The mobile app market is growing by leaps and bounds. This huge industry is expanding every day, and its expansion will not stop soon. The army of developers is growing as fast as the number of apps. Revenues from the mobile apps industry undoubtedly break all records. This trend inspires many established and start-up entrepreneurs to consider releasing their own app with a clear goal – to make more money. But can a mobile app make you money, and how exactly can it do that?
Mobile app charging models
You have created a perfect app that has been downloaded by thousands of users in the first month. But wait, where’s the money? Your great idea and great mobile app don’t bring you any income? A correctly chosen charging strategy (“Monetization”) can help apps generate significant revenue. Wondering how much you can earn with your app? It depends on the strategy you use. There are two main charging models to choose from. Let’s take a closer look at each of them.
You have probably noticed there are apps with a premium character. These are the ones that cannot be downloaded without purchasing them. All you can explore first is a description, video, screenshots, and reviews. Convincing the user to download a paid app is a daunting task, so all materials must be very attractive.
However, daunting does not mean impossible. A real and successful proof is Minecraft Pocket Edition, for example. The game was launched in 2011 for $6.99 and became the most frequently downloaded paid app on Google Play.
This model hides payments within a “free” app. By default, users can enjoy the app’s basic features for free but have to pay for some advanced features. With this strategy, you have a better chance of converting your users into paying customers. This is because they can try out your solution, look at its benefits, and then invest in other functions. There are several ways to make money with apps through indirect sales:
You can sell ad banner space in your app through various ad networks. Revenue depends on the number of users, the quality of the ads, and the number of people who click on them. The more users you have, the more clicks and money you get. In addition, advertising means the possibility of applying another charging model – the user can “pay extra” for the version of the app that does not contain ads. Example: In 2013, Instagram implemented advertising in its app. With highly specific audience targeting, users receive ads on the platform and interact with them. Instagram ads have a conversion of 1.08% (source), compared to an average of 0.07% (source) for image ads. In 2019, Instagram earned $20 billion (source) from global mobile advertising revenue.
Sponsorship & Partnership
You can reach certain companies directly and suggest exclusive placement options for their ads. In partnerships, you work with another app or company with similar users. It’s a mutually beneficial relationship that helps both parties improve their offerings and attract more users. Example: The Nike + and Headspace partnership (“Mindfulness” apps) results are new voice-guided runs that, besides coaching from Nike’s professional and elite athletes, including Headspace expert advice to improve the running experience and help users enjoy their exercises. For both Nike and Headspace, this means more users who are also heavily involved.
A very popular charging model in the entire gaming industry. Those using the mobile gaming app can spend money unlocking a new vehicle, weapon, map, or another upgrade. In-app purchases within mobile games are a separate and very complex topic. Example: Pokémon GO is a gaming app that has generated $4 billion since its launch in 2016, despite being free. The mobile app sells “PokeCoins” – a virtual currency that can be spent on in-game enhancements that enhance the gaming experience.
You need two versions of the app for this charging model: basic and advanced. The goal is to offer a free version with basic features and a premium version that provides a better user experience, contains no ads, or offers some significant added value, unlike the free version. Example: Spotify offers a free version of its app that anyone can download and listen to online music for free. However, an ad, about 30 seconds long, runs between songs every 15 minutes. The premium version of this app, for which Spotify charges €6 per month, has no ads, and the user can download songs and listen to them offline.
Wondering which apps are at the forefront of mobile stores around the world? See the most profitable non-gaming apps of 2020 below in the table.
The best ways to make money using your app
After analyzing the effectiveness of all the above methods of direct or indirect sales, three methods that can work for each app were demonstrated. Sometimes, it is even better to use a combination.
If you are planning to develop your own app or have done so, the easiest way to charge for it is to charge for a subscription. The subscription is usually tied to a monthly or annual period, which is more cost-effective. This is by far the most popular charge and, according to statistics, allows app owners to earn 50% more than any other charge.
From a development viewpoint, this is a more complicated task. To be interested in renewing subscriptions repeatedly, you need to offer slightly better services and new features. This means constant development and updates, covered by a team of creative people and developers who continue to improve your app.
Creating an app with hidden purchases inside can be a great choice to support your current business or to create a new one from scratch. You’ve probably heard of the many apps that allow users to purchase virtual items that can only be used within the app itself.
Many gaming apps have been using this strategy for years, and they make a big profit. Some language learning platforms have also opted for such charging techniques. Let’s say you learn languages , and for each completed level or task, you get a certain number of virtual coins to spend on improvements in the app. It is an element of the so-called gamification, an effective tool for making money. For example, you can add something special to your app that users can buy for virtual coins. You can get them by using the app or buy them for real money. It really works!
Advertising is more complicated but still an effective technique. However, before using it, you should understand your target audience and offer relevant ads in particular. It takes time and effort, but it pays off. For example, if you have a music search app, it would be unwise and irrelevant to show your users washing accessories. However, if you advertise headphones or speakers, you can succeed.
In addition, you can benefit from advertising through partnerships with other apps or brands. You can charge them impressions (CPI), clicks (CPC), or ask them to promote your app. What’s even better is that you can set your ad as a required item in your app and charge a small amount to remove it.
How much to charge for your app?
One of the biggest mistakes you can make is setting the wrong app price. If you make your app a paid app, you need to think twice about whether it’s worth every penny you ask for. Put yourself in the user’s skin, be honest and answer whether you would buy the app for this price.
Before answering the question about the price tag, ask yourself these questions:
- What are the features of my mobile app?
- What added value does my mobile app bring to the user?
- Will the app be used daily?
- What category does my mobile app belong to?
- How much do competing apps cost?
- How many downloads do competing apps have?
Research and analyze your competitors’ products and charging strategies. Find all the main aspects and compare them. This information will help you choose the right charging model and ensure the financial success of your app.
Apps that make money
When you create an app, the first question is, which app to develop? You can start with what you like or what you think will be in demand. However, you should study the market first. According to Liftoff’s 2017 market analysis, gaming apps are the market leader and generate $34.8 billion in revenue annually.
Gaming is a popular industry, but not only such apps have the opportunity to become financially beneficial projects. There are many more interesting ideas for popular apps with which you can make money. Here are some:
- Sports, fitness, health, and travel apps (e.g. Nike Training Club)
- Personalization apps (icons, background images for the main and lock screens etc.)
- Mobile versions of magazines and newspapers (e.g. The New York Times)
- Shopping apps (e.g. Amazon)
- Internet of Things apps (for example, Bolt uses IoT to track the current location of their rented electric scooters and to authenticate their users)
- Social media apps (e.g. Facebook)
On mobile devices, we spend up to 90% of our time in apps. Most of this is occupied by segments such as social networks and music apps. The layout looks like this:
How much can you earn with your app?
A mobile app can be a good business if you do everything right. You may be wondering how much money apps make. For example, the revenue of Supercell, which developed “Clash of Clans”, is about $1,548,536 per day (source). King Digital Entertainment, the publisher of “Candy Crush”, earns $72,227 a day. Most gaming apps are free and charge for in-app purchases or include advertising.
According to available information, Match Group’s earnings, the developer of “Tinder”, was around $521 million in the third quarter of 2019 (source).
Here are some of Google’s best revenue apps – note this is just revenue on the Google Play side, the Android platform. Adequate revenues are also generated by the App Store on the iOS platform.
Which platform to choose?
Choosing the right platform for your app is very important. The App Store (iOS platform) and Google Play (Android platform) have the largest and most popular app market. When comparing these platforms (iOS and Android), the CPI (price per installation) in the App Store is 60% higher than in Google Play. CPR (price per registration) is 73% higher, and CP-IAP (in-app purchases price) is 30% higher in the App Store.
InMobi conducted a survey stating that by 2016, over 25% of iOS app operators had earned more than $5,000 a month, while only 16% of Android app operators had achieved this result.
However, Google Play does everything it can to stay competitive with the App Store from the viewpoint of developers and reduced the subscription fee for Google Play developers. In general, Google charges 30% of the price as a transaction fee for all in-app purchases and subscriptions.
However, the rules are changing to encourage developers to create engaging and lucrative apps. From January 1, 2018, the transaction fee was reduced from 30% to 15% for developers of those apps whose users have been subscribers for over 1 year (source). These changes are due to Apple’s new pricing policy introduced in 2016, which sets subscriptions as in-app purchases. The fee was also reduced from 30% to 15%.
The money you can make may depend directly on your decision as to which platform to develop your app first. It may seem like an easy decision, but in reality, it is difficult. IOS and Android users have different “digital habits” and each prefers a different type of app.
Suppose you are a retailer with a successful website and want to expand your business to mobile devices. In that case, you should be better oriented to iOS users, as they tend to shop online using their phones more often than Android users.
Apps in the Apple App Store generate almost twice as much revenue as those in the Google Play Store. According to a study by Appsflyer, iOS users spend an average of 2.5 times more on in-app purchases than Android users.
Cover new areas
Although mobile phones are probably the most popular smart devices today, don’t forget about other categories that can bring interesting profits. Here we are talking about apps for these devices:
- Wearables (smartwatches)
- Smart speakers (Alexa, Google Home)
- Video game consoles (PlayStation, Xbox and Wii)
- Smart TVs (giants like YouTube, Hulu, Amazon Video and many more already have Smart TV apps and make billions of dollars)
To get entirely new sources of revenue and differentiate yourself from the competition, offer more options for more devices.
Making money with an app is a good idea in 2021 as well. Mobile internet has become a common part of an individual’s smartphone equipment, and people are spending more and more time on their smartphones. The global pandemic and regulations on social distancing have only exacerbated this habit. The number of installed apps in ordinary people’s smartphones is increasing, and their use is becoming a norm.
With increasing competition, start-ups and business owners need to make a greater effort to get the user’s attention. The more time someone spends in the app, the more likely they are to buy something extra within the app. The main task of every developer is, therefore, to help you create the most attractive app possible.
Because the market for mobile apps is constantly growing and competition among developers is quite high, competition analysis is a must before any app development. All you need now is an idea that explodes in the app market – and we cover the professional technology!