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Mobile app monetization comes in various forms, but most commonly through in-app advertising and in-app purchases, according to a report from App Annie [download page]. The study, which is based on a survey of more than 1,200 app professionals, found that earning revenue within the app store through in-app purchases and paid downloads is the top goal companies have for their mobile apps.

Gaming companies are far more likely than non-gaming companies to offer in-app purchases and in-app advertising, per the report. That stands in contrast to previous research from AdColony, which found that among the 50 top-grossing apps, gaming ones were more likely to lean on in-app purchases and less likely to rely on advertising.

Non-gaming apps, for their part, are more likely than gaming apps to monetize using subscriptions purchased via the app store and through mobile commerce (transactions processed outside of the app store, such as Ebay and Uber).

Freemium’s Popular

The majority (58%) of companies that derive revenue from their apps use a freemium model, per the report.

Excluding apps that rely solely on in-app advertising for revenue, App Annie’s survey indicates that 71% of gaming companies use a freemium model, compared to 52% of apps excluding games.

The most common way of monetizing freemium mobile apps is through their functionality – where users pay for virtual items, speed-ups, content, add-ons, upgrades, services or capabilities.

How Many Users Pay?

Given their reliance on in-app purchases for revenue, apps’ monetization depends greatly on converting users to in-app purchasers.

App Annie asked respondents who offer in-app purchases to estimate the percentage of their monthly active users who make at least one such purchase each month.

Overall, 62% estimated that 5% or fewer monthly active users (MAUs) make an in-app purchase each month, and 77% overall estimated that 10% or fewer did so.

Those figures are similar to empirical data released last year by AppsFlyer: in its review of more than $300 million in transactions covering more than 1,000 apps with purchase activity, the study found that 5.2% of app users around the world make monthly in-app purchases.

Video Ads Provide Results, But At What Cost?

The App Annie report reveals that video ads generate the most ad-based revenue for app professionals, followed by static banner ads and static full screen ads. That follows from an AdColony report, in which top-grossing app developers pointed to rewarded video ads as being the most effective ad format for monetization.

But while respondents to the AdColony survey also believe that rewarded video ads have a solid user experience, the app professionals responding to App Annie’s survey aren’t so sure about video ads as a whole.

Indeed, 74% believe that video ads have either a minor (40%) or significant (34%) negative impact on the user experience. As such, they tend to have a more negative impact than static banner ads and native ads, per respondents.

The format with the worst impact? Static full-screen ads: fully 90% consider them to have a minor (47%) or significant (43%) negative impact on the user experience.

The App Annie report can be downloaded here.

About the Data: The results are based on a survey of more than 1,200 app professionals, including developers, marketers and executive management, from more than a dozen industries. The companies represented are headquartered in the Americas (34%), EMEA (46%) and APAC (20%).

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