For apps to gain STAR STATUS, 2 things are needed: loyalty and monetisation.
We’ve already shared with you our tips for gaining loyal users, but we know you really want to hear about … the MONEY! Here’s an article we hope will get you laughing all the way to the bank!
The truth is, you need to do a little research before you can make good money on any app.
Apps can be monetised in 2 ways
1. Paid apps:
- A one shot purchase to download the app
- Freemium model: this can be thought of as the “Gated Features” version. The user gets to test run a free version of the app with limited features and can upgrade to use the full version of the app.
- Feature purchase: the app is free and products are sold within the app
2. Free apps
- Financed by advertising displayed inside the app
Paid vs. Free on the Playstore
In 2013, 80% of applications on the Google Playstore (and 60% on the Apple Store) were free. Going forward, the number of free apps continued to increase: 93% in 2015 and 94.5% in 2017. Today only about 7% of the apps are paid.
What’s the most popular way to monetise a paid app?
In 2011, 85% of revenue generated by those apps worldwide came from one shot purchases, 8% from feature purchases and 5% from advertising. These purchases represented 80% of apps in total.
But the trend is still evolving: in 2015, 59% of revenues were from one shot purchases, 30% were from feature purchases and 7% were from advertising.
What Payment model is right for your app?
ONE SHOT PAYMENT
Considering that there are over 1 million apps on the Play Store and the majority of them are free, you are taking a risk if asking for payment up front. It’s unlikely that someone will fork over their hard-earned money for your app if they can find an equally good alternative for free (know your competition!). It’s also asking a lot of a user to pay money for something that they’ve never used. You are better off proving to them how great you are before asking for payment.
Whatsapp provides a good case study: Whatsapp gives users the app for free for a whole year, and then they only charge a $0.99 annual fee (that’s peanuts for the user! Keeping your app affordable keeps users happy and can add up to a lot of revenue when you have a popular app!). This is a great example of getting users addicted to the service before charging. If you are confident you’re app is worth the money, paid apps are a safe bet because getting money for your app is a sure thing.
In 2013, of the 100 most profitable Android apps, 96% were using a freemium model (The money came from micro-transactions and/or advertising). Gaming apps have had success with this model. Users get addicted to the free version, and then can’t help but upgrade to keep their wins going.
|Works For||Doesn’t Work For|
|Apps with long sessions or advanced levels can understandably charge money for extra features.||Apps with free versions that are too basic. If your free version is too basic, users will not understand the value, and will not want to pay.|
Gartner expects in-app purchases be the leading form revenue for apps by 2017.
|Works for||Doesn’t work for|
||App developers who don’t want to split their earnings with the Play Store|
How much money can you make with your app?
The ARPU (Average revenue per user) changes depending on the category of the app, but the global ARPU (meaning for all apps globally) is at about $0.48 USD per active user per year in 2013. Of course, there’s always the dream that you are creating the next Flappy Bird, the app that generated $50,000 a day! We say, go for it!
Today, free apps are the most common. To earn money on free apps, developers increasingly use the advertising option.
Tech Crunch noted in 2012 that, ” a study by Cambridge University computer scientists found that 73% of apps in the Android marketplace were free, and of those, 80% relied on advertising as their main business model. Free apps are also far more popular in terms of downloads. Just 20% of paid apps are downloaded more than 100 times and only 0.2% of paid apps are downloaded more than 10,000 times. On the other hand, 20% of free apps get 10,000 or more downloads.”
In-App advertising allows your users to download and use the app for free in exchange for seeing ads posted while they use the app. Advertisers pay you, instead of the user. Since users don’t have to pay for the app, your user base is likely to grow faster, and remain loyal.
Even if it’s not yet a big source of revenue, advertising is definitely a key factor for the future of mobile apps revenue. In the battle for money, advertisers are much more willing to pay you than users are. Choosing in-app advertising allows you to focus on growing your users (who are happy to use your app for free), while money comes in from other sources.
As an app developer, you can also offer advertisers data information about the users. Just take care when selecting to work with advertisers; you want to make sure that the advertisements integrate nicely with your app and do not take away from the user experience.
We hope this helps you make a wise decision! Good luck!