You may have big plans for that app you’re building. Maybe you want to create brand awareness, grow your mobile customer base, cultivate loyalty, or something else. Regardless of the many reasons that may have motivated you into app development, the one expectation you do have from your app is for it to be a steady source of revenue, unfortunately, not many apps developers are able to get that. In one of our earlier analysis, we discussed how 73% of independent app developers are able to make only less than $1000 monthly, while the average monthly app revenue stands at $1,500 globally. In contrast, the overall global monthly average app revenue varies from $5,000 – $11,000. For this to happen, app developers have to monetize their business plan by choosing the right bankable business model, which will help their app make handsome revenue.
There are different mobile app monetization models you can consider when it comes to making a profit. While you can always adopt the paid app business model (which means your app isn’t free to download), selling an app can be difficult, particularly in an overcrowded store where some of your best competitors are offering their apps for free. Since this is the case, the following are the top two free app monetization business models you should consider.
Freemuim is definitely among the most dominant business models, especially for mobile app developers. If you’re not familiar with this term it helps to know the freemium definition. Freemium is a type of pricing strategy. A product or service that falls under this particular business model is provided free of charge but if customers would like to access the product’s or service’s full features, functionality or virtual goods, they will need to pay to obtain the premium content, tools, etc. The term combines the words “free” and “premium”.
Many smartphone app developers tend to take the Freemium route because it gives user’s free access to the app’s basic functionality but charges them if they want the premium or propriety feature. In essence, it lets users sample the app, giving them a rich preview of your product so they can see what it can do without giving them everything. The goal of this model is to accumulate users and engage them until they are willing to pay for the additional goodies.
In 2013, Freemium apps received record 211% growth surpassing all other app monetization models. However, making freemium work effectively can be easier said than done. You need to find the right balance to convince your users to buy. Offering two few features for free will turn users away, so will not being upfront with users about only certain parts of your app being free. No one likes to be surprised with a hidden fee. The other issue is offering too many features for free as this can make it difficult to convince users that they want more than they already have. Consumers love to try before they buy but they need to feel that what they’re going to purchase is worth it.
However, choosing the better fit for monetization doesn’t necessarily mean adopting the freemium business model. Another popular model for free apps is in-app advertising.
Apps that use this model are free to download but they have ads, which is how you remove the cost for the user. Your goal when using this model is to obtain information on the people who interact with your app. This data is stored and sold to app publishers who in turn pay you to place targeted ads in your app.
The one major downside of this model is that users can quickly become annoyed with ads if they’re not strategically placed in the app, such as after a natural break in a game (ex. between levels). If ads are too intrusive, like banner ads, users will quickly delete your app. Therefore, In order for this model to work well, ads need to be limited, interesting and appeal to your app’s target audience.