Developers create applications for different purposes. Someone wants to increase the amount of loyal audience, raise brand awareness of their company, someone wants to get more customers, but almost all of them want to earn money. Immediately. Usually, mobile applications are just an additional marketing channel for the brand. In many cases, it starts working after launch so a very efficient one.
At the moment, indie developers create apps on their own because they want to join the market where are published applications like WhatsApp that cost billions of dollars. This sphere really gives a chance to make money. So let’s review the available business models for mobile applications in this article. We will focus on the most probated methods for monetizing applications that have proved their effectiveness more than once or twice.
How to choose the right business model for your application?
Below, we will look at six of the most popular and profitable ways of monetization. But before that, let’s try to answer a few questions that will help determine the right choice. This is a strategic step which is more valuable than any other one.
1. What is the problem you want to solve?
2. How does your application solve this problem?
3. Is your application unique and why should people pay for it?
4. How useful can be any type of monetization you have chosen (will choose) for this application?
5. How much time do you have?
It is also important to determine the balance between your desire to acquire more users with the desire to earn money. Because there are methods of monetization that will let you earn money immediately after the release, while other models provide a gradual set of user audience with the ability to monetize in future. Would you mind to refrain from monetizing the application to gain a user base first?
Remember, the monetization plan should be developed and implemented in the application before the release. In this case, the methods of monetization, which are described below, can be combined, it is not necessary to use only one of them.
“Free” apps that contain ads
This is one of the most simple & common ways to earn money from your mobile app. There are no restrictions on downloading. No costs on publishing the app to the iTunes or Google Play. The goal of the developer is to get as many users as possible. Data on their behaviour are then analyzed and provided to advertisers willing to pay for advertising. Pretty simple, huh?
A mobile Facebook application is an ideal example of using this model. Users do not pay anything to the social network, but Facebook collects huge amounts of data about its users, then launches targeted ads. In this case, the model is extremely effective – just take a look at the companies capitalization!
An example of Facebook ads:
Conclusion: you will earn money by providing an ad slot in your application. It can be a video ad (skippable, unskippable), static pictures, 360 video ads, playable ads, custom HTML creatives containing a mix of functionality.
Advantages: A free mobile application can very quickly acquire a solid user base. No costs on maintaining the distribution, payments to app stores etc. The volume of the mobile advertising market has already surpassed the volume of the traditional advertising market on the radio, in magazines, newspapers. A popular application is able to collect & sell the user data. It can be the behavioural patterns of users, their preferences, which can be useful to many advertisers.
Drawbacks: This is a very well-known strategy of monetization and many users are annoyed by ads, especially non-user initiated. That leads to the low retention rate. Mobile advertising is limited to the screen size of the device. This method of monetization does not work for niche programs that are designed to help the user perform a limited number of functions (advertising may look unnatural in a Holy Bible app etc).
A unique business model that enabled more levels (features) on a paid basis. It is one of the main ones for the popular worldwide apps. As a rule, Freemium-application has a set of basic or additional functions that the user can purchase for a real money. The goal is to attract users to the free version of the application. Over time, the users want more and they start to buy additional features. You need a large number of users that have the interest to play your application for a long time.
An excellent example of it is the game Angry Birds. A company called Rovio provides the application for free. But some features are blocked until you make a payment. Those features are additional levels, empowerment of birds etc. The game is really exciting, which is why users play it for months and some spent a decent amount of money.
Conclusion: Freemium is a model where you acquire users to the basic version of the application. But then users should pay money for the additional opportunities: levels, weapons, health etc.
Advantages: This way of earning money from the application allows you to build a user base in a relatively short time similarly to ads monetization. People pay you the money, most likely, can be your “clients” for a long time and become loyal users. You can use their data (preferences) to get even more money later on! It’s a very flexible solution that can be used in an overwhelming number of applications. Can be combined with the use of the advertising model if some segment of users does not wish to pay.
Drawbacks: If you offer too few basic functions, users will not retain to make in-app purchases. If there are too many basic functions, users will not buy additional ones as more likely would be confused with the variety of choices.
Paid apps distribution
Another business model is based on paid apps distribution. A payment is required to be made in order to gain access to the application. The cost can differ from $ 0.99 to $ 999.99 and the developer receives money from each new user. More users = more money. The key to success is the developer’s ability to present the application’s capabilities in a good way so that the buyer is interested in the very beginning. In the catalogue, as a rule, the “killer-features“ of the program are indicated.
An example of a successful application with this application monetization model is Calendar 5 sold at $ 4.99 per install. The program is positioned as a smart calendar for corporate tasks and important events. The author of the application was capable to convince users that Calendar 5 is better than the Android calendar (default one).
Conclusion: paid app business model follows the principle of “pay then use”. If you are confident with the unique value of your app then feel free to distribute it on a paid basis. Most of the developers who choose paid application distribution use advertisement through social networks, search engines, in-app advertisement or mobile website promotion.
Advantages: You get money for every download immediately. People who paid for the application are likely to use it often – because the money has already been spent. In some sense, they are forced with the own choice. In a paid application you should not use any advertising that can annoy users so they should be loyal to your product. The model motivates developers to pay maximum attention to the promotion and simplifies the calculation of ROI.
Drawbacks: It’s quite hard to sell applications because the competition in the iTunes/Google Play is very high. Consider this my own estimation, but more than 90% of paid programs are downloaded less than 1’000 times per day.
Applications that are monetized in this way sell two types of products – virtual or real. It can be anything: clothing, accessories, books, candies etc. But often they are virtual goods, for example, cryptocurrency, game currency, online course, promo code for or a gift cards etc. Usually, game developers sell in-game products such as weapons, new life in case of death, other benefits compared to other players.
An example is a MeetMe program. A social app with the ability to purchase certain products and services. For example, to increase the visibility of your profile you need to pay a certain amount. Developers get a good income thanks to this business model.
Conclusion: this type of business model allows you to open another channel for the sales of your products/services. In addition, it can be a way to make money in the gaming application – sell in-game currency and various kinds of bonuses. It can be even combined with a freemium model, ads monetization or even both of them at the same time!
Advantages: A fairly flexible business model that can be successfully used by companies operating in eCommerce / mCommerce. In-game purchases are a great way to sell goods or services with minimal risk. The possibility of acquiring virtual goods can increase the degree of loyalty of the user. The margin is usually quite high because sellers do not spend incidental costs for renting store areas.
Drawbacks: Application catalogues take away part of the revenue from the sale of virtual (but not real) products purchased within the program. Most of the users need more than 20 days before making in-game purchases. So you should be patient unless you run a CPA campaign.
The conclusion of the money earning ways website regardin application monetization
Now the ecosystem of applications is becoming more complex and diverse. You can expect the creation of new ways of monetization. Some of them will be performed as a combination of the business models mentioned above. So please, do not repeat somebodies actions. Try to combine different models of application monetization, adapt them for your application and be creative!