Mobile apps have undergone tremendous change. Games created for entertainment are becoming a lucrative business, and large companies are creating pocket-sized assistants to simplify user interaction with their products and services. How do apps make money?
Pay-per-download is a traditional distribution method for App Store and Google Play. User receives the application only if he paid for it in the store. Still relevant, but slowly dying out monetization method, which was replaced by a subscription system.
Apps that make money with this approach are unstable. There are too many drawbacks:
- You can’t try it before you buy it. You have to create a finished product right away. Beta versions are not suitable for distribution because they will instantly drown in negative feedback, as buyers expect to get a quality product commensurate with the price tag.
- Apps make money once and do not profit from a particular user in the long run.
- Promotion is complicated by the very fact of paid access. In a market where most products are distributed on a free-to-play model, it is very difficult to convince a customer to buy.
- The most important problem is piracy. As soon as a programmer with the appropriate skills pays for the purchase and downloads, they hack it and put it in the public domain. This also forces developers to switch to other ways of monetization.
So using the “free app” model to make apps make money regularly is more profitable. The user can download the product and test it, so this approach is becoming more and more relevant. But how exactly do such apps make money?
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How apps make money with advertising
Many developers use the introduction of advertising as their main monetization tool. It’s hard to sell at full price in a highly competitive environment.
In projects with low popularity, whose functionality doesn’t depend on paid subscriptions and one-time purchases, purchases are made in 3 cases out of 100. Such a volume of sales doesn’t allow us to deal with the product on a long-term basis and keep a staff of programmers to support it.
In this case, advertising is the only way out. The high demand for advertising allows you to choose among the ads the one that will bring the greatest benefit to the developer and will look organic, without compromising the integrity of the interface and design.
The main types of advertising:
- Banner — used in low-budget projects, usually located at the bottom of the screen. Brings little profit, because users rarely consciously pass on it.
- Video — is most often rewarding advertising. The user watches it, then gets in-game currency or extra time, attempts, and so on.
- Interactive — ads that allow you to try a third-party product. Sometimes it pops up instead of the video. After certain actions (folding a mini-puzzle, solving a small puzzle), offers to go to the store to download. Some unscrupulous advertisers disguise the video as interactive advertising, but immediately after clicking on the screen to try it, the user is redirected to the “store”.
- Native — ads that are designed by the project design. It looks like a full-fledged part of the interface, but it is not. It has a high conversion rate.
Apps make money with in-app purchases
The second most popular monetization tool. One-time purchases are relevant for any type of project, but more often they can be found in games, where you can buy in-game values for real money. For example, in shooters for real money, you can buy currency, which can later be used to pay for a “combat pass”, various improvements, or cosmetic items that change the appearance of weapons.
Freemium is a natural way for Apps to make money
This monetization method is inherited from the “ancestors” — computer programs, which are distributed on the model of conditionally free of charge. The user downloads a fully working program, but which has certain restrictions. For example, some of the functions or tools cannot be used: banners will pop up, instead, inviting the user to purchase the full version of the product.
Subscription
This way Apps make money started not so long ago. But many applications and games switch to this distribution model. It has similarities with the freemium, but in fact, it is its complete and perfect version. The user is given limited functionality, which can be expanded by purchase, but only for a certain period, after which you will need to pay again.
Regular income, which is generated regardless of the user’s involvement. They can subscribe once, try and not renew for the next period, or they can pay for access permanently. They can buy a subscription for one month or for a whole year. Pay for this half year, the next year you don’t use it, but in a year again repeats the payment. In any case, an interested person will pay regularly.
User loyalty can be supported by the fact that the subscription will be inexpensive. A user who is not sure they need the full version can try it once for a modest fee. If they like it, they will renew it every month. There are times when a user pays, uses it for just a couple of days, and drops it.
Percentage of transaction
Implies the creation of marketplaces and aggregators. Large companies that have agreements with publishers and developers to distribute their products do this. But in non-promotional cases, the function of marketplaces is to display ads from people who offer their services. Customers go to these marketplaces in search of performers or sellers and transact with them directly in an application that provides security — for which the owner of the service gets a percentage.
If the product is very popular, it is possible to integrate advertising functions: to promote products and sites with which the owner agrees or to raise the offers of sellers who have placed ads in the application itself in search results lists.
Mixed type of monetization
To get the most out of monetization, multiple types should be combined. Analyzing the behavioral traits of the consumer can only create the ideal combination of different types.
Monetization mistakes
Making a profitable product for the first time is a difficult task. Monetization tools can help promote a product, but they can also ruin it. A short list of things developers who want Apps to make money often encounter:
Incorrect strategy. You need to select your monetization model, focusing on the closest and similar analogs of competitors.
It is better to integrate monetization tools not after completing the product, but during its creation — only in this case paid features will not look rudimentary, but organic and complementary.
Without deep and thorough analytics, nothing will work. Do not be surprised that advertising brings in little profit, and you need to figure out why this is so. Maybe the banner should be moved to a more appropriate place, where the user is sure to notice it. Or replace it with a more appropriate one for the subject of the application.
Choosing the wrong ad network can take a toll. Network effectiveness varies from region to region, and what works well in Japan will never function properly in China due to cultural differences.
To avoid making critical mistakes, it is worth paying attention to competitors’ mistakes.
Read: How to Implement Successful Contingent Workforce Solutions through Technology
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