Successful App Revenue Models: Where to Start?
Building a successful app startup means that you’ll eventually have to figure out how to sustain your business’s long-term growth. If you’re trying to appeal to investors, you’ll absolutely need a monetization strategy in place. Garnering revenue through your app is a sure-fire way to bring in funds, but how exactly do you start implementing a successful revenue model?
Fortunately, there are already a number of business models already available, and they are not all complex or difficult to implement. Here we’ll cover the various kinds of app revenue models, outlining the pros and cons of each so you can find the perfect fit for your app.
A Brief Moment of Introspection
With millions of apps available for download, it’s no surprise that there isn’t a one-size-fits-all revenue model. Before settling on a monetization strategy, you will first have to do some app introspection. What makes your app so great that users will pay for it? Does (or will) your app offer upgrades? What about similar apps – how do those earn money? Is it important that your app has a strong user-retention or are you only concerned about getting initial downloads? How can your app turn users into customers?
Freemium apps sound like what they are: free. Users can download a standard or basic version of the app and use it for free. Developers earn money by offering premium content, advanced features, or upgrades for a fee. The benefits of this business model are apparent from the get-go: users can try your app risk-free before committing to the price tag. For initial download numbers, this is a great way to monetize your app because users are more likely to download your app, even if they know little about it. With this model, you reach large numbers of new users without any barriers.
There are several methods for garnering revenue when you create a Freemium app.
Premium Content Purchases
Firstly, you can offer users to pay a one-time fee for an upgraded or premium version of your app. With one-time payments, there is an element of ownership involved — users can have the app for years and use it on numerous devices. The downside to this plan of action is that you need to keep finding new users to download and pay for the app, which will require diligent marketing.
The second option is to have a subscription service where users pay a recurring fee for the premium version. A subscription service takes the pressure off of having to aggressively recruit new users as you will have a sustained income from a solid user base.
Because users face no risk with freemium apps, your user “trial period” is crucial in securing either premium upgrade or subscription income. A popular company utilizing this strategy is Dropbox, an online storage company that now streamlines cloud storage and file synchronization. Dropbox can be downloaded for free, and users are placed on a Basic plan that allots 2GB of storage. Users have the option to upgrade their plan by paying a recurring subscription fee. This model is also known as capacity-limited because there is a limited capacity available to users for free (like 2GB of storage). Dropbox also employs the feature led model by allowing users to upgrade to business or professional accounts with tailored features and priority chat support. Dropbox offers limited-time trial offers on premium content, which is another option you can take advantage of with your own app if you want to entice users to go beyond the basic version.
A popular option, especially for gaming apps, is to employ in-app purchases. These in-app purchases can offer extra levels, enhanced features, virtual money, or virtual commodities. One example is the language-learning platform, Duolingo, in which users buy gems to unlock benefits. Mobile games, like the Sims or Farmville, provide virtual goods for sale.
Ultimately, whether you’re selling gems or coins or virtual furniture, in-app purchasing is ideal for apps that have a dedicated user base. Like subscription fees, this model doesn’t rely heavily on reeling in new users, although you do have a greater obligation to keep your current users happy in the long run.
In-app advertising is, exchanging money with an advertiser for real-estate in your app. Using app analytics, a mobile ad partner will work with you on how, when, and where to place ads. This is a perfect option for app startups with a large audience and can become the sole revenue for your business. Like advertising in all other arenas, in-app advertising faces the same difficulties. Ads have the propensity to annoy or disrupt a user’s app experience, which is what you want to avoid as much as possible. You will need strong user data, perhaps an app analytic software, to design the timing and placement of your ads. Additionally, your user base should be using your app frequently enough to appeal to advertisers.
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Paying for an app up front is perhaps the simplest revenue model. Like one-time payments in freemium apps, where users buy the app and use it on multiple devices at any time. Because this revenue model does not offer users a chance to try out the app before monetarily committing to it, your app startup will advertise aggressively and garner an excellent user reputation so that potential customers already have an idea of your app’s value. Significant advertising will eat into your initial costs, but this model guarantees revenue with each download.