So you decided to build a mobile app. You have pretty much everything ready, and your app idea is crystallising. As a part of your Minimum Viable Product (MVP), you need to decide how to make money. You are building an online business after all, so it must have a revenue stream to become successful.
The App Store celebrated ten years as it surpassed 2 million apps. That’s where we go to get our apps. Apps that make us laugh, discover places, keep us fit, help us communicate, meet other people, waste time, inform or help us be more productive. Most of the apps in the app stores are free to use, but the companies behind them make money other ways like advertising.
Let’s explore the most popular monetisation options and help you decide what’s the best choice for your app idea. There are two platforms, the App Store and Google Android Play Store. They are a bit different, but all these revenue concepts apply to both.
The global app economy is massive, and you have many different choices. Apple also surpassed the milestone of $100 million paid to developers, a very lucrative market to be part of. The first and most popular earning model is freemium. The app is free to download and use.
Free to download and free to use
Most of the users on all continents prefer free mobile applications. So how does one make money from a free app? Several ways. For the indirect revenue stream from your app we have the freemium model, you can think of Twitter, Facebook but then that’s advertising, and mostly we are putting a price on our private data. People get to use the full app for completely free.
Your app can have a basic free option where a purchase unlocks the features of your app. As app developers, we have several options here. We can use iOS or Android in-app purchase options for one-off purchase right within the app. In-app purchases are used to sell a variety of content, including subscriptions, new features, and services. Once you make a purchase, that content is unlocked for you forever. Think of it like buying a customised bunch of recipes, European maps bundle or anything selective.
Apple Store offers a vast selection of updated options for an in-app purchase. It’s quite amazing into how much detail you can now develop your app and sell content.
A simple, straight up subscription either monthly or annually is what we came to expect as a standard. A simple monthly option or a discounted annual charge unlocks the full app for you to use. When we say subscription, we think of Netflix video streaming or the new Centr app by Chris Hemsworth.
User signs up via the App Store either by monthly or annually and gets to enjoy the app for the subscription period. Once the subscription period runs out user is charged automatically unless they specifically cancel the service. Interestingly, we have two options.
The first option is via the App Store Subscription where you pay Apple commission for providing and managing the subscription service. It manages everything about your use; you can very quickly make discounts, upgrade packs and much more. That comes to 30-10% of your sales depending on your numbers of transactions and age of the app in the store. Apple offers 85% net revenue after one year. We recommended subscription plan option for Do A Wilson app for its simplicity.
Alternatively, you can develop your API system to manage users and subscriptions, including payment gate. Question is if that is a commercially viable option for you as developing backend APIs can increase the cost of your project. In 2018 Netflix abandoned the in-app subscription options and switched to their internal system. It can be quite costly 15% when your app reaches new popularity heights.
Mobile advertising remains the most profitable app revenue model. Especially on the Android platform, in-app advertising is quite normal; you can see adverts everywhere. Free apps are the usual subject of advertising models, the question is, of course, if this option is best for your users.
There are vast advertising networks nowadays, so you can use API from a selected supplier and manage your advertising options via an external system.
Since people are now spending 25% of their time on mobile devices, it is becoming the primary target of advertisers. It’s debatable whether it is all that effective. Facebook and Twitter implemented advertising nicely into the user-generated content, offering relatively relevant marketing. That works, but I am talking about the Android apps where you have to wait 15 seconds to see an advert before you can resume your gameplay. Those I don’t think work at all.
Instead of mass-advertising, consider subscription or purchase models.
One off purchase
Of course, there is always the option to pay a one-off fee. We all bought that £2.99 app which we never use, right? It works because it’s simple, you buy it once, and you get to use it forever and even with updates. The problem is that this model is no longer lucrative. You would need to support old users with new updates while acquiring new users to pay for the app, which is incredibly difficult and costly. A subscription-based model was born to tackle this solution, and it quickly became the standard.
The personal level of progression. That’s the central theme here, you develop your character and unlock certain perks. To do that you need to spend time in the app, and that’s precisely the point. People like to take a shortcut and will happily pay extra to skip ahead of the line — a brilliant monetising concept where you play on the user impatience, and that can be quite lucrative.
The best examples of app gamification are Todoist Karma, Fitocracy or Habitica – the productivity app that turns life into a game. Good news is that gamification is incredibly addictive, and we can use it for some excellent concepts. Imagine a charity app where you progress through a game planting trees or saving whales while technically giving charity steady support. Thus having fun in the process and supporting something that matters!
Last option is where your app does not fit into any of those options above. Think of Lyft and Uber apps. Their businesses are based on a commission of a provided service. We have built such a sharing economy startup for My Hippo Space, providing storage options to people while paying the host minus the commission, see how it works on a short tech demo video.
There is no simple integration of this system; it has to be build custom, which can be quite costly. Commission based revenue model is becoming very popular, and we can see examples of successful businesses using this model everywhere. Think of Deliveroo, Airbnb and Ticketmaster. We used this model for My Hippo Space project and you can see the action in demo video.
The benefit of this model is scalability and controls. You can manage every aspect of this process and build every feature that your business desires.
So which revenue model is the best for your mobile app or startup business? Well, there is no simple answer. It depends on your app idea and route you want to take. Empire Elements can help you to make business projections, based on which you can then pick up the best revenue model to suit your business goals. That can be growth, profitability, speed to market or other.
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