Developing mobile apps can be your passion or what you do for fun and challenge. Ultimately, it is a business and you need money to come in to keep doing what you do.
With the number of people joining the growing trend of developing mobile apps, many are wondering if doing the same thing will be worth their while. Some apps are made available for free download, how do you make money and gain profit?
Developing mobile apps is not cheap, so questions like this are legitimate. According to reports, cost of developing mobile apps can range from $3,000 and up to $1 million. Before you venture into this new industry, expectations on profitability and monetization should be very clear.
Industry reports revealed that there are some 1.5 billion mobile users with Google dominating at around 900 million users and 600 Apple devices users. These numbers alone speak of the many opportunities for mobile app development since all of these users will use mobile apps.
Apple has 1.25 million apps in its App Store with over 50 billion downloads earning developers $5 billion. Largest Android developer Google, has 800,000 apps with 48 billion downloads and $900 million payouts to developers. This further reveals that indeed there is money in developing mobile apps. To be able to financially succeed in this industry, it will be largely dependent on which of the three pricing or monetization models are you going to pursue. Here's what you need to know:
A freemium app is an app offered for download free of charge. The catch is that it has limited content, features, and options. To be able to use the complete set of features and content, you have to pay.
This is a win-win situation for many. First, consumers are not compelled to pay to download which means many of them will download it, and it provides good exposure to the app or the developer.
Second, by offering a free download, you can let the users sample your product, which is an opportunity to prove your app's value. Third, after sampling your great product, users will now have less resistance to purchase additional features and content. You have users who find value in your app, they are hooked to it, and now they are willing to spend.
This model is widely used in games where people get addicted to the fun and entertainment it brings, having no qualms about in-app purchases for extra life or coin to continue their enjoyment. This is also the route used by apps offering regularly updated content for a subscription fee like magazine apps, recipe apps, exercise apps, and radio apps.
This isn't just the most popular monetization model, but also the one that brought in the most revenue overall, which is pegged at 71 percent according to App Annie. It is the most popular form of app, with over 100 billion downloads. It was predicted that in four years, almost all downloads will be free apps.
Free downloads doesn't mean no revenue or less money as more and more people spend on in-app purchases. It was also predicted that people will spend three times as much as they do now in four years. Apps are moving forward in the direction where people play before they pay.
With the rise of free apps comes the decline of paid apps. It doesn't mean consumers are not spending on money on apps as revenues in App Store and Google Play continue to rise. There just has been a shift on app users behavior as they appreciate the free apps with in-app purchases.
Revenues are declining, but it is not dead on the side of paid apps. This is an opportunity for developers to launch really amazing apps that will compel users to buy right away without sampling it. And there are still consumers who don't mind paying for great apps.
Trusted developers who have gained a following will have the advantage here, as they won't have as consumers don't mind paying to those they have good experience with.
For new developers, it might be worth noting that the disadvantage of this model is that there will be no repeat purchase from existing users, you will only make money once every time a download is made. For revenue to continue coming in, you have to find new customers all the time.
Careful consideration should be undertaken when deciding whether your app should be a paid one. Paid apps should be able to offer complete value at initial download and provide regular updates. The usual paid apps are utility apps, productivity apps, and multitasking apps.
Paid apps with paid features
If it is hard getting consumers to go down the paid apps road, it is harder yet to convince them to pay and then continue to pay some more. With almost all apps offered for free, this kind of hybrid revenue model has gotten its own share of criticism.
But a wise developer can turn this around to his advantage. The trick is to build a really good app with also a good value proposition, and it can certainly work. There are actually successful apps in the market following this monetization model. An example is the flight tracker app called Flight Radar Pro.
Free apps with advertising
While most monetization models are based on revenue from users, you can actually gain profit from another medium, which is advertising. There are some apps that are free to download and use while advertisement runs unobtrusively.
Developers will make money when one downloads the app and uses it very frequently. Developers will not make money when the app is not in use, because the advertising revenue kicks in per use or per click. This monetization model is best used for apps that will require prolonged usage.