Generating income from apps happens in essentially two ways: ad revenue and in app purchases (IAP).
For app developers of all stripes, whether they've got one big hit app or a smorgasbord of free games throughout the app store, the money they earn is generally coming from one (or both) of those two places.
Most developers looking to make money in the the app store are going to fall into one of three categories – we'll call them Person A, Person B, and Person C – and the best ways to generate app revenue are going to be different for each.
Let's dig in.
Person A: The App Store Novice – Just Starting Out
Person A is likely a newcomer to this business, with a low budget and limited knowledge… And that's just fine! We all start somewhere.
This is the app developer likely working from purchased source code, working solo without hired help or a marketing team, slowly eking out a small side income from a range of free products available in the app store.
Generating a profit is of course the goal here – but so many novice developers forget (or just overlook) their best chances to make money: reducing costs.
Since the bulk of the revenue (and therefore, ROI) is coming from ads, most likely across a whole host of different free games and basic apps, one of the best ways to “make money” is to spend less of it!
Don't worry about huge marketing campaigns or constantly releasing new products.
Take the “slow burn” approach, adding apps to your overall collection as you go, but not racing to always have more on the market, burning up your revenue on source code and pushing your newest releases.
With many apps in the store, a few are likely to gain some traction – and the ad revenue from these apps will be your largest source of income.
It might not be enough to quit your day job yet, but it's something. Let your audience unfold naturally and pinch your pennies along the way.
Focus on reducing your costs, and your profit margin will increase.
Person B: Tech Savvy Newcomer – Familiar With Web And Business, New To Apps
Person B is perhaps the best positioned to really step up their profits from the app store. This is the person with a background in entrepreneurship, the tech field, online business, etc., but relatively new to the app world.
Like Person A, they might not have the largest budget or biggest following, but because of a fundamental understanding of how business operates – particularly online – Person B is prepared to execute effective product launches, generate buzz for their apps, leverage existing connections to boost traffic, and so on…
Even if the apps are still coming mostly from source code, the other areas of the business are likely to be further developed.
So, the primary way of boosting profits in the situation is still through ad-revenue and multiple apps in the store, but on a larger scale.
Use bigger source codes, operate at a higher level with your budgets, and look to hire experts (instead of doing everything yourself).
Instead of diving into custom development yourself, look to hire people to add knowledge to your system – whether that's developers, designers, coaches, mastermind groups, and so on.
Spend your money on expertise, and keep your other costs low by continuing to rely on source code.
You're still looking to maintain a small bottom line, but relative to the scale of your business.
Where Person A might be looking to make $500 per month and only spend $400, Person B should be shooting for a scale closer to $5000 per month in app store revenue and $4000 in expenses.
The same idea of profitability applies, but at a larger scale. Casino apps are an excellent market for this level – that's where all the money is.
Update strategy is also huge here. Since a person of this type will already have some business experience, they will be able to plan where they want to be in six months, and implement the right steps to reach those goals.
For Person B, making money in the app store is all about scaling and building expertise!
Person C: The App Store Veteran – Knows The Ropes, Looking To Grow
Person C is someone who as been working in the app development and marketing world for some time already. They've established their business, know the ins and outs of the app world, understand how revenue is generated, and need to take the next step…
The difference between Person B and Person C is customization.
The competitive edge here is knowledge. At this point, you're going to be doing custom development, or at least taking large source code and knowing exactly how to make it worlds better.
With these types of “top-tier” apps, the real money is going to come from lifetime customer value – and that's going to take time.
Like any serious business, you might not see big profits right away, but with the right strategies, you could be making windfalls in a short couple of years.
You're still going to be generating ad revenue, but your real focus should now be on in app purchases.
This means paying close attention to your metrics, engaging with your users on social media, learning their preferences through reviews, even acknowledging their worst complaints. You've got the capability to make truly awesome apps, and building an audience that loves to use them is going to keep you profitable in the long run.
You want a HUGE customer feedback loop.
Remember, knowledge is your advantage. Your experience in creating an awesome product, in effective marketing strategies, in cultivating real relationships with your user base – that's what will make your business thrive.
Be patient and focus on lifetime value.
No matter which of these three categories you fall into, making money in the app store requires patience. Recognize where you are in the industry, and use the strategies that best work for where you are right now.
Test everything, keep your costs low, and don't get too far ahead of yourself.
The profits are out there, and these strategies will bring them closer to your fingertips – wherever you are in your timeline as an app developer.