A hyper growth mindset has infiltrated every aspect of the App Economy. As we explored in Part 1 of this series, The App Economy and The User, growth metrics such as monthly active users (MAUs) have created perverse incentives for app publishers to the detriment of end user experience. In Part 2, we dissect how app publishers are growing their user base.

Houston, We Need to Grow

Your boss comes to you and says, “We need to get to 100,000 MAUs in 6 months.” What do you do?

This is exactly the situation that Sara Cole found herself in on her second day as Marketing Director for Eyecon Global. Cole’s challenge was exacerbated by the fact that she was working at a bootstrapped startup with significant resource constraints.

Cole met the challenge and was not only able to reach the  initial growth goal, but exponentially surpass it - over the next 24 months, Eyecon achieved 11 million downloads.

How did she do it?

Organic Growth

Cole’s first step was to work on growing organic downloads. That is, new users who cannot be directly attributed to an advertisement. For instance, if a user installs your app after browsing or searching the App Store, they would be considered organic.

App publishers can cultivate organic growth by honing keywords, tweaking marketing language, and making other improvements under the umbrella of app store optimization (ASO).

App store optimization (ASO) is the process of optimizing mobile apps for the purpose of achieving a higher rank in the app store search results and top charts rankings. Due to similarities with search engine optimization (SEO) for websites, app store optimization is also referred to as app store SEO, app search optimization, and mobile app SEO.  (Source: Meatti)

With the abundance of apps available, if a user simply downloads your app it is a meaningful signal that they are interested in what your app offers. Additionally, since these users aren’t gained from an advertising campaign they likely cost less to acquire.

While some evidence suggests that organic downloads are often better than other methods at retaining users, the industry has shown an unwillingness to depend on on organic growth alone.

With this in mind, ASO wasn’t the only approach Cole used. There was more she had to do to achieve her growth targets…

Paid Downloads

Increasing organic downloads through ASO and other marketing takes time. Due to this reality, purchasing app installs has become a generally accepted practice used by app publishers to generate growth.

Called cost per install (CPI), app publishers pay whenever an ad results in a new install of their app. Major CPI vendors include the usual suspects including Twitter and Facebook.

Silicon Valley firm AppLovin is another major leader in the paid download space. In 2016, a Chinese private equity company agreed to pay over $1.42 billion to acquire the firm - proof that the CPI market is big business.

Apple even participates in paid downloads by selling Apple Search Ads which feature prominently in the App Store.

According to Growth Bug’s Deepak Abbott, however, marketers boast about optimizing CPI (e.g. paying less per install), while not fully appreciating that doing so may lead to difficulty keeping such users active.

Abbott recommends app publishers use smarter metrics including cost per active user and monthly retention to inform how to focus resources.

Sara Cole confirms this approach. At Eyecon, she used A/B testing to strike a balance between keeping CPIs low and retaining users, but…

Churn and Growth Whack-a-Mole

Relying heavily on paid downloads or the wrong type of paid downloads can quickly turn problematic. It’s a bit like eating sugar. A little is not bad, but too much will deliver a short term kick followed by a very hard crash.

Imagine your boss walks in one day and says, “We need to grow faster!”  A typical solution might be to up your advertising spend because it generates more installs. The growth manager immediately gets to work and is excited to start executing campaigns that achieve a low CPI.

Installs increase. Crisis averted! - Reverse that. You’ve just arrived at churn. New users abandon your app as quickly as they installed it.

What’s the prescription for churn? Most of us have experienced apps that send way too many notifications reminding (read: begging) us to visit the app.

The solution for the user to rid the annoyance is to turn off notifications, right? Many of us have experienced the onslaught of emails that follow, pleading for our return to the app.

To compound the issue, app publishers often do not differentiate messaging for actively engaged users (low churn risk) from users who are less engaged (high churn risk). Instead, they panic and blast all users with one-size-fits-all messaging.

I experienced this first hand from a well-known meditation app. After a much needed meditation, I left the app and within minutes was disrupted by ‘re-engagement’ messaging. It was infuriating, not calming. Not only was the notification patronizing and counter to the entire point of meditation, it felt like an act of desperation by the app publisher. This wasn’t a one time occurrence and (so far) has resulted in less frequent use of the app.

The problem with over messaging is simple - Best case: Users tune you out which negatively impacts your monthly active user metric. Worst case: Users delete your app and you get churn.

This cycle is hard to break, especially in an ecosystem that is addicted to hyper growth based upon metrics that don’t account for quality of engagement.

"90% of our daily growth comes from organic and viral downloads." - Sara Cole, Marketing Director, Eyecon Global

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Ultimately, Eyecon’s Sara Cole ended up with a healthy organic growth story, meaning her company was well positioned to focus less on retaining low quality installs.

Until Next Time…

In Part 3, we’ll explore how to build a healthier relationship with our users by focusing on selling your app, not your users.

Join the Nami team at one of the premier indie iOS developer conferences. Learn about how the Nami platform can help you get the most out of Apple App Store subscriptions.

• Sun, Aug 25 - Wed Aug 28
• Grand Hyatt Denver, 1750 Welton Street, Denver, CO, 80202
• Learn more at https://www.360idev.com
  

SAN JOSE, Calif.--(BUSINESS WIRE)--Nami ML revealed the future of mobile app monetization to a packed audience of developers, investors, and industry heavyweights just a few blocks from Apple’s World Wide Developers Conference.

Using their cloud-based platform, Nami demonstrated how publishers can manage their mobile app paywalls, and optimize in-app revenue by utilizing Nami machine learning capabilities.

App publishers have struggled to convince their customers to subscribe in-app because existing do-it-yourself solutions offer little flexibility, contributing to the fact that fewer than 3,000 apps are making any real money on the app stores.

“The Nami Smart Paywall makes it easier than ever to generate mobile app subscription revenue by giving publishers more flexibility and control,” said Dan Burcaw, Co-Founder and CEO. “Plus we’re protecting user privacy using on-device intelligence.”

The patent-pending SaaS offering empowers app publishers to create customer journeys from the first run of an app through purchase. Once a developer installs Nami, marketing teams control the presentation of sales offers that guide the user toward conversion.

Nami automatically learns behaviors that signal a propensity to purchase which improves the user experience by reducing extraneous marketing noise thus increasing customer satisfaction.

“The mobile app industry is struggling to build a healthy paid customer base. We want to give app publishers the tools they need to win,” explained Joe Pezzillo, Co-Founder and Chairman.

This is the second company jointly founded by Burcaw and Pezzillo. Their prior startup, mobile notification provider Push IO, was sold to Oracle, where they helped build and sell the Oracle Marketing Cloud’s B2C mobile product.

Nami has raised a pre-seed round of more than half a million dollars from WndrCo alongside strategic investors with experience at Apple, Oracle, Samsung, WPP and more.

Additionally, Alejandro Cantarero, Ph.D. joins the company as CTO, after years of experience applying machine learning to monetize digital products, most recently as VP of Data at the LA Times.

Mobile app publishers can request an invite at: http://nami.ml

Nami ML is a trademark of Nami ML Inc., all other trademarks are property of their respective owners.

Something New from Dan & Joe

From the founders of Push IO, Dan & Joe have been in stealth working on something new. Be the first to see what we've been working to help app developers make more money. Get an exclusive sneak peek at an event near WWDC by emailing us.

WWDC19 Details

• Monday, June 3, 2019 - Friday, June 7, 20195:00 PM
• San Jose McEnery Convention Center150 West San Carlos Street, San Jose, CA, 95113United States (map)‍

What Are Subscription-Based Apps?

Subscription-based apps are applications that offer content, services, or features to users for a recurring fee, typically on a monthly or yearly basis. These apps can be found in a wide range of categories, including entertainment, fitness, productivity, news, and more. Unlike one-time purchase apps, subscription-based apps generate continuous revenue over time, providing businesses with a more predictable income stream.

By offering a subscription model, apps can provide users with ongoing access to premium content or features while fostering long-term customer relationships. With the growing popularity of services like streaming platforms, fitness tracking apps, and online learning tools, more and more developers are shifting to subscription-based models to capitalize on the trend.

👉Read More: The Power of Cross-Platform Subscriptions: How to Enhance Customer Retention and Boost Revenue

Benefits of Subscription-Based Apps

Consistent Revenue Stream

The most significant advantage of subscription-based apps is the ability to generate a steady, recurring revenue stream. This predictable income allows businesses to better forecast growth, plan for the future, and reinvest in app improvements. For businesses with a well-established user base, subscriptions can provide a reliable foundation for continued expansion.

Increased Customer Lifetime Value (CLV)

With subscription-based models, businesses can achieve a higher customer lifetime value (CLV). Rather than relying on one-time purchases, apps with a subscription model are able to generate revenue from users over an extended period of time. As users continue to subscribe to the service, the value they bring to the business compounds, creating opportunities for upselling, cross-selling, and retaining loyal customers.

Lower Churn Rates

By offering valuable content and features continuously, subscription-based apps can lower churn rates. Subscribers are more likely to stay if they feel they are consistently receiving value. Whether it's through frequent content updates, enhanced features, or tailored experiences, keeping users satisfied increases the likelihood that they will remain subscribed.

Scalability and Flexibility

Subscription-based apps can scale efficiently as user demand grows. With a subscription model, businesses can offer tiered pricing plans that cater to different user needs. From freemium plans with limited features to premium versions that unlock advanced functionalities, businesses can scale their offerings to match the evolving needs of users while driving more revenue.

👉Read More: Cross-Platform App Development: The Key to Building Scalable and Cost-Effective Apps

Popular App Categories for Subscription Models

The subscription model has become particularly effective across various app categories, where users seek continuous access to services or content. Below are some of the most popular categories for subscription-based apps:

Streaming Services

Streaming apps are some of the most well-known subscription-based models. Whether it's video content, music streaming, or podcasts, these apps generate significant revenue by offering users unlimited access to their content for a recurring fee. The success of platforms like Netflix and Spotify demonstrates how subscription-based models can disrupt traditional industries and create large-scale business opportunities.

Fitness and Wellness

Fitness and wellness apps are increasingly popular, offering users access to workout plans, nutrition guides, and wellness tracking tools. Apps like Peloton or Headspace have proven that people are willing to pay for personalized and ongoing fitness experiences. A subscription-based fitness model ensures users are committed to their fitness journey while generating consistent revenue for the app creators.

Educational and Learning Apps

Online education and learning platforms are also thriving under the subscription model. Apps that offer e-learning courses, study guides, or professional development tools can retain users through continuous content updates, certifications, and ongoing support. These apps cater to both individuals and businesses, making them a great source of sustainable income.

News and Magazines

News and magazine apps have increasingly shifted toward subscription-based models as users demand more personalized and ad-free content. By offering exclusive access to premium articles, reports, or special editions, businesses in this category can build a loyal user base willing to pay for timely and relevant content.

Key Strategies for Success in Subscription-Based Apps

Focus on Value-Added Features

To make your subscription-based app successful, ensure that it provides real value to your users. Value-added features like premium content, advanced tools, personalized recommendations, and improved user experiences can justify the recurring cost and make users feel that their subscription is worth the investment. The more value users perceive in the app, the more likely they are to remain subscribed.

Optimize Onboarding and User Experience

The onboarding process is crucial for turning free users into paid subscribers. A seamless, user-friendly experience ensures that users quickly see the benefits of subscribing. Walk users through the app’s features and show them how they can get the most value out of their subscription.

Providing easy navigation and delivering personalized experiences can significantly improve user retention and conversion rates.

Offer Flexible Pricing Plans

Flexible pricing plans allow businesses to cater to different types of users. Offering multiple tiers—such as a free plan, a basic subscription, and a premium plan—enables users to choose the level of access that best fits their needs and budget. A freemium model can also help attract users who may later upgrade to a paid plan once they see the value of your app.

Monetization Models for Subscription-Based Apps

In addition to offering subscription-based models, app developers can enhance monetization by integrating different revenue streams:

In-App Purchases

Incorporating in-app purchases can allow you to generate additional revenue even for free users. Whether it’s unlocking specific content, purchasing virtual goods, or adding extra features, these purchases can complement the subscription offering.

Advertisements

Advertising is another way to generate revenue within your subscription-based app. Offering users the option to remove ads with a premium subscription can help incentivize upgrades while still generating revenue from free users.

👉Read More: How to Set Up and Manage Purchase Approvals on Google Play

The Importance of Customer Retention in Subscription-Based Apps

Customer retention is at the heart of any subscription-based app strategy. The longer users stay subscribed, the more profitable they become. To increase retention, regularly update your app with new content, improve features, and maintain a consistent level of service. Retention can be boosted by personalizing the experience, offering discounts to long-term subscribers, or rewarding loyal users with exclusive perks.

Understanding why users leave your app and addressing these pain points is just as important as attracting new subscribers. With a focus on retention, businesses can maintain a steady, growing user base that generates long-term revenue.

Analytics and Optimization for Subscription-Based Apps

To improve the success of a subscription-based app, businesses should continuously monitor key metrics, such as:

• User Acquisition: Track how many new users are converting to paying subscribers.
• Churn Rate: Monitor the rate at which users cancel their subscriptions.
• Lifetime Value (LTV): Measure how much revenue each user generates over the course of their subscription.
• Engagement Metrics: Analyze how often and in what ways users interact with your app, helping you fine-tune the user experience.

By analyzing these metrics, businesses can optimize their subscription strategies, adjust pricing, and provide personalized content that enhances user loyalty.

Conclusion

Subscription-based apps offer businesses a powerful way to generate consistent revenue while fostering long-term customer relationships. By understanding the value of premium content, offering flexible pricing, and focusing on customer retention, developers can build a successful subscription model that thrives in today’s competitive app marketplace. With the right strategies and tools, your app can achieve sustainable growth and profitability.

FAQs

What is a subscription-based app?

A subscription-based app charges users a recurring fee for access to premium features, content, or services, typically on a monthly or yearly basis.

How can I make my subscription-based app successful?

Focus on offering real value through premium features, ensure an easy onboarding process, and offer flexible pricing plans to cater to different user needs.

What are the most popular types of subscription-based apps?

Popular categories for subscription-based apps include streaming services, fitness apps, educational platforms, and news or magazine apps.

How can I retain customers in a subscription-based app?

Focus on delivering consistent value, regularly updating content, offering personalized experiences, and analyzing user behavior to improve customer engagement and reduce churn.

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What Makes AVOD Unique?

AVOD (Advertising-Based Video on Demand) offers free content to viewers, monetised through the display of advertisements. Unlike SVOD (Subscription Video on Demand), which relies on subscription fees, or TVOD (Transactional Video on Demand), which charges viewers on a pay-per-view basis, AVOD allows users to access a wide range of content at no cost. In exchange, viewers are shown ads before, during, or after the content they are watching.

The key difference with AVOD is its accessibility—users don't need to pay anything upfront, making it an attractive option for a larger and more diverse audience. For advertisers, AVOD presents a valuable opportunity to reach a broad audience by delivering ads to viewers in a more targeted, digital environment.

Key Benefits of Advertising-Based Video on Demand

AVOD offers numerous advantages for both content providers and users:

For Content Providers:

• Scalable Revenue Stream: AVOD allows platforms to generate revenue based on the volume of views and the number of ads served. This makes it easier to scale, especially as the audience grows.
• Large Audience Reach: By removing the paywall, AVOD platforms attract a broader user base. More people are willing to watch content for free with ads, which leads to a wider range of potential advertisers.
• Low Barrier to Entry: AVOD offers users free access to content, lowering the barrier for new viewers to engage with the platform.

For Viewers:

• Free Content: The major appeal of AVOD for users is the ability to watch content without any payment. This opens access to movies, TV shows, and more without the need for subscriptions.
• Variety of Content: AVOD platforms often offer a diverse array of content, including niche genres, older films, and user-generated content that may not be available on premium subscription-based platforms.

👉Read More: What is TVOD (Transactional Video on Demand)? Key Insights and Benefits

AVOD vs. SVOD vs. TVOD: Which Model is Best?

When it comes to VOD (Video on Demand) models, AVOD, SVOD, and TVOD each offer unique benefits. Here’s a quick comparison:

AVOD (Advertising-Based Video on Demand)

• Monetisation: Free content supported by ads
• User Experience: Viewers watch ads in exchange for free access
• Audience: Large, diverse audience with no financial commitment
• Best For: Platforms seeking broad reach and scalability

SVOD (Subscription Video on Demand)

• Monetisation: Paid subscriptions (ad-free)
• User Experience: No ads, uninterrupted viewing
• Audience: Loyal, paying subscribers
• Best For: Platforms offering exclusive content and premium experiences

TVOD (Transactional Video on Demand)

• Monetisation: Pay-per-view model (rent or buy)
• User Experience: Users pay for individual content
• Audience: Viewers willing to pay for specific content (like new releases)
• Best For: Exclusive content, limited-time offers, or rentals

While AVOD is ideal for reaching a large, non-paying audience, SVOD and TVOD are better suited for users seeking premium or on-demand content with more specific revenue models.

How AVOD Works: A Deep Dive into the Process

Understanding the mechanics of AVOD helps content providers and advertisers harness its full potential. Here’s how AVOD typically operates:

1. Free Content Access: Viewers can access content for free, as long as they are willing to watch ads. This makes AVOD platforms highly attractive to viewers who are unwilling or unable to pay for subscriptions.
2. Ad Insertion: Ads are inserted before, during, or after content (pre-roll, mid-roll, post-roll). The frequency and length of ads depend on the platform’s model and viewer engagement.
3. Monetisation: Revenue is generated from advertisers who pay for ad placements. Ad rates can vary based on factors like viewer demographics, ad format, and placement within the content.
4. Targeted Advertising: Using user data and viewing behavior, AVOD platforms can serve highly targeted, relevant ads to different audience segments. This improves ad performance and overall revenue for platforms.

👉Read More: SVOD vs AVOD: Understanding the Key Differences in Video on Demand Models

Best Practices for Implementing AVOD

To successfully implement an AVOD model, content providers should follow best practices to balance user experience and ad revenue generation:

• Optimize Ad Placement: Ads should be strategically placed at natural content breaks, like scene transitions or between episodes, to minimise disruption and maintain viewer engagement.
• Limit Ad Frequency: Too many ads can drive viewers away. Striking a balance between ad frequency and content consumption is key to maintaining user satisfaction.
• Leverage Data for Targeting: Use viewer data to target specific demographics and viewing behaviors, ensuring that ads are relevant and effective for the audience.
• Offer Multiple Ad Formats: Providing a variety of ad formats, such as skippable or interactive ads, can increase engagement and improve the overall viewing experience.

How Advertisers Can Maximise AVOD Potential

For advertisers, AVOD platforms offer a unique opportunity to reach a wide audience with targeted messages. Here’s how they can make the most of AVOD advertising:

• Target Specific Audiences: By using data to understand viewers' preferences and behaviors, advertisers can serve highly relevant ads to specific audience segments, increasing the likelihood of engagement.
• Experiment with Interactive Ads: Interactive ads, where viewers can engage directly with the content (e.g., clicking on links or making purchases), can enhance user interaction and drive conversions.
• Measure and Optimize: Constantly monitor ad performance, including metrics like click-through rate (CTR), view-through rate (VTR), and revenue per thousand impressions (RPM), to fine-tune campaigns and improve ROI.

Tracking Success: How to Measure AVOD Performance

To evaluate the effectiveness of an AVOD strategy, it's essential to track key performance indicators (KPIs):

• Ad Impressions: The total number of ads served to users is a direct measure of ad exposure and potential revenue.
• Click-Through Rate (CTR): Measures how often viewers engage with ads by clicking on them, providing insight into ad relevance and effectiveness.
• Revenue Per Thousand Impressions (RPM): Calculates how much revenue is generated per 1,000 ad impressions, helping to assess the profitability of ad inventory.
• Viewer Retention: Keep track of how many users return to the platform and watch content again. High retention rates indicate that users are satisfied with the ad experience and the content offered.

👉Read More: What is VOD Streaming? A Comprehensive Guide to Video on Demand

Conclusion

AVOD (Advertising-Based Video on Demand) is an effective and scalable monetisation model for streaming platforms. By offering free content to viewers and generating revenue through targeted ads, AVOD provides content creators with a powerful way to reach a large audience. For advertisers, AVOD offers valuable opportunities to engage with consumers through highly targeted, interactive ads.

As the digital streaming landscape continues to evolve, the AVOD model will likely remain a key player in how content is monetised. By adopting best practices and measuring success with key metrics, content providers and advertisers can maximise the potential of AVOD to boost revenue, increase viewer engagement, and expand their audience reach.

FAQs

What is the difference between AVOD and SVOD?

AVOD is ad-supported and free for viewers, while SVOD requires users to pay a subscription fee for ad-free access to content.

Can AVOD generate significant revenue?

Yes, AVOD can generate substantial revenue, especially if the platform has a large user base and effective ad targeting strategies.

How can I optimise my AVOD platform for better performance?

To optimise AVOD, balance ad frequency, target ads effectively, and ensure that the ad experience doesn't disrupt the viewing process. Regularly measure performance metrics to refine your approach.

How can AVOD platforms attract a larger audience?

Offer high-quality content for free, ensure seamless user experience, and provide a mix of relevant ads to keep users engaged. The more attractive the content, the more likely it is to attract a wider audience.

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