Frankly, most app and game developers don’t make any money with their apps. This is not very surprising, considering that:
- 250.000 mobile apps are already available on Apple Appstore and Android Market respectively
- Marketing an app can be expensive if you don’t know the tricks
- Size matters – it is easier to promote an app if you have 10 apps that you can cross-promote than if you only have one
AdMob App Usage Study Feb. 2010
There are 5 basic ways of monetizing apps:
1. Paid apps
The most direct way to monetize an app is to charge for it. Paid-for apps though, compete with a broad variety of free apps and free alternatives. Still, AdMob found that 50% of iPhone owners buy at least one paid app a month and the average paid iPhone app has sold 101,024 copies over a lifetime of 261 days. So despite a low average price of $ 2,33 per app developers can still hope for a decent revenue, if the content is relevant and offers great value to users.
2. Subscriptions
Instead of charging for one-time download, subscription models charge for content within an app. Particularly reasonable for apps that offer a lot and fast changing content like magazines or newspapers, virus protection, music streaming and more.
3. In-app payments/ sales
14% of the daily revenue on the Android Market is generated with in-app purchases, including the purchase of virtual goods, unlocking features, promoting oneself in communities, access to content and more. In-app purchases are available for iOS and Android and can be implemented in both free and paid apps.
4. In app advertising
If providing interesting content or offers, in-app advertising is great for apps with high and frequent usage such as news, sport, weather, social networking, etc.. Ad space can be sold via ad networks like AdMob, inMobi, iAd (Apple) etc. Customers are paying based on impressions or per click on the ad, so for this model to work, high usage rate is essential in order generate substantial revenues.
GomoNews have published a list of ad networks here http://www.gomonews.com/mads/
5. Sponsored apps
e.g. Timeout UK, Cocktail guides, Cookbooks, Racing games, etc. One of the most common ways of monetizing an app. If a company sponsors or fully pays for an app as a way to promote their brand, there is little risk for the developer, but also little space for unexpected wealth.
The most successful app developers such as Rovio (Angry Birds) use a combination of paid apps and free apps with advertising. The free app targets a wide audience and makes money through adverts and then promotes the full pro version. This is usually referred to as the freemium model.
Some key stats:
- Apple has paid out more than $2bn to iOS app developers (Press Conference Apple, Dec 2010)[ii]
- 7% of iPhone and iPod touch owners have spent more than $50 on games in the last three months (DFC, March 2010)[iii]
- iOS users have an average of 37 apps on their devices, compared to 22 for Android users and 10 for BlackBerry users (Nielsen, USA, Sep 2010)[iv]
- The average smartphone owner downloads 15 apps to their handset, keeps 12 of them, and uses 5 every day (GfK, UK, Sep 2010)[v]
- US iPhone users download 60 apps a year (YG, USA, Sep 2010)[vi]
- iPod touch users that purchase paid apps spend $11.39 vs. $9.55 webOS vs. $8.36 Android, vs. $8.18 iPhone (AdMob, Feb 2010)
Some other key insights are:
- To make money, the app needs to offer something beyond what other free apps in the same category offer
- When offering a lite and a pro version of an app, it is essential that the pro version really offers more value than the lite version
- Great ratings and updates are critical in keeping people buying apps
- The majority of premium app revenue comes from games
- Many apps generate a lot of revenue the first month when it’s new. Unless constantly updated and promoted it then dies a slow death
So how do you make money from mobile apps then?
The answer is simply that you can make money from apps through a combination of creativity, hard work and a bit of luck. The key ingredients to success however are:
a) Make sure you have a great idea/concept for your app to begin with
b) Know who your target audience is and come up with a marketing and PR plan focused on them
c) Try different types of monetising methods depending on the app and target audience
d) Experiment, experiment and experiment more with updates, pricing, marketing, etc
Good luck and tell us if you find a secret way of making money!
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