just to entice users to contribute can lead to disappointment and distrust if the project fails to meet its goals or timelines. Try to be realistic.

Example

Although not a mobile app, the game Star Citizen has raised over $700M in crowdfunding so far. The developers continually engage with backers through detailed progress updates and playable modules, maintaining interest and trust. This example demonstrates the importance of ongoing communication and delivering incremental value to backers

Are these right for me?

The motivations of users that are likely to monetarily support a crowdfunded app make it lend itself better to certain types of apps:

Innovative Apps: Apps that introduce new technology or unique solutions without too much technological risk, creating excitement and attracting early adopters.
Community-Focused Apps: Projects that have a strong community or social cause resonate well with backers who feel they are contributing to something meaningful.

By contrast, this could work much worse for highly technical apps, which are prone to project delays and may find difficulty in communicating the concept to a wide variety of backers.

Data Monetization

Definition & Mechanics

Data monetization in the app industry involves collecting and selling anonymized user data to third-party companies.

This data is valuable for advertisers, marketers, and researchers who use it to understand consumer behavior and improve their products or services.

The process typically involves integrating a data monetization SDK (Software Development Kit) into your app, which collects specific data points while ensuring user anonymity and compliance with privacy regulations like GDPR.

Examples

The popular weather app WeatherBug monetizes its user data by selling anonymized information about weather conditions and user interactions with the app to third parties. This data is used to improve weather prediction models and provide targeted advertising.

Strava, a fitness tracking app, monetizes its user data by sharing anonymized activity data with city planners and transportation departments. This data helps improve infrastructure for cyclists and pedestrians.

Are these right for me?

The demands of data monetization make it much better suited to apps with a diverse appeal or large existing audience.

However, it can also be highly valuable in industries where user behavior and preferences are valuable to certain parties, such as fitness, navigation, and weather.

You must also have developers who are comfortable with integrating SDKs and ensuring compliance with privacy regulations, as violations, while rare, can carry costly penalties.

By contrast, apps with a small user base may struggle to generate meaningful revenue from data monetization. It might also not be an option for apps that handle sensitive information where even anonymized data might pose privacy risks, such as medical information.

Finally, it is worth noting that the subsegment of users who are highly privacy-conscious may be deterred by data monetization practices, which can carry a stigma, even if anonymized.

Conclusion

Choosing the right monetization strategies can make or break your app – either making your users feel like they are getting a steal, or alienating your user base entirely. Whether you choose in-app purchases, subscriptions, sponsorships, crowdfunding, or data monetization, make sure it fits the nature of your user base.

Don’t forget to always keep user experience in mind, be flexible, and adapt based on market trends and customer feedback. Ongoing adjustments to your strategy will ensure your app stays competitive and continues to get more profitable over time.