The truth of the matter is, if you’re a developer, you’re most likely not creating apps for the fun of it. Creating an app can be seen as a business venture where you will have to generate revenue to continue operating. However, there are quite several options to select when it comes to monetization, it can be quite confusing to know which one you need to choose for your application.
If you understand the peaks and valleys associated with app monetization, you would be able to seamlessly show your prospective uses that your app can solve a problem you have identified. This is an important aspect of validating your app idea.
When it comes to pricing models, there are 3 ways you can generate revenue for your app. Research has shown that the bulk of revenue is mostly generated from freemium apps, while paid revenue and in-app revenues derived from paid apps stand at 24% and 5% respectively. The question is, how to earn money from developing android apps?
The Monetization Models in Depth
When it comes to the most widespread monetization models for android apps, freemium is the least popular. This is surprising given that it is the only model that rakes in over 60% of the android app revenue. It is so large that in-app purchases from free apps generate about 90% of the revenue in the Asian app market.
A freemium app can be defined as an app that is offered to users for free with certain limited features. The premium version of the app tends to contain additional features and content. It might also come with an in-app purchase. This freemium model can also come with a subscription model for frequent content updates. Having the free app come with in-app purchases helps to eradicate the price point barrier that users might ordinarily face if they want to download an app. Additionally, it provides the developer a chance to highlight the value of their product or app.
The additional or premium content can be offered at a cost as the next tier to the basic features which are offered for free.
You could also choose to offer the free version of the app to prospective users so that they can become entrenched in the app as quickly as possible. This enables them to purchase extra features for a set price or for a monthly subscription the moment they become hooked to the value your app provides.
2. One Time Fee App
Just as the name suggests, this type of app requires users to simply pay a one-time fee to download the app. After this, features, updates, and any other additions should be free. If you aim to launch your app with this monetization model, you should understand that your app has to be sufficiently compelling to users that they download it without even having to witness a demo. Additionally, your current customers shouldn’t be a repeating source of revenue. In order to have a continuous stream of revenue, you will have to constantly search for new customers.
If you are wondering how to determine if your app needs to be monetized using this method, you can consider that the majority of the paid apps available on app stores offer an intrinsic value right from the very first download. And that value is continued with design enhancements or minor updates. The majority of productivity apps tend to fall into this group.
3. Paid Apps With Additional Paid Features Included
This monetization is a hybrid model that has recently gained traction; however, it has also received its own share of criticism. Numerous users believe that they should not have to pay to download an app, only to then pay some more money just to access some additional features. This monetization model is a bit tricky to utilize, however, if you do so cleverly and with value, it is something that could work.
4. Ads Included With Free Apps
While the previously mentioned monetization models require a user to pay to gain access to the app, this one is a wholly free app that contains advertising. There are quite some apps that utilize this monetization model. For one, the app does not cost anything to download, and the ads are non-intrusive, only running adverts so long as your app is being used.
Making money with your app
There are hundreds if not thousands of apps available out there for purchase, however, most of these apps do not make any money. This all stems from the fact that a couple of years ago, nearly everyone was creating android apps in the hope that they could cash in on the fact that Google had shown that the populace was into Android mobile apps. Quite a number of developers were attracted to this potential market prospect and in a bid to claim their own slice of the pie, decided to create a free app and earn money. This boom has considerably died down, however, the desire to learn how to make money from an app idea has blossomed, and the opportunities available to developers to create a free app and earn money are still there.
Research has shown that about $23 billion worth of apps were sold across multiple platforms last year, and if you were to take out the percentage that Google, Apple, and any other OS platforms get for placing the apps in their stores, you have about $18 billion going to the pocket of app developers. This does beg the question; how can you get the largest share of this revenue after you learn how to make money from an app idea?
The key to this answer is analyzing the revenue and sales of mobile apps. When whittled down, this revenue generation stems from the user engagement model, which when defined simply means the amount you charge for your app has to be based on how the users interact with it.
Low User Engagement
For example, if your apps are just used a couple of times, then having an add supported monetization model would make the least sense. You are unlikely to make more than a few pennies per app user. It would be better to charge an upfront price of $3.99 or 99 cents depending on your preference. this means that even if the amount you generate from these upfront app sales are a fraction of what you could gain from the ad-supported app, your overall revenue is likely to be higher.
High User Engagement
Alternatively, if the user engagement of an app is estimated to be quite high, irrespective of what type of app it is be it news, social feeds, sports scores, or any other information-oriented app, the advertising monetization model would make a lot more sense. This is because you are able to make a lot more money from the increased rate of impressions you get over the course of your app’s lifetime. The revenue generated would be much larger per impression compared to just charging a one-time fee upfront. That being said, when wondering how to make money from an app idea, you have to know that ad networks are notoriously difficult to get money from.
This is another factor that you have to consider. Free Android applications, with this classification also including freemium titles, are perhaps the easiest apps to market. The truth is, as humans we love fee stuff and we do not mind even if the “freeness” comes at the cost of the app developer making money from us. As stated earlier, marketing a free app is much easier to do compared to a paid app, however, your marketing costs should not be the sole focus of the app creation. You don’t want to end up enticing people that aren’t paying for apps, as well as those that simply use an app a couple of times and then abandon it. If you do then your revenues from in-app purchases or ads are likely to be a lot less than you estimated, causing the whole point of this exercise, which was to create a free app and earn money to be moot.
What this means is that regardless of your chosen pricing model, you have to remember that your app has to be good at its aim as that is the value that will cause users to engage with it. Quality is what matters when you are looking to gain users, increase user loyalty as well as referrals from colleagues and friends.