This article is a basic guide on App Monetization Options (how to make money from Apps). In case you are venturing into the world of becoming an Appreneur, this guide will help you understand the charging options available and choose the one that fits your business model.
If you go through all of your mobile apps installed on your phone, you will find that all apps can fit into three categories — Utility, Communication, and Entertainment. So, a good starting point for any idea validity and its worth would be to ask, am I building something which would fall into those three categories. If so, you are on track.
Regarding monetization, the main ingredient to any app success is the number of users using your app. Also, it’s good to know terms like Daily Active Users, Monthly Active Users, Retention Rate. All these measures are meant to determine the stickiness of your app.
Now coming towards money-making options, following seven ways best summarizes all the options available.
1- Ad Revenue
Easiest to explain. You are providing users with service or information for free and showing relevant ads to make money. You make money off user clicks, installs, or views of ads. Weather Apps are an excellent example of this category, as users need daily info and will be coming back on a frequent basis. For this mechanism to work, you need an engaged customer base and a way to determine the demographics of your audience (to target better-converting ads). Most of the Ad tools available in the market will do the job for you. Gaming Apps make significant revenue through this technique.
2- Stop the Ads
One other interesting way to make money from Ads is to give users the options to stop viewing or listening to Ads. Once the user pays, he/she gets a cleaner version of the app that is Ad free and doesn’t cause any interruption in the service. Music streaming apps are utilizing this mechanism well by inserting audible ads in between songs, and to stop listening to the ads, one has to pay. Deezer is an excellent example of this mechanism.
3- In-App Purchases
With this model, you are presenting the user with the basic version of the services and are charging for an advanced version or better features. The most popular utility of this mechanism is for the Gaming Apps. With gaming, many in-App Purchases are available to get better tools, skip versions, get a remodelled costume, unlock new features and so on. For this to work, the basic version has to be this good and inciting that will make engaged users buy more for money. Angry Birds and many popular games utilize this mechanism.
4- Charge upfront for download
With this mechanism, you charge any user for download and the end user. Users will make decisions to download your app based on the app creatives at display in app stores. For new app makers, I would not advise going down this route. Pay to upgrade are better models for newbies. With this model, you are limited regarding showing the features and utility of your app. The only way the user will decide is the creative element of yours or a good marketing push. Not for everyone. Better for bigger known brands and celebrities.
Such models are common, and many companies in the domain of SaaS (Software as a service) are utilizing it to make good money. The basic model of the app provides a useful utility and is free to use. For better functionality and features, one has to pay. Also, once you add more team member or start utilizing it for a company, then you will have to pay. Tinder is an excellent example of this category. One can search and match people on a limited scale using the basic version of the app. But to get better and advanced features, like unlimited matches, one has to pay to upgrade.
6- App as a service
In this category, I will categorize all apps similar to Uber. The apps are primarily free and are only used to get services. With this model, companies make money by charging a part of the transaction. So, in case of Uber, for every ride, a part of the fare would go to the company.
7- Appeal to generosity or a cause
Many apps utilize the mechanism of stopping ads by making you pay to help support a cause. Duolingo, a language learning app, is a good example of this category. Their message mentions a cause and states their company mission of keeping the education free. A noble cause and an interesting way of monetization.
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