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# How to Build a Monetization Strategy Based on User's in-app Behavior

Gracefully integrating ads doesn't ruin your app; it actually increases retention and paying users. Learn to build a hybrid monetization strategy driven by granular in-app behavioral data.

- **Speakers:** Natalie Sieradzki
- **Event:** World Congress 2021
- **Published:** July 1, 2021
- **Duration:** 38:59
- **URL:** https://www.wearedevelopers.com/videos/174-how-to-build-a-monetization-strategy-based-on-user-s-in-app-behavior

## Summary

Building a successful application monetization strategy requires moving beyond blank-slate pricing and instead deeply integrating user behavior data. Because monetization is fundamentally a consequence of engagement, developers must first focus on guiding users through a seamless journey from initial onboarding to long-term retention. A positive first-time user experience—where individuals quickly hit an "aha moment" and learn core mechanics—can increase Day 1 retention and boost the likelihood to pay by up to 21%. By pinpointing an app's specific "activation metric," such as a core action that highly engaged users consistently share early on, software creators can intentionally nudge new signups toward that exact behavior.

Once onboarded, retaining users relies on building habit loops through targeted external triggers, like personalized push notifications, and addressing core human motivations. Embedding the self-determination theory into UI and UX design fulfills psychological needs for competence, autonomy, and relatedness using frameworks like gamification, the endowed progress effect, and social proof. Leveraging quantitative analytics platforms allows engineering and product teams to segment their audience into robust behavioral cohorts. While highly engaged purchasers require specific funnels to drive repurchasing, a vast majority of users will remain non-purchasers, requiring developers to bridge the value gap through alternative revenue streams.

Because historically only about 5% of app users convert via direct in-app purchases, adopting a hybrid monetization model that intelligently pairs direct purchases with ad formats is essential. Counter to common developmental fears, gracefully implementing integrated ad layers like app open, native, banners, and rewarded video can actually increase retention and the overall volume of paying users. By mapping ad placements to specific granular tracking data—such as enforcing a "grace period" before serving ads, dynamically adjusting ad density to monitor the retention curve, or leveraging completion bias through rewarded soft currency—developers can effectively monetize their entire user base while preserving a premium software experience.

**Keywords:** app monetization strategies, user behavior analytics, mobile app onboarding, day one retention metrics, user activation metrics, DAU/MAU stickiness, hybrid monetization models, in-app purchases, rewarded ad placements, user cohort segmentation, UX self-determination theory, app engagement gamification, ad density experimentation, interstitial ad formats, completion bias design, push notification strategy

## Chapters

1. **Learning from consumer behavior for pricing strategies** (00:26) — A streaming company example illustrates how pricing adapted to market piracy drives mass user growth and revenue.
1. **Leveraging user data to drive engagement and monetization** (02:57) — Tracking in-app behavior data and segmenting users enables targeted engagement, which acts as the foundation for effective monetization.
1. **Designing onboarding experiences to boost retention and revenue** (04:34) — A positive onboarding experience critically impacts day-one retention and increases the overall likelihood of user payments.
1. **Measuring onboarding success with funnels and retention logic** (06:22) — Tracking funnel completion rates and day-one retention reveals optimization opportunities in the initial user experience.
1. **Best practices for successful user onboarding and activation** (08:03) — Finding activation metrics, demonstrating upfront value, and personalizing the flow can significantly nudge users toward long-term usage.
1. **Correlating deeper app engagement with higher monetization success** (11:25) — Increased minutes engaged consistently translates into a higher probability of users spending money within the application.
1. **Identifying highly engaged app users through behavior metrics** (13:21) — App stickiness, ideal session lengths, and core mechanics interactions help developers locate their most valuable user segments.
1. **Applying psychology and triggers to sustain user engagement** (15:58) — External triggers, self-determination theory principles, and variable rewards effectively bridge the gap between low and high user engagement.
1. **Differentiating strategies for purchasers and non-purchasers effectively** (22:11) — Analytics data allows applications to target distinct user segments to drive initial conversions or encourage repeat transactions.
1. **Implementing hybrid ad models to monetize non-purchasers** (24:28) — Thoughtfully placed in-app advertisements can maintain or even boost retention while converting non-paying users into revenue sources.
1. **Understanding common ad formats for mobile applications** (28:02) — Developers can choose between banners, interstitials, native designs, rewarded spots, and app-open formats to preserve the user experience.
1. **Shaping ad strategies around user time and traffic** (30:12) — Applying grace periods, interpreting session lengths, and targeting high-traffic screens ensures ad placements complement natural user behaviors.
1. **Optimizing ad density and rewards for user retention** (33:13) — Experimenting with the volume of ads shown daily and adjusting variable rewards prevents churn and sustains positive engagement.
1. **Crafting attractive rewarded ad experiences for users** (36:13) — Offering premium features, virtual currencies, or temporary upgrades motivates non-paying users to interact with voluntary advertisements.

## Related Moments

- [Leveraging dopamine and confirmation bias for user retention](https://www.wearedevelopers.com/videos/1584-the-irresistible-ux-the-psychology-of-brainwaves-and-clickbait) (from "The irresistible UX: the psychology of brainwaves and clickbait")
- [Gamification and collaboration techniques that drive product retention](https://www.wearedevelopers.com/videos/1423-the-retention-flywheel-designing-products-people-don-t-want-to-leave) (from "The retention flywheel: designing products people don’t want to leave")
- [Shifting product strategy from acquisition to a belonging mindset](https://www.wearedevelopers.com/videos/1423-the-retention-flywheel-designing-products-people-don-t-want-to-leave) (from "The retention flywheel: designing products people don’t want to leave")
- [Tracking retention through essential user lifecycle metrics](https://www.wearedevelopers.com/videos/1423-the-retention-flywheel-designing-products-people-don-t-want-to-leave) (from "The retention flywheel: designing products people don’t want to leave")
- [Exploring emergent monetization models and usage-based billing structures](https://www.wearedevelopers.com/videos/2120-chatgpt-apps-from-chat-to-checkout) (from "ChatGPT Apps: From Chat to Checkout")
- [Shifting data analytics from monetization to player experience design](https://www.wearedevelopers.com/videos/176-how-data-is-shaping-our-games) (from "How Data is Shaping our Games")

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