Ever wondered exactly how the apps make money? How do their developers and designers earn profits? Well, there are several business models that yield sizeable income. The selection of the right business model can be determined once you have all the details and specifications of your future app determined with your development team.
This is perhaps the single most burning question placed in the meetings with developers. Depending on the idea and the target audience of the app, your development team will suggest a couple or more business models. Deciding on this feature in the early stages of app design will radically change the coding and integration of the app. In this article, we discuss the fundamentals of the app business models. Towards the end of this article, you should have a sound idea on how to earn money on your mobile app.
The basic factor that is determined when allocating a business model to the app is whether the app would support traffic. Does your app allow the organic traffic methods that are available in the app store or would you be spending significant dollars to pull that traffic to your app? Or would your app be combining leads with sales? Whatever the case, you do have a lot of opportunities to optimize your app and generate profits.
Try to answer these basic questions before you begin reading:
- Problem: What problem is your app trying to solve and how?
- Uniqueness: What makes your app stand out and how will people pay for it?
- Features: What key features will your users be willing to pay for?
- Competitors: What business models are your competitors using and how well have they worked for them?
Let’s look at the six most commonly used business models. Remember, you can use a combination of each of these models for the unique needs of your app.
Six Mobile App Monetization Business Models
Freemiums with in-app advertising
In this model, you give away your app for free. User’s love these kind of apps. But that doesn’t stop the money coming to you! With each free download, your app will be able to access data from the user’s smartphone. This data includes email address, gender, age, occupation and sometimes location. This valuable information is used to provide highly customized advertisements to your user. With each click into the ad your user makes, you get paid by the advertiser.
Freemiums attract a sizeable customer base. This enables your app to collect more data on more people. A good example here is Facebook that leverages a vast amount of data to sell highly targeted ads. A word of caution here: use moderate advertisements. Users do not like to be bombarded with ads!
Freemium with in-app sales
This business model is similar to the above model, the only difference is the in-app purchases that bring in revenue. Basically, your users download the app for free but will need to pay in order to use its premium features. This works really well for most users because it enables them to get the “look and feel” of the app. If they find the app and its locked features useful, they are very likely to purchase its features. A cleverly designed app can earn a good income in this way. The more negating your app is, the more users will download your app and willing to pay for the locked features.
Angry Birds describes this business model aptly. The app is highly addictive. It’s free to download but users need to purchase features to move across levels. The trick here was to allow the users to access a few levels for free. If you allow too less features for free, your users won’t be convinced to purchase the closed features. Once they are hooked, they are willing to make purchases.
Apps that Charge on Download
Simply put – these apps cannot be downloaded unless you pay for them. Paid apps can cost anywhere between $0.99 to $999.99. Your app makes money upfront and then enables users to enjoy its features. How can you convince your users to pay for your app? You would need to showcase a few winning screenshots of your app functionality. They should demonstrate a problem being solved effectively. If possible, a comparison to the failed apps. The beginner customer base should award a minimum 4.5 to 5 star rating to your app. Numerous popular apps have used this “pay then play” strategy. The key is to market and position the app optimally.
This app monetization strategy involves selling goods, services or virtual goods within your app. These also deal with virtual currency – a model increasingly earning fame. Social apps have a lot of in-app purchases that have become a natural part of the app engagement experience. The goal here is to create an app that is an online store-front – a center for selling multiple goods and services. These apps support the eCommerce and mCommerce efforts of other businesses. It’s a powerful way of generating revenue because brands selling their goods on your app without worrying about the brick-and-mortar rent costs. Affiliate marketing is also utilised in these apps.
The freemium business model is similar to the subscriptions business model – except for one difference. The subscription model blocks content instead of app features. Users would need to pay in order to access content. This model is best suited for service focused apps. It enables brands to earn on regular basis. Subscriptions allow users to experience the app to their satisfaction before they urge them to pay. The payment schedule ranges from weekly, monthly or yearly, depending on your setup. Subscribers usually yield a loyal customer base.
A sponsorship business model involves partnering with advertisers who provide the users the rewards for completing selected in-app actions. Many brands and businesses participate in this model to incentivize the app. The app earns money by earning and redeeming rewards and a customer base. Advertisements are an integral part of this app.
Can you actually earn money on mobile apps?
The best advice on monetizing your app is to emulate what has been done before. Research on current best practices for your region. Determine which business model has generated the most revenue. Also correlate what types of apps work with what types of business models. With the right planning and strategy, it is definitely possible to earn money on your mobile apps.