Free vs Paid Apps – Which Makes More Money?
One of the largest parts of iPhone app marketing is the pricing strategy. Do you move in at $0.99?
How much do ads pay on apps??
The decision can be a tough one, especially when you are launching. My app has been in the store for about 11 days now and I've banked about $400 off the app (after Apple's 30% cut) and about $400 off of my Playhaven integration (partnership program that sells cost per install).
This is only the very beginning of my findings, but am starting to see some trends that hold value.
I launched with a $0.99 and let that run for about 9 days with the intention of having it paid and then marketing the absolute heck out to of it, selling quality and sizzle. It wasn't going to be a volume move, but it would maintain the value. I figured this would be longer term strategy so that I could increase the value of my marketing.
Well, I was wrong. At least as far as I can tell from the first two weeks.
Volume Buries Price
This means that the bottom line of my app being free is dwarfing the results I got from having it be paid. Here are some assumptions:
1. Your app has a strong in-app purchase functionality
2. Your app has a monetization program beyond in-apps and cost of app (Playhaven, iAds, etc)
3. You value things like reviews as much as price (typically true during a launch period of 3 months)
Here are two snapshots of the life cycle of the app. First is my Sales data chart:
And here is my PlayHaven account:
The Playhaven chart is a more accurate representation of download numbers (about 8,000 a day when free) but is measured by Clicks which follow the same trend. The dip at the end is because that's real time data and it's only half way through today.
If you've ever asked “how much do ads pay on apps” my experience has been that it's a factor of how many impressions you can get. The term that is most often used is “eCPM” which stands for earnings per thousand impressions.
This means if you get 1000 impressions and make $5 from your ads, your eCPM is $5.
Getting more impressions makes more money with ads. Free apps get WAY more impressions.
Reviews = Value = Money
Do not underestimate the power of positive reviews. The rankings climbed because I hit top 50 in Free Games for a few days, but the biggest difference is that I added about 10 five star reviews.
The download numbers on the 29th and the 30th were about the same, but I made about 70% more money on the second day. The only variable that changed was the number of positive reviews.
This shows people that the game is credible and makes them more likely to engage. That usually means more in-app purchasing. As I add more reviews and the download numbers even out, I will find out what my average income will be.
But just keep in mind that positive reviews do matter and you should try to solicit positive reviews. Also keep the user experience in mind and keep your users happy, so they are more likely to give you favorable reviews.
If you are looking to get in the app game to make money, here are my recommendations:
1. Create a fun and engaging game (the download numbers on games are 5-10x higher than other categories)
2. Create a easy and viable in-app purchasing model
3. Integrate various paths to make money on the user, not just through Apple
4. Cycle your pricing to understand where your sweet spot is (but know the Free is where you want to be)
Sidenote: A lot of people are tempted to leverage the Free app download numbers with iAds to create revenue. I suggest against this.
Most people find the ads very annoying and the payout is really, really low. It's kind of a chicken and egg too because you need users to use the app multiple times, but if they find the ads annoying they won't.
I don't have proof for this, just my two cents from talking to lots of developers and their experience.
2017 Update: If you want to read about my #1 experience with how to make money with apps, click here.
I need to do more testing with promotions vs Free release vs price cycling, but I am creating a theory that the best way to market an app is not over the long term, but to put all your eggs in one basket a few times a year. Timing 5-10 promotions and your free release all at the same time could potentially get you into the top 10 of your category, which will then feed you 100K organic users, etc.
I'm going to test all this and report back with proof.
If you have any questions about pricing and how to make more money with an app, make sure you sign up for the free app business workshop and get your free 150 page ebook that explains everything (click here)!