By Jacquie Pirnie - August 9, 2015
Tags: business, mobile app, money
Being clear about the monetization model of your app from day one will help to prove that your customers are willing to pay to solve the problem you’ve addressed which is a vital part of validating your app idea.
There are mostly three pricing models that pulls in all the mobile app revenue. According to Distimo‘s report, interestingly in-app revenue from free apps brought in the majority of the revenue at 71 percent. Paid revenues followed at 24 percent and in-app revenues from paid apps came in at 5 percent.
so, if you launch your app using one of these monetization models, you have a much better chance at generating more revenue than any other pay model.
What follows are the details about each one:
1. Freemium for apps and games.
While this isn’t just the most popular monetization option for games and apps, it is also the one that generates the most revenue. In-app purchases scoop up 76 percent of all revenue in the Apple App Store in the US and over 90 percent in the Asian markets, according to Distimo’s report.
What is a freemium app? It is an app that is offered free-of-charge to the user but with limited features, virtual goods or content. The app users can only access the premium version or additional content through an in-app purchase. This route is also used for subscribing for monthly content updates. A big benefit of the freemium app is that removes the price point that could be a barrier for people initially downloading an app and also gives the developer the opportunity to prove the value of their product.
One can offer premium or additional content or offer basic features for free that require the user to pay to use complete functionality of the application. A good example is Pandora Radio which offers additional content, updated every month for a subscription fee.
If you want a quick buy-in with the least resistance, offer a free basic version of your app. And let them buy additional features for a fixed price or a monthly subscription once the app user is hooked and find value in it.
2. One-time paid apps.
Users pay only once to download the app. All updates and new feature additions are expected to be free of charge.
If you want to launch a paid app,you should make it compelling enough for users to pay to download even without first being able to test drive it. In addition, there is no repeat revenue from your existing customers. So for a continuous revenue stream, you will need to look for new customers all the time.
What will help you determine whether to make your app a paid one? Well, nearly all paid apps offer the core value in their first download, which is then followed by minor design and usability enhancements and updates. Most utility apps fall into this category.
3. Paid apps with added paid features.
This is a new entry to the app market. It is a hybrid monetization model that is gaining momentum. But is not without its fair share of criticism. A fair number of people feel it’s unfair to pay to download an app and then pay once more to access additional features. With a clever value proposition, this tricky hybrid can certainly work and can even bring you an ongoing positive flow of revenue.
Flight Radar Pro is an example of an app with this strategy.
4. Free apps with advertising.
Interestingly, this type of app was excluded from Distimo’s large research study.
In fact, many apps use this model of monetization. For example, the Sleep Easily Meditations by Shazzie, costs no money to download and runs unobtrusive advertisements for as long as the app is in use. This app receives over 330 downloads every day and it runs for over 20 minutes every time it is used.
Now in this situation, you only make money when a large number of users download and use your app on a very frequent basis. So you should choose this model of monetization only if your app calls for prolonged usage frequently.
The way to achieve any kind of revenue growth as your business and app evolves is through repeated transactions from existing customers as much as through new ones.