iPhone Life magazine

How to Make Money with Mobile Apps

Warning: This article could provoke deep insight and ‘aha’ moments.

Developing a mobile app is a piece of cake if you have a good idea and a killer team of developers. But designing a foolproof monetization strategy that works — not just for you, but also for your users — is another challenge altogether.

Even though each monetization model can work incredibly well, the way you apply each strategy will make a noticeable difference to your bottom line. And let’s face it, if you can make another 20-30 percent revenue, then it’s worthwhile to read the rest of this article, right?

Below are three key monetization strategies for mobile apps:

1. Pay-Per-Download

Pay-per-download strategies are best deployed with apps like games, utilities, education, fitness, etc. However, if you’re using this strategy, it’s important to offer something that people really want and can’t get anywhere else to prompt the download. People rarely spend money on something they aren’t sure that they need or want.

Once you’ve built a brand of recognizable apps, people will become more inclined to download your apps on a pay-per-download basis.

When it comes to social media applications, charging users upfront is bad business. Just take a look at the top 10 social media apps (bar Zoosk and other dating apps), none of which use the PPD strategy.

Besides, Facebook already tried this and nearly lost a quarter of its users at the time.

You can make your social media app profitable by establishing a loyal user base and adding an online website (PC) to your system to run ads to generate revenue. This is a long-term strategy so I wouldn’t hold my breath to see that return on investment. You can add other monetization strategies later with future updates.

2. Free with Ads (Cost-Per-Click & Cost-Per-Mille Advertisements)

In a nut-shell, the CPC/CPM ads are the annoying little banner ads you accidentally click from time to time, opening your browser to a webpage almost completely unrelated to what you were just doing.

As annoying as them might be, they work. And this is how:

Every ad a user clicks (or taps by accident) earns the app owner x-amount of money and every thousand impressions (times an ad has been displayed on the screen) also earns the owner money.

The amount earned per click or thousand impressions varies depending on the ad. The way to use this strategy to make a lot of money is almost completely volume based. That means you need to optimize your banner and full-page ads to pop up as often as possible, but not in a way that is going to turn your users off.

It's not uncommon to see people using this strategy in conjunction with the PPD strategy, by pushing users into paying for a version of the app that has no ads. It's pretty basic, but it works.

3. Freemium (In-App Purchases)

The freemium model is a little more complicated, requiring in-app marketing and finesse. What this strategy does is allows users to utilisz the app in its full functionality, but lets users pay real money to improve their experience. This can be in the form of virtual items like coins, or credits to use within the app.
This strategy is commonly used by social games and in the states, this strategy alone, makes up for 78 percent of app revenue... not something you want to miss out on.
So how is it applied? Taking a game for example, users can pay to unlock new levels, features, get more money to buy upgrades for their character, etc. Basically, you can do whatever you want.
However, throughout the last 12 months it's become clear there is a limit to what you can do with in-app purchases before you start losing users. The rule of thumb is, don't get greedy. Let the user play the game in its entirety without having to make an in-app purchase, and capitalize on the extras - for the curious e.g. new outfits, etc. - and to make the game easier for those people who are lazy.
 
4. Combining Strategies to Monetize Your App
 
The social media giant Linkedin is a great example of an app that uses a killer monetization strategy. A clever group of people developed a system where professionals like you and me can jump online and build a network of connections from all industries around the world. LinkedIn is one of the fastest growing social media apps in the world with more than 200+ million active users. So it's doing something right.
 
This is how Linkedin makes its bread and butter, using two core revenue streams:
  1. An In-App-Purchase strategy where users subscribe to use premium services hidden within the system, and;
  2. An advanced cost-per-click and cost-per-mille system allowing any business to sign up as a user and advertise its services to its specific target market.

I also would like to share a basic strategy with you that I learned from big app developers like Rovio, @angrybirds. How do they monetize their apps? Check this out…

Step 1: Launch your app and charge your nominated fee (average fee on app store: $0.99);

Step 2: Deploy a free version of the app, which uses an ads strategy that pushes people into downloading the paid version of the app;

Step 3: The app allows users to make purchases (extras, unlock levels, hints, etc.) that improves the users’ experience.

There are truckloads of ways each of these strategies can be used and combined, and it really comes down to how creative you're willing to get. If you feel that a particular strategy isn’t working for you then rethink your approach and try something different.

Key Take-Aways:

  • Be careful how you monetize your mobile app. Not every monetization strategy works for every type of app;
  • Monetization rule of thumb: grow a large user base first, and then find a way to monetize it;
  • Pay-per-download apps get less downloads than free apps.

Next in Logan's App Development Series: Why Mobile Apps Fail

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Logan Merrick's picture
Logan is a tech junkie born and raised, with a strong interest in the wonderful world of app development. In fact, he both owns and works in a successful app development company in Melbourne, Australia, called Buzinga. He also develops his own mobile apps through his new app business, Lofty Interactive. Logan has been featured and published in Digital Marketing Monthly Magazine, App User, The Australian Appreneur, Channel 7, and Manhattan Media. He's also authored Getting Started with Your App, Advanced App Marketing 2.0 and The App Monetisation Guide, which are all available from the Buzinga website.