As more and more apps are launched, recent research has shown that the ones that will make the most money in the long run will be those that are free to download but then offer ‘in-app’ products to buy.
Of course, there’s a vast difference between apps you can get for free and those that you pay to use, including difference in customers and business models as well as in commitment from the developer and the end user.
So when it comes to generating revenue from the standard app business models, which one do you go for i.e. Do you distribute your app as a paid for app or do you offer it for free? Of course, either model is likely to generate some form of revenue, but the model you choose to adopt will be largely driven by what your app actually does and who it is intended for.
Whichever model you decide to go with, the chances are that you’ll make significantly more, if you give the app away for free and offer some sort of incentive for the user to pay and continue using it.
In case you don’t fully understand the paid for process, let me just go over how it works. Basically, when you’re ready to launch your app, you decide on a selling price that you feel buyers will be happy to pay. In the UK, apps start from 0.69 pence and go up in increments to several pounds. In the iPhone market, Apple takes a 30% cut of each transaction, so you’re going to be left with about 0.48 pence per sale. This may not sound much, but if your app gets thousands or even millions of downloads the figures soon add up! This is why there are already so many success stories from individuals who have made thousands and in a few cases millions of pounds in their first year. Not bad for a few weeks’ worth of work.
When pricing your mobile app, I don’t think it really matters whether you price it at 0.69 pence or £1.69. The majority of people, who want your app and are prepared to pay something for it, won’t really hesitate in paying a pound more.
Moving on to the free app process, well this can work in a few ways. Again, once you’ve developed your app, you launch it to the market, but this time you offer it for free. Your revenue can either come from using ‘in-app’ advertising, which is very similar to AdSense or a ‘Freemium’ purchase model. The latter is about using a free app as a preview or “teaser” app for a paid version.
So far, freemium purchasing has been pioneered by games apps, such as Angry Birds, allowing players to pay extra for additional features and levels, once they have downloaded the app for free. Although this trend is continuing within the gaming industry, there are a number of apps now coming onto the market that also satisfy a business requirement or fulfil a specific need. This model allows many users to benefit from the app, while still earning revenue from those who use it enough to be willing to pay. Since users download the app for free, they are more liable to try it out, and hopefully, upgrade later.
The other way to earn money from your free app is to incorporate ‘in app’ advertising. This is fairly easy to put in place and has resulted in some substantial results, but the downside is that it can be off putting and annoying to your users. It’s a bit like the chicken and the egg because you need users to use the app numerous times before it starts paying for itself.
If you do choose the advertising option, there are numerous mobile advertising agencies out there that will be happy to provide code that is placed into your app during the development process and once the app goes live and is downloaded, adverts will appear on the users screen at appropriate times. These include agencies such as AdMob, InMobi and JumpTap.
Another revenue stream called the ‘currency model’ is starting to become very active in the social and strategy gaming market. Similar to some of the above models, users are free to download the game but collect ‘in-app’ currency within the game. With various ways to increase currency, gamers can progress faster and achieve more by in-app purchasing of additional currency which enhances the overall gaming experience.
With so many different types of apps now coming on to the market place, it’s already becoming a difficult year for anyone to justify charging an upfront fee for their apps, unless their app fulfils a specific business need. Faced with so much competition of free content and revenue from in-app purchasing set to increase significantly by 2015, it seems the best way forward at the moment is to incorporate the freemium model and monetise content through in-app purchasing.