OK, let’s face it, if you are an app developer, you are not just building apps for fun, right? Building an app is a business where you need to earn money to keep going. But, with so many options available for monetization, which tactic should you adopt for your app?
If you know about the ups and downs on app monetization model from day one, you can easily prove that your customers are willing to pay to solve the problem you’ve identified for your app – this is a crucial part of validating an app idea.
There are actually three good pricing models that bring in all the revenue for apps. According to Distimo’s report, IAP revenue from freemium apps brought in the most revenue at 71%, with paid revenues following at 24%, while in-app revenues from paid apps are only at 5%.
If you launched your app using one of these monetization models, most likely you’ll have a greater chance at making more revenue than any other model.
Here’s what you need to know about each monetization models:
- Freemium App
This may not be just the most popular monetization option for Android apps, but it is the most revenue generating one, with in-app purchases raking in 90 percent in the Asian markets, according to Distimo’s report.
A freemium app is being offered free-of-charge to users with limited features. Users can access a premium version or any additional content and features via in-app purchase. This model has also been used for subscribing for monthly content updates. The free app with an in-app purchase removes the price point as a barrier for users to download an app and gives the developer the fighting chance to prove the value of their app or product.
You can offer premium or additional content or offer basic features for free and require your users to pay to use the complete functionality of your application. A good example of an app who uses this model is the British celebrity chef Jamie Oliver’s recipe app wherein it offers additional content and is updated every month for a subscription fee.
You may offer a free basic version of your app to your users so they can get a quick buy-in with least resistance. This allows them to buy additional features for a fixed price or a monthly subscription once they’re hooked and find value in your app.
- One-time Paid App
As its name suggests, you users pay just once to download your app. Updates, features, or any other additions are expected to be free.
If you want to launch an app using this model, it should be compelling enough for your users to pay to download it even without a demo. Also, there should not be repeat revenue from your existing customers. For a continuous revenue stream, you should look for new customers each time.
So how do you determine whether your app should be monetized using this model? Well, most paid apps offer the core value in the first download, followed by minor updates or design enhancements. Most productivity apps fall into this category. Take, for example, Clear.
- Paid Apps with added Paid Features.
This hybrid model has gained traction fairly recently, but not with its fair share of criticism. Many users feel that it’s not fair to pay to download an app and then pay more just to avail additional features. It’s kind of tricky for you to build on this, but if you do it cleverly with a value proposition, it may certainly work.
An example of an app for this strategy is the flight tracker app, Flight Radar Pro.
- Free Apps with Ads
While the abovementioned monetization models require the user to pay to use, one of the monetization models that Distimo has excluded from its research is a free app with advertising.
There are many apps that use this model of monetization. Take for example the Sleep Easily Meditations by Shazzie. The app is free to download and runs non-intrusive ads for as long as the app is in use. No wonder this app receives over 330 downloads daily and it runs for over 20 minutes every time it is used.
You only make money with apps when a large number of users download and use it on a very frequent basis. So choose a model for monetization wisely. Also, when making or developing apps, you should not overspend. You can try Appsgeyser as it can help you create Android apps easily for free.
While there are different options to monetize your app, the way to achieve continuous revenue stream is through repeated transactions from new and existing customers. The lifetime value of your customer will determine whether your app is a hobby or a business.