It was not very long ago that there was a gold rush of app stores on all the major platforms. Everyone with an idea and a dream of being rich tried their hand at creating the next big thing in mobile applications. There were some clear winners (Instagram, WhatsApp) and some unlikely winners (Angry Birds, Words with Friends). In either case, the creators were able to bring their ideas to life and to make a lot of money. But how? How do I create an app and make money? This is a question that every app developer, designer, and/or creator wants to answer. Many app developers give little thought to this in the beginning and adopt the “Field of Dreams” approach to app development (If you build it, they will come). And popular apps tend to make money, but every app takes a different approach and endeavors to add value in a different way. And depending on the approach and use of the app there are different business models for making money.
• Ad-supported model
• Paid for apps
• In-app purchases
• Subscription Model
This is probably the most common pricing model that new app developers come up with when thinking about monetization of their app. With this model Appreneurs, make the app free to download for the user community, but make money through partnerships with advertisers. This model is tried, tested, and successful among many app developers, but it is not a pricing model that will work for every app.
For apps that are not used often implementing an ad-supported model is not going to yield large revenues for the team behind the app, because ad-supported models work best with large volumes of users and high frequency of use. A great example of an app that is useful, but used sparingly is Aptrax, which tracks the frequency and duration of the usage of all your apps on your device. It is kind of ironic that this app would fall in this category.
Paid For Apps
This is the second most common pricing model that new developers consider when thinking of how to monetize their mobile app. Depending on the utility of the app and the problem it solves or the value it creates, this is a viable pricing model. Some apps that fall into this category are iPhoto, GoodReader, and Quickoffice.
It is important to note that there is a HUGE difference between a free app and an app that costs 99 cents. Statistically speaking, you will see far fewer app downloads for an app that costs 99 cents than you will for one that is free. That said, charging 99 cents upfront may yield greater profits over the lifetime of the app than a free app with ads. The right answer for your app depends on a number of factors, which include number of users, frequency of use, type of app, and overall utility of the app.
The in-app purchase pricing model is usually implemented with apps that have high and unique utility. Apps in this category have trial versions or versions with limited features that are free to download. And after some number of interactions with key features inside the app or a specified amount of time, the user will have to purchase an extended version of the app. The main idea here is to give users a chance to use and benefit from the app. Once they can see the value of the app, they will pay for a full version of the app in order to keep using it.
There are also some apps that do a hybrid of in-app purchases and upfront cost, like Scanner Pro or Splashtop 2 Remote Desktop for iPhone and iPad.
Subscription models can offer significant revenue potential. They offer access to a service or content for a weekly, monthly, or annual fee. For example, a magazine subscription to BodyMedia Fit. These apps have not taken off as a category in the same way free and paid apps have; however, this is a viable option for apps that can provide fresh and valuable content.
In conclusion, the best pricing model will depend very much on the features and category of your app. The very best advice is to do your research. Look at apps similar to yours and ask yourself: Are they successful? What is their pricing model? What are they priced at? How many downloads do they have?
Facebook focused on getting to 1 billion users before focusing on monetization. If you deliver value to your user community, the money will come. To this end, consider a different incentive program for users, and that is to allow them to unlock app features or get a free upgrade if they provide a review for the app. This will boost your app on the app charts and give it more visibility.
No matter what your research yields, remember above all else that your app must work well and be designed to promote easy and intuitive user engagement. The marketplace is unforgiving and you will not get a second chance to make a first impression. Do everything you can to ensure a positive user experience, and you will gain loyalty and positive reviews from your user community.