Understanding App Features, Business Models, and Monetization Strategies: Insights from Fredrick Adams at App Summit 2024

At the recently concluded App Summit 2024 hosted by Fintech Magazine Africa, Fredrick Manafen Adams, Co-founder and Product Consultant at Bankly, shared his expertise on what it takes to create successful mobile applications.

Speaking on the topic, “Monetization Strategies for Apps: From Freemium Models to Subscription Models”,  Fredrick explained the concept of apps as software programs designed to perform specific functions directly for users. He highlighted that apps could be categorized by their function or platform, listing types such as native apps, web apps, hybrid apps, and further dividing them into consumer apps, enterprise apps, utility apps, and specialized apps.

He discussed extensively on app features, breaking them down into basic, core, and delightful features. Also, he noted that functional features enhance usability, foundational functionalities define an app’s purpose, and unexpected additions like Tinder Swipe or AI-generated playlists in Spotify improve user experience. Fredrick also explained feature gating, which he described as a method of controlling user access to features based on specific criteria, such as subscription tiers or user roles. According to him, this approach allows companies to manage feature rollouts and tailor access to features, ensuring customers pay for what they require. He added that implementing feature gating requires robust infrastructure, including user authentication and subscription management systems.

Notably, he emphasized that monetizing app features relies on understanding the value exchange, tailoring features and pricing strategies to users’ needs, and ensuring users perceive value quickly, which could enhance conversion rates.

He elaborated on various business models for apps which include the following:

• The freemium model, which offers a free version with limited features while encouraging users to upgrade to paid tiers for full functionality, citing Spotify and Dropbox as examples.
• The subscription model, involving recurring fees for access, with Netflix and Adobe Creative Cloud being prime examples.
• The pay-per-use model, where users are charged based on actual usage, as seen in AWS and Google Cloud Platform.
• The one-time purchase model, which offers perpetual access to software after a single payment, like Microsoft Office (pre-365).
• Ad-supported apps, which generate revenue through ads, as seen in YouTube and Facebook.
• In-app purchases, where users can buy virtual goods or premium content, exemplified by Candy Crush and Fortnite.

The co-founder of Bankly further described hybrid models, such as combining freemium with ad-supported features, as seen in Duolingo. He mentioned B2B licensing, where apps are licensed to enterprises for multi-user access, and open-source models, funded by voluntary donations, such as Mozilla Firefox.

He also detailed models like:

• Affiliate/referral programs, generating revenue through third-party links (e.g., Amazon Associates).
• Bundled services, offering apps as part of packages (e.g., Microsoft 365).
• Consulting or service-enhanced models, complementing apps with professional services (e.g., Salesforce).
• Product-led growth models, focusing on great free or low-cost experiences to drive growth, with examples like Zoom and Canva.

In the context of consumer apps, Fredrick explained that these focus on engaging users, driving virality, and creating habit-forming experiences. Monetization strategies included ad-supported models like Facebook, freemium features like Snapchat+, and subscription models such as Twitter/X Premium.

For entertainment apps, he highlighted subscription services like Netflix, pay-per-view models like Amazon Prime rentals, and merchandising tied to the app’s brand, as seen with Disney+. He also mentioned gaming apps, which often use freemium models with microtransactions, citing Candy Crush, and the use of season or battle passes for ongoing engagement.

Lastly, Fredrick addressed innovative models like hardware-software integration, on-demand services, tokenization, and cryptocurrency-based ecosystems, referencing Fitbit, DoorDash, and Axie Infinity as examples. He concluded by emphasizing the importance of aligning app features and pricing strategies with user needs to optimize monetization and enhance user satisfaction.