Have an App Idea? According to a Mobile App Forecast carried out by App Annie last year, the global gross revenue from free apps was expected to reach almost $51 billion in 2016, and this figure is likely to double by 2020. This is a huge market you don’t want to miss out on.
The mobile market has grown substantially over the years and industry experts predict continued growth. In 2018, mobile traffic accounted for 52.2% of total website traffic in the United States, and 3.6 hours that adults spend consuming digital media occurred on smartphones, with desktops, laptops, and other connected devices struggling to keep up. With such impressive numbers, it’s no wonder that Fortune 500 companies and entrepreneurs alike are trying to get a piece of this modern-day gold rush.
According to TechCrunch, more that 90% of apps on the market now are free. Revenues generated from an app idea like Uber, that charge for download are expected to go down in incoming years. Statistic presents past view and future forecast for free and paid app market from 2012 to 2017.
How does and app idea make money?
Advertising
Mobile advertising remains the most profitable app revenue model. 7 out of 10 app providers used it in 2016, 18% plan to use it in the near future. Using ads to monetise app is quite simple, all required is to display commercial inside your mobile apps and get paid from the ad networks.
According to Sweetpricing report, 32.5% of the largest mobile providers use in-app ads as the only source of in-app revenue. You can get paid every time the ad is displayed (per impression), per click on an ad, or when a user installs the advertised app (per install).
Ad revenues can be pretty low for apps with a small audience. Despite advertisement is wide used by developers, it remains the most hated by users, so it should become a part of the interaction and act as its natural part.
Sponsorship
Sponsorship placement within the application can be a powerful app monetisation model if provider builds the right niche app for tailored users and launch it on behalf of another company. The main challenge is to find a funder with similar or the same target audience and white label an app or adapt its design to match sponsor’s brand.
The main types of sponsorship deals:
- Agreed revenue split generated by the app.
- Monthly sponsorship fee paid by funder for app maintenance or use.
The strategy is also lucrative for developers to generate and expand user audience and promote an app, as most sponsors already have good website traffic and loyal customers.
In-app Purchases
In-app purchases provide an ability to sell a variety of virtual items directly from your app — including extra bonuses, premium content, game currency, and goods or unlock game levels.
The strategy falls into categories:
- Consumable – a product that can be purchased and used once within the app. Example: virtual currencies.
- Non-consumable – a featuring product bought for permanent usage, that does not expire. Example: new game levels or maps.
- Subscriptions are used to unlock features and content for a limited period. Example: annual news subscription.
50% of the leading apps use in-app purchases a stream of earnings, and the model is expected to dominate in the next years. It is commonly preferred among game developers, mostly due to digital money, used by users to purchase in-app content or to unlock new levels. That is more, half of the games provide more than one virtual currency- ‘coins’, ‘gems’ or ‘gold’.
Used wisely, in-app purchases can generate a good revenue – the mobile game developer Supercell boasted to earn $1 million a day on purchases in their Clash of Clans game. Pokemon Go users spend about $1.5 million on in-app purchases daily.
Physical purchases and Merchandise
E-commerce businesses use free apps for selling physical goods or branded merchandise: toys, t-shirts, cell phone cases, etc. via email marketing or specially developed applications.
One of the first and most successful apps to boost revenue from branded merchandise was Angry Birds game. Rovio Company sells 1 million branded t-shirts, backpacks, and stickers every month. That is more, they managed to get 1 million per month revenue only on plush toys.
Amazon provides an ability to get revenue from merchandise by creating a Merch self-service program that allows app publishers to sell custom branded t-shirts from within their apps.
All you need is to create and upload own artwork and promote it using the Amazon tools. Branded t-shirts will be produced, sold by Amazon and you get your revenue share. App developers don’t handle any payments and fulfilment, making the whole process really easy and beneficial.
Collecting and Selling Data
Well, this is probably not the most widespread and ethical way of app monetisation (and that’s great), but collecting and selling personal data still remains one of the effective approaches to turn a profit.
Some companies that offer free mobile apps sell their databases to third parties. The information may contain user’s email address, social media accounts, and personal preferences.
From a marketing point of view, companies want to pay to display ads to the most relevant audience possible; while on the flip side, far not each service can gather the same data as Facebook or Google does. Nevertheless, if your app idea is able to gather relevant data, then you may have a way to profit from it.
Conclusion
There are a lot of effective ways to monetise free apps, but it will take some planning and well-rounded marketing strategy. Advertising is still holding the leading position as app monetisation method, with 65% of all apps on the market. (Source: Sweetpricing report). Still, developers use app monetisation mix: in-app purchases and ads.
App publishers should do a market research, define target users, check other app developers success stories. The main challenge is to get awareness, acquire loyal users and choose the right revenue model. Developers should plan more targeted ad campaigns to promote their app idea and its releases. Constantly provide updates on features, use more blended and unique revenue models to deliver value to users. This will lead to greater profits and help keep your customers satisfied.
References
- App Annie - https://www.appannie.com/
- Think Mobiles - https://thinkmobiles.com
- Sweet Pricing - https://sweetpricing.com/en/
