How to Monetize an App [In 2023]

Summary

In this episode of Raw Startup, the founder of Vivino, the world's largest wine app, explores the top five strategies for monetizing apps in 2023. These include selling products or services, offering digital subscriptions, integrating advertising and sponsorships, selling digital goods or in-app purchases, and selling anonymized data. The video discusses the pros and cons of each method, emphasizing the importance of user privacy and compliance with regulations like GDPR. The founder shares insights from his experience, highlighting the complexity and potential of app monetization.

Takeaways

• 💡 The founder of Vivino shares insights on monetizing apps, highlighting that the app has remained free yet successful.
• 💼 There are multiple strategies to make money from apps, with the top five being product/service sales, digital subscriptions, advertising, digital goods, and data sales.
• 🛒 Selling products or services within an app can be done through affiliate marketing, marketplaces, drop shipping, or full e-commerce, with varying levels of complexity.
• 🌐 Digital subscriptions are popular for regularly used apps, offering a recurring revenue stream, but may not suit occasional use apps.
• 📺 Advertising in apps can be simple to implement with platforms like AdMob, but requires a large user base for significant revenue and can be intrusive.
• 🎮 Digital goods, often in-app purchases, are prevalent in gaming apps and can be consumable or non-consumable, offering one-time or recurring revenue.
• 🔒 Selling data can be lucrative, especially for industry-specific trends, but it's crucial to handle user data responsibly and comply with regulations like GDPR.
• 🚫 A strong emphasis on privacy is advised, with a warning against selling personal user data due to strict regulations and potential fines.
• 🤝 The founder suggests aligning with platforms like Apple, which prioritize user privacy, and to avoid third-party SDKs that might compromise it.
• 💰 Monetization strategies can be combined to cater to different user preferences, such as those willing to pay for an ad-free experience or purchase additional features.

Q & A

What is the primary question the founder of Vivino addresses in the video?

The founder addresses the question of how to make money from a free app, specifically discussing various monetization strategies for apps in 2023.

How many users does Vivino have according to the founder?

Vivino has over 60 million users worldwide.

What are the five biggest ways to make money off apps mentioned in the video?

The five ways are: 1) Selling products or services, 2) Digital subscriptions, 3) Advertising and sponsorships, 4) Selling digital goods, and 5) Selling data.

What is an example of a low complexity way to sell products through an app?

An example of a low complexity way to sell products through an app is through affiliate deals where the app sends buyers to another platform that handles the e-commerce.

What is the advantage of selling products or services within an app?

The advantage is that it can be a feature that doesn't get in the way of the app's primary function, and there's a potential for a big upside if customers buy a lot, with the app getting a cut of the sales.

Why is the digital subscription model popular for apps?

The digital subscription model is popular because it's suitable for apps that are used regularly and it provides a high margin, recurring, and predictable revenue stream.

What are some examples of apps that use the digital subscription model?

Examples include Netflix, Disney+, Max (formerly HBO Max), and various health and wellbeing apps like Reflectly, Strava, MyFitnessPal, and Headspace.

What are the potential downsides of using advertising and sponsorships as a monetization strategy?

The downsides include the potential intrusiveness of ads, the need for a large user base to generate significant revenue, and the fact that users often do not like ads.

How does the founder of Vivino feel about selling user data?

The founder is strongly against selling user data, emphasizing the importance of privacy and the legal risks associated with it, especially with regulations like GDPR.

What advice does the founder give regarding combining monetization strategies?

The founder suggests that often you can combine different monetization strategies to monetize different kinds of users, which can lead to a better overall revenue.

What is the founder's recommendation for app developers interested in selling data?

The founder recommends being very careful and only selling high-level, anonymized data. He warns against selling personal user data due to strict regulations and potential fines.

Outlines

00:00

💼 Monetizing Apps: Strategies and Examples

The founder of Vivino, a leading wine app, discusses the various methods to monetize apps, focusing on five primary strategies. These include selling products or services through in-app marketplaces or affiliate deals, offering digital subscriptions for regular app use, integrating advertising and sponsorships, selling digital goods like in-app purchases, and selling data while ensuring user privacy is maintained. Each method is analyzed for its complexity, scalability, and potential revenue, with examples provided such as Amazon, Booking.com, and Netflix. The founder emphasizes the importance of choosing a monetization strategy that aligns with the app's purpose and user experience.

05:00

📊 Data Monetization and User Privacy

The discussion concludes with a cautionary note on selling data, highlighting the importance of user privacy and legal compliance, especially with regulations like GDPR. The founder shares insights on how Vivino monetizes high-level, anonymized data without compromising user privacy. The segment also warns against selling personal user data, citing hefty fines imposed on companies like Meta. The founder advises app developers to be cautious, especially with third-party SDKs that may compromise privacy, and to prioritize building a good relationship with platforms like Apple, which values user privacy.

Keywords

💡Monetization

Monetization refers to the process of generating revenue from a product or service. In the context of the video, monetization is the central theme as the founder of Vivino explores various strategies to make money from a free app. The video discusses different monetization models such as selling products, digital subscriptions, advertising, and more, providing examples and insights into how each model can be effectively implemented.

💡Affiliate Marketing

Affiliate marketing is a strategy where an individual or company earns a commission by promoting another company's products or services. In the video, the founder mentions affiliate deals as a low-complexity way to monetize an app, where the app directs users to purchase products from other companies and earns a commission on each sale, as exemplified by Vivino's marketplace feature.

💡E-commerce

E-commerce, or electronic commerce, involves the buying and selling of goods or services using the internet, and it's a high-complexity method of monetization discussed in the video. The founder uses Amazon as an example of a full e-commerce model within an app, where the company operates a marketplace allowing users to buy a wide range of products directly through the app.

💡Digital Subscriptions

Digital subscriptions are a model where users pay a recurring fee, usually monthly or annually, to access premium content or services within an app. The video highlights this as a popular monetization strategy, especially for apps that are used regularly, with examples including Netflix, Disney+, and various health and fitness apps.

💡Advertising

Advertising within an app involves displaying promotional content, such as banners or interstitial ads, to users. The video explains that while this method is relatively easy to implement and can be lucrative with a large user base, it can also be intrusive and may not be well-received by users, thus requiring a balance to maintain user experience.

💡In-App Purchases

In-app purchases allow users to buy digital goods or services within an app, often used in gaming apps to buy additional features like skins or extra lives. The video distinguishes between consumables and non-consumables, with consumables offering a recurring revenue stream as users continually purchase them, similar to a subscription model.

💡Data Monetization

Data monetization is the process of generating revenue from the data collected through app usage. The video cautions that while selling high-level, anonymized data can be valuable, selling personal user data is illegal and unethical. The founder of Vivino mentions that they monetize by selling data about wine trends to the industry, but emphasizes the importance of adhering to privacy laws like GDPR.

💡Freemium Model

The freemium model is a business strategy where a basic version of an app is offered for free, but users can pay for additional features or services. The video discusses this as a common approach in digital subscription monetization, where users might start with a free app and then choose to pay for premium features, as seen in many streaming and utility apps.

💡Drop Shipping

Drop shipping is a retail fulfillment method where the seller does not keep the goods in stock but instead forwards the buyer's order to a third party, who then ships the goods directly to the buyer. The video mentions this as a medium-complexity method of selling products through an app, where the app facilitates the order but the actual shipping and logistics are handled by another party.

💡Marketplace

A marketplace within an app is a platform that allows multiple vendors to sell their products or services directly to consumers. The video uses Etsy and Amazon as examples of marketplaces, noting that this model can be complex to manage but offers a high potential for revenue if executed well.

💡GDPR

GDPR stands for General Data Protection Regulation, a regulation in EU law that aims to give individuals more control over their personal data and simplify the regulatory environment for international businesses. The video emphasizes the importance of GDPR, warning that selling personal data can result in severe fines, as illustrated by the example of Meta's $1.2 billion fine.

Highlights

Vivino, a free wine app, has been successful for 13 years, raising the question of how it monetizes without charging users.

There are multiple ways to monetize apps in 2023, with the top five strategies covering about 90% of current app revenue models.

Selling products or services within an app is a common monetization strategy, with varying levels of complexity.

Vivino operates a marketplace within its app, allowing users to purchase wine directly.

Non-physical products like hotel bookings, flights, or car rentals can also be sold through apps, as seen with Booking.com and Skyscanner.

Revenue from product sales typically comes from a commission on items sold through the app.

The complexity of selling within an app ranges from low for affiliate deals to high for full e-commerce operations.

Digital subscriptions are a popular monetization model, especially for apps used regularly.

Examples of apps with digital subscriptions include Netflix, Disney+, and various health and wellness apps.

Subscription pricing can vary widely, from a few dollars to over $20 per month, depending on the service and category.

Advertising and sponsorships within apps can be an easy way to generate revenue, but may require a large user base for significant income.

In-app purchases, or selling digital goods, are common in gaming apps and can include consumables and non-consumables.

Selling anonymized data can be a revenue stream for apps, but there are strict regulations and ethical considerations to avoid selling personal user data.

Combining multiple monetization strategies can cater to different user preferences and increase overall app revenue.

Vivino's founder emphasizes the importance of respecting user privacy and adhering to data protection regulations like GDPR.

The founder encourages viewers to explore creative monetization methods and to engage with the content by liking and subscribing.

Transcripts

- I started Vivino 13 years ago,

and always got the same question.

"The app is free, how the heck do you make money?"

That's what we're gonna talk about today,

how to make money from apps,

and there are many ways to make money,

to monetize an app in 2023.

This is Raw Startup. (upbeat music)

I'm the founder of Vivino, the world's largest wine app,

and wine community with over 60 million users

all over the world.

The app has always been free, and yet we're still here.

How the heck is that possible?

And yes, this is something I know a thing or two about.

We look at the biggest five ways to make money off apps,

and I will show you examples in every single category.

We look at how much money

there is to be made in each category,

as well as the good and the bad.

This list of five doesn't have all the ways

you can make money off apps,

but probably 90% of how money is made in apps today.

With that, let's get started.

Number one, sell products or services.

You basically facilitate the sale of a product or a service,

and this can be done in many ways

with very different complexities.

From a very low complexity affiliate deal

to full-on e-commerce in many countries.

Examples are Vivino,

we have a full marketplace in the app

where users can buy wine.

Amazon is another great example here.

This can also be done with nonphysical products,

like hotels, flights, or car rentals.

In that space, we have apps like booking.com and Skyscanner.

Usually you get a cut,

some kind of commission on everything sold through the app,

that's how you make money this way.

Let's have a look at how a sale can be made through an app,

and this is important because the complexity changes a lot.

Affiliate, basically sending buyers

to somebody else that does the e-commerce, complexity, low.

Marketplace, a marketplace with many vendors,

one good example here is Etsy,

but Amazon also has a marketplace, complexity, high.

Drop shipping, you take orders,

but somebody else does most of the shipping, et cetera,

complexity, medium.

Full e-commerce, you run a full e-commerce shop

just like Amazon, complexity, high.

Now, let's look of a look at the good and the bad

when it comes to selling stuff in your app,

and we're starting with the good.

It's a feature, and doesn't really get

in the way of your app.

There's a big upside if customers buy a lot,

and you get a cut of that.

The bad, can be low margin, really depends on the category.

Hard to scale, especially internationally.

Adds considerable complexity depending on the model.

All in all, this is a very complicated way

to make money off an app, and yes,

this is something I have extensive experience in.

Number two, digital subscriptions, and this is a big one,

have a paid digital subscription

where users pay monthly or annually.

This model is very popular for many reasons,

we'll get to that.

This model is especially good for apps

that are used on a regular basis,

monthly, weekly, or even daily.

Apps that use this model

that you probably have heard about already are Netflix,

Disney+, Max, used to be HBO Max,

as well as most other streaming apps.

And dating is a big category here.

We even did a full video on the dating app, Smitten,

check that out later.

There's also a lot of health and wellbeing apps

that use this model.

Apps like Reflectly, the journaling apps,

Strava, the biking app, MyFitness Pal for calorie counting,

Headspace, the meditation app, and many, many more.

When it comes to how is you charge, and what you you charge,

the strategies vary a little bit.

A very common way of doing it is having a free app,

then adding a few features, and you pay for that,

that's known as freemium.

Others are paid only,

maybe you get a short trial,

but then after that you have to pay to use the app.

Prices vary depending on the service,

value, and the category.

We see prices all the way from a few dollars a month

all the way up to 20, $30 every single month.

If you have a free app,

the number of users that are willing to pay

can vary from say one to 10%.

My impression is that most apps are between three and 5%.

Okay, let's have a look at the good and the bad.

The good, instantly global, high margin,

recurring and predictable.

The bad, not for occasional used products,

some markets and people just don't like subscriptions.

All in all, this is a fantastic way to monetize an app.

This is a reason why it's very, very popular.

Number three, advertising and sponsorships.

Basically putting ads or some kind of advertising

into the app,

it could look something like this, or even interstitial ads,

they take over the full screen and the user has to wait.

They're more intrusive, but they will pay better.

You will need some volume,

you'll need a lot of users to make money here,

or it can be very, very targeted.

Then you can make a little bit of money.

Showing ads to a small group of people.

Say 200 people is not gonna get you very far.

You will need a lot of users, but the usage is wide,

it's used in all kinds of different apps.

The good, pretty easy to do.

There are platforms like AdMob,

and it's a pretty simple way to make money.

The bad, can be intrusive.

Users often don't like banners,

and advertising in general takes a lot of volume

to get a good revenue,

usually millions of users before it becomes meaningful.

Number four, sell digital goods.

This is sometimes referred to as in app purchases.

Basically you pay something to unlock a feature

or get something special inside the app.

These days it's mostly used in games

where you can buy things like skins,

weapons, extra lives or turns, levels.

These are split into two categories,

consumables and non consumables.

Consumables are things that you buy, and then you use them,

and then you need a new one.

Non-consumables, you buy once, and that's it,

maybe it unlocks a feature or something like that.

The cool thing about consumables

is that people keep buying them.

It's almost like a subscription.

This can be used outside games,

but you have to be a little creative.

If you know any good examples, put them in the comments.

The good, instantly global.

There is a willingness to pay in certain categories,

especially games.

The bad, not recurring,

unless it's consumable, then they sort of keep coming.

This is a good way to monetize,

especially in certain categories.

Number five, sell data.

When you have an app, the usage of the app

usually generates some data,

and there might be people willing to pay for that.

With the Vivino for example,

we know a lot about what people like to drink,

what's trending upwards, and what's falling out of favor.

This data can have a lot of value for people

in the wine industry,

and it is something we make money from at Vivino.

All that said, please be very careful.

It's okay to sell some high level data,

but you can never sell user data.

We would never do that.

The rules are very strict, especially in Europe with GDPR,

those rules are coming in the US too.

I think California is leading the pack.

The EU will give you a massive fine

if you break those rules.

Meta just got a $1.2 billion fine for selling personal data,

so be very careful, or just don't do it.

On top of that, apple really values privacy.

They do not want you to sell any sort of user data.

You are making an app,

and you should really be friends with Apple.

Anonymized data about users and behaviors,

trends and so on is okay,

but any sort of user data is a no-go.

A lot of hustlers in this space,

they'll try to put some SDK into your app,

and sell the data, stay away from that.

And the good, doesn't get in the way of the product.

There is money to be made in some categories.

The bad, so many things, especially on what you sell,

so be careful here.

All in all, this is a bit of a minefield,

so if in doubt, don't do it.

Here's the list of the full monetization strategies.

Very often you can combine things,

and then you have a really good revenue.

This way you monetize different kinds of users.

Some users are willing to pay for the app,

others are willing to see ads.

If you know other creative ways of making money on apps,

please let me know in the comments.

If you want more content just like this,

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Thank you very much for watching Raw Startup.

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(upbeat music)