5 Ways to Make an App Profitable
Making apps has become easier these days, however, monetizing an app has become the Rubik’s cube for app publishers. Users have become “greedier” these days with so much competition and (free) alternatives out there. The contest is fierce, but the truth is, even big companies struggle with this puzzle. When companies like Twitter or Instagram start actually making profit using some of the tools described in this article, not even they can escape the anger and ruthlessness of the almighty user.
READ ALSO: 4 Issues of Mobile App Retention and How to Overcome Them
But you’re probably not Twitter or Instagram, and when you decide that it’s time to start making some profit out of your app, you will probably get some raging comments and tweets, but hold strong. In order to understand what your right solution is, here are the top 5 methods to monetize your app.
FYI
Before writing this article, we decided to analyse the monetization strategies for the 200 top grossing apps in the iOS App Store. We gathered data from three main markets: US, Germany, and Brazil. So far, we have some teaser findings:
- Games are kings in making money and represent about 50–80%(!) of the top grossing apps depending on the market.
- Even though Virtual Goods are a strategy wildly popular amongst gaming apps, it’s slowly starting to be adopted by other kinds of apps. About 26% of non-game apps use this strategy in the US App Store.
- In-App ads and sponsored content were only used by 15% of the analyzed apps. These are the less adopted strategies.
- Subscription is by far the most used monetization strategy with over 50% of non-game apps using it.
Stay tuned for a comprehensive infograpic coming soon!
What are my options?
#1: THE PAID APP
Who uses it:
Whatsapp has tried the paid app model. Popular Games like Angry Birds, Monument Valley, or photos apps like Afterlight and Camera+ have also done so.. Some apps like Alto’s Adventure are paid for iOS but free on Google Play which shows you don’t have to have the same model for different market segments. An interesting number to have in mind though, is that in 2015 68,8% of the apps in the Google Play store are free. Some popular tech news giants like Techcrunch have reported that paid apps are dead. For the most, it looks like utilities apps are the ones that use this model the most.
Some apps like Alto’s Adventure are paid for iOS but free on Google Play
The Good:
First of all, making your app a paid app gets you a more constant revenue stream. Every user, pays before he/she gets in.
Secondly, by getting completely rid of ads, you connect more personally with your user. Without apps, there are two people sitting on the table, you, and your consumer. If there are ads on a app, suddenly there are three. You, your user, and another chair, that is occupied by whoever wants to advertise. And this affects your relationship with the user.
You will be in the awkward position to ask the user to pay for something they have never tried
An undeniable truth is that ads not only make user feel exposed, but they also annoy users. They take space, they make the user lose time, and they make the UI “dirtier”. Making your app paid is a way of avoiding all this.
The Bad:
Users are ungenerous. They usually don’t like to pay for something they have not tested before. It seems that making an app free, and then charging on the inside, might be a better model. And since neither the App Store or the Google Play store offer trials, you will be in the awkward position to ask the user to pay for something they have never tried. Unless you are a known company or service, this method is definitely a risky one.
#2: IN-APP ADVERTISEMENT
Who uses it: In terms of popular apps that use banners and pop-ups, most of these are games. Flappy Bird, or popular arcade game Stack. The big “addicting games” manufacturer KetchApp (2048, Stick Hero, Circle, etc.), uses this model almost in almost every app. Popular apps normally distance themselves from this model since it violently affects the UI and overall experience. A lot of small utilities apps like FlashLight and Calculators use this model.
Get a constant revenue stream proportional to traffic
The Good:
Again: Flappy Bird. The developer of this game was one of the many that used this method, adding a banner in the gameplay of one of the most annoying and addicting games of all time. This allowed the him to get a constant revenue stream proportional to his traffic.
Another good thing is that these banners and pop-ups can be dependent on the location, showcasing ads that are related to the user’s location. Moreover, if you use Google Ads, the commercials showcased will take into consideration the user’s habits, which makes your advertising space even more valuable.
Even though only the clicks in the banners and pop-ups generate serious revenue, there is another strategy than can be used. A lot of games suggest the removal of these ads for a fee, like this you can generate revenue either way. By giving them the choice, this strategy of “removing ads for $0.99” has proven to be very popular — especially in games.
When you are trying to make a serious app, banners and pop-ups are tremendously invasive
The Bad:
Killing the UX: Having 10% of the screen occupied by some 3rd party banners, unintentionally opening an annoying pop-up ad that redirects straight to the App Store, or simply having to constantly tap crosses. Of course, in games like Flappy Bird or Stack, the UX isn’t necessarily the first thing in the priority list, but when you are trying to make a serious app, banners and pop-ups are tremendously invasive.
Another bad thing, is that even though high traffic can generate revenue using this technique, it still relies on connection. If a user is playing a game with banner when not online, the banners become less useful and less attractive for advertisers.
Also, relying on network to make money can turn out badly when a user checks his data usage and realises that a little arcade game has used more than it should, there is only one solution: delete.
#3: SPONSORED CONTENT
Who uses it:
Snapchat uses this model in its Discovery Section, with companies like Mashable, Vice and CNN producing content. Tinder also uses it by adding cards that are locations and products instead of possible matches. Instagram, Facebook, and Twitter are known to use this model when monetizing. With sponsored posts, pages and other types of content.
It can turn a source of revenue into something very interesting
The Good:
Using sponsored content is not only a way of monetizing your application, it is also a way of getting more content in it. This method can turn a source of revenue into something very interesting.
It can also be more profitable than others: It’s a way of transforming your platform into a channel that can actually connect advertisers to their audience (while preserving your platform’s integrity).
Furthermore, using sponsored content is a way of keeping your app “pure”. This system makes everything that is in your app feel like it belongs there. Everything becomes more native, discrete, and profitable.
This method might only work if your platform has already proven its value
The Bad:
When used by big companies like Instagram, Facebook and Snapchat, this method oftentimes encounters resistance from users. In some cases, it caused outrage (the first two) and in others, excitement (Snapchat with the Discover Pages).
An underlying truth is that this method might only work if your platform has already proven its value. In other words, you have to be big. Companies have to be interested in entering your app and your target audience. For example, Vice and Mashable couldn’t wait to make their way into Snapchat. Targeting a young audience (just like Snapchat’s 16–24 audience) is a core strategy for these companies.
Finally, even though sponsored content can be a great way to make some profit through your app, it seems reserved for only some types like service, photo or location apps.
#4: VIRTUAL GOODS
Who uses it:
Games are the category of apps that use this method the most. For example, in the US App store, games represent 80% of the 200 top grossing apps. And these top grossing games use almost as a general rule, virtual goods. Apps like Candy Crush and Clash of Clans made millions by making their user buy power-ups, lives, gems and coins. However, dating apps like Tinder and Badoo also use it by implementing a credits system for “power-ups” and perks inside the app. Also, some popular chatting apps like Line and Viber use their stickers as virtual goods: By selling packs of stickers or credit pre-se, users can upgrade their app or make actual phone calls.
The Good:
What seemed like a good tool only for apps, proved to be valid for a bunch of other services. Apps like Candy Crush and companies like Supercell made millions out of this model. By providing a “virtual advantage” in their games. Users pay for extra coins, diamonds, and other “bonuses” to get an advantage over other users or simply help them pass levels. If you developed a game and already have lots of users, this a very good model as it doesn’t affect the UX and your app doesn’t feel invaded.
Suddenly, apps like Tinder and Badoo realized that this “virtual advantage” model could be used to monetize their apps. By selling useful tools to users in the “hard” world of online dating. Snapchat uses it for “replays” that you can use to see other people’s snaps more than once.
Even though finding that “virtual advantage” users are willing to pay for isn’t easy, the return can be big (whilst keeping your app free and beautiful).
Unfortunately the non-paid experience turns out to be a bad one
The Bad:
Paying for something that isn’t tangible is something users still struggle with. Don’t compare buying something like the Adobe Suite to buying “Go-Backs” on Tinder. We are not talking about paying for software,but rather something that empowers users inside the app.
A lot of apps find this virtual advantage by cutting down on the normal proceedings of the app. And make the non-paid experience a bad one.
Even though spending of any kind is hard of for users, if you are a game or if you think you can find your “virtual” advantage, this method is a very good one.
#5: SUBSCRIPTIONS
Who uses it:
This is one of the most profitable methods, as it’s wildly popular, and known to be the one that generates regular revenue. Probably due to its “constant payment” characteristics. Netflix, Hulu, Spotify, Deezer, HBONow, and Tidal are only the tip of the iceberg. One thing worth noticing is that smaller apps and services have also been testing and using this method. With apps like LifeSum and Runkeeper promising more features for a monthly fee. RunKeeper for example, provides you with more stats, an in depth analysis and a private virtual coach for your runs. Of course these extra features are only available for users who subscribe to the app.
When you offer a subscription service you can keep your app free, and your user experience pure
The Good:
Subscriptions are about offering the “virtual” advantage mentioned above but on a constant level. In return, a regularly charged fee. This is popular in music and video streaming services but not only: smaller apps like App in the Air offer a pro membership that gives user more features within the app. This method is effective for two main reasons:
Subscribed/Pro users are users that will provide a steady and regular source of income for your app.
When you offer a subscription service you can keep your app free, and your user experience pure.
On the other hand, you can also “seduce” users by letting them use a free tier and then after an amount of time or usage, suggest (or even impose) a pro service. This free period can be used to show your user every advantage of using your app. For this reason, the free tier has to be powerful enough to show the user your app’s possibilities, and what he is missing by not joining the subscription based service.
The secret for making users subscribe to your app is finding a balance
The Bad:
Sometimes, the free tier is too good or too bad. What I mean is the following:
- When a free tier is too good, users will not feel the need to sign up for a pro plan. This is what happens with Evernote for example.
- When a free tier is too limited, users will often turn to another service.
The secret for making users subscribe to your app is finding a balance between these two.
The bottom line
The bottom line is that every strategy has its upsides and drawbacks. Some strategies are likely to be more adopted by some kinds of apps. For example, games usually go for virtual goods if they see the game is going to be popular for a long time, and in-app adds if they see it is going to be only a hype.
However, the most important questions you should try to answer in order to correctly pick your strategy are:
- How important is the user experience in your app?
- How much is your monetization strategy affecting the overall experience?
- What kind of user are you dealing with? And how/where is he/she likely to spend money?
Try Liquid for your app analytics!
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