How Do Apps Make Money?

Got An App Idea How Apps Make Money

A fair portion of the available apps today are add-ons to an existing company’s business or services. Some apps are loss leaders for companies intending to drive stickiness in their brand by offering alternative methods of interaction by their existing customers. And still other apps are designed and published simply because the next generation of smartphone users is more accustomed to apps than to the mobile web. 

But what if you want to build an app for the purpose of generating revenue? Is it possible to make money on an app strategy alone? And what are the pathways for making money from an app? 

App purchase
The most obvious way to make money with an app is to charge for the initial purchase and download of the app. This is a pay-to-play type of fee and can be as high or as low as you want. 

However… Keep in mind that most people are very hesitant to buy apps outright without experiencing them first and determining whether they do what is promised. So, while you CAN charge for your app to be downloaded, this is typically a very high-customer-acquisition-cost strategy and not a recommended one. 

Free Trial
Apps that offer a free trial before purchase are much more appealing to a wider audience. This strategy allows users to download the app for free, use it for a period of time, and then opt-in to pay outright for the app (or opt-in to a subscription) once they’ve realized how much they love it and can’t live without it. You’ll get a much higher conversion rate of paying customers with this method than the outright purchase method.

Monthly or Yearly Subscription
This brings us to the SaaS (Software-as-a-Service) model, where you offer some kind of recurring value in exchange for recurring revenue. Typically, the user has the option of a monthly or yearly subscription, often with a discount given for the purchase of an annual license, and there is on-going value the user receives for their on-going payment. This strategy, in tandem with the free trial, is a very effective way to build a user base of paying customers that allows you to keep innovating and updating your app, which in turn provides that continuous value that has them coming back for more, month after month and year after year. 

In-App Purchases
Another strategy for monetization is in-app purchases. Many games use this method for things like extra lives, bonus levels, and the like. This strategy entails timely, one-time payments at a point where the user really WANTS to keep going and will pay a nominal fee to do so. We’ve seen creative uses of this outside the gaming world, but that is where it is most prevalent. 

Ads
Of course, no list of options to monetize an app would be complete without the mention of ads! While we find them rather annoying, they can be incredibly effective when implemented properly. Keep in mind that you need a fairly large user base, or a very targeted user base, in order to get the right number of or kind of impressions to make your ads pay off. Also, it is a LOT easier to start an app off from the get-go with ads already in it than it is to add this as a monetary strategy later on; so if you think you might want to do an ad strategy, start out with it from the beginning. Your users will be accustomed to it all along, and if you find it’s not valuable enough for you, you can always remove it. No one will ever complain about that. 

Ultimately, how you monetize your app comes down to your target audience and the intended use of your app. Spend time getting to know your target users, hearing their thoughts and feedback, and letting them guide you to the right strategy or set of strategies that make you their hero. And you should always do this BEFORE you spend a lot of money hiring a top app development firm. In the end, you’ll spend less money on app development if you spend more time on target market research.  Contact Got An App Idea for more valuable information and implementation of your app ideas.  

GotAnAppIdea is an app design and app development company, primarily working with new ideas in the earliest stages of incubation. As one of the top app development companies in the Denver, CO, area, we help new start-ups get from idea to execution planning quickly, efficiently and with as little time and money invested up front as possible. Our philosophy is that failing quick and often leads our clients to better outcomes, bigger businesses, and healthier work-life balance. Need Android app development, iOS app development or app design help? Call us today!