How does the app make money
Develop your own app: this is how you make money!
One reason why many customers underestimate the difficulty of the ROI is an incorrect cost estimate: Many think that having an app developed will cost a few hundred euros! Of course, it's nothing like it. Many apps that we use every day cost well over € 50,000 in the first development step alone. In addition, there are the running costs, the costs for the further development and also expenses for administrative tasks for the operator of a mobile application. If you want to plan your project professionally right from the start, you should deal in detail with how high the app development costs are. But we don't want to discourage you with this article. A professional project can be very profitable. How? Read on and get to know the most important strategies!
Monetization of free applications
Free app with in-app purchases
The first model is one of the most popular: the download of the app is generally free for every user. This is usually recommended for Android apps in particular. The provider earns money by giving users the opportunity to buy something within the app. Many different products are conceivable here. From the purchase of a paid premium version of the free basic app (freemium model) to the purchase of products (m-commerce) to payment systems through the app at parking machines or at the box office, the provider has countless options.
Example: A 3D mobile game is free and offers a basic version of the game. The user can play the first three levels for free and is then offered to buy more levels. Instead of new levels, the user could also buy individual items (new weapons, additional lives, etc.). It is also conceivable that he can play the whole game, but has to endure advertising. The provider earns money by downloading the paid, ad-free version.
This monetization strategy can be very successful. But the provider must be aware that he has to plan the purchase process well. If the offer is placed incorrectly or the basic version is not attractive enough, the shot will backfire because the users will not recognize the value of the app.
Free app with in-app advertisement
The opportunity to earn money with a free app by in the application of advertising banners, videos or pop-ups shows is known to most. You can ask the advertisers for money. A pay-per-click system is often used.
The problem here is that the provider of the mobile app often at the expense of user experience advertising shows. You can counteract this with the clever placement of the advertising content.
Much more problematic is that the analysis of the numbers shows that the Advertising is rarely really worthwhile is. Many advertisers have already noticed that only a few users click on the banners and videos. And whoever clicks on it, often leaves the target page after a second, because the advertisement was clicked accidentally. As a result, it is very difficult to achieve marketing success, which of course means that advertisers are not willing to pay a large sum for the individual click.
We have already explained the freemium model above. However, this model is so successful and popular that we would like to take a closer look at it at this point.
Basically, a freemium app is nothing more than a free app that can be upgraded for a fee. There are no limits to the possibilities. The best way to explain this is with examples:
- There are two versions of the same app.One version provides the basis. A few things can be considered here: advertising is shown, the speed is lower, some functions are not available, there is only the English-language version, etc. The second version corrects the “bug” of the first: It is ad-free, the performance is better, the user can use all functions without restriction, the language can be adjusted etc. etc. etc.
- Items can be bought in the app. With many apps, the user uses a wide variety of items to solve tasks. However, only limited items are available. However, by paying a very small amount, additional ones can be purchased. The simplest option is that there is an internal currency in the app (buttons) that can be exchanged for real money. A little tip on the side: It has a positive psychological effect if you get a lot of buttons with little money. So € 1 = 1000 buttons, instead of € 1 = 10 buttons.
- Additional accounts when downloading the premium version. There are also some apps where you can create an account for free, although the number of accounts per user is limited. However, if the user wants to create additional accounts, he has to download a paid version. If you cannot imagine why the user should do this, you will receive two examples: In a soccer manager game, the user has an account and thus participates in a private league. However, he can only create one team like this. If he had multiple accounts, he could create different teams, participate in multiple leagues, and use the app for longer. Another example are payroll programs. On PCs, you can create your own payroll accounting free of charge with a basic version. But if you also want to create accounts for clients, you have to buy a premium version in order to register several users. Of course, this can also be transferred to mobile devices.
It is important for us to emphasize that this list is far from complete. You can Incentives for the user vary, or even combine different models with one another. A basic version with advertising and a paid premium version is basically an app with in-app purchases and in-app advertising, but at the same time it follows the freemium approach.
Free trial software
This model is easy to understand. The user can download the app free of charge and use it for two weeks, a month or another fixed time. However, he then has to install a paid version if he wants to continue using the mobile app.
This model is very often used in software for the PC. However, it is very rare to find it in mobile apps. Nonetheless, applications, especially in the business sector, are also conceivable for mobile devices.
The advantage is that users can test them completely risk-free, which can have a positive marketing effect. Tip: IF the user decides to pay after the test phase, he will be satisfied. This is exactly the time when you should ask him for a rating on the App Store! On the other hand, avoid asking users who decide against it for a rating.
Develop a paid app
Mobile apps that cost money to download are of course downloaded less frequently than free apps. And it takes thousands of downloads to cover development costs. The most common mistake people make when developing paid apps is a simple calculation mistake. I will also explain this to you using an example:
Not so long ago I received a business plan from a customer that stated the following. The customer assumes development costs of € 10,000 and running costs of € 5,000 / year. This means that he needs at least 15,000 downloads in the first year because he wants to offer his app for € 1 in the App Store. What would happen if 15,000 users actually bought the app? You will of course spend a total of € 15,000. But is that why the provider creates the ROI? No! Because The operators of the marketplaces keep around 1/3 of the money of every purchase that is made via the app stores a! In the end, the customer is missing € 5,000, even though, which would be honorable, he had achieved his goals.
It is therefore very difficult to cover development costs in the long term; especially if you want to offer the app at fair prices. But it is by no means impossible.
But it is essential that the user knows that your app is worth paying for it. This means that the app is so important for a niche that users can hardly help but buy the app, or your brand is or becomes so well known that customers know what your app can do.
In this context it is of course also important that this Strategy for iOS is much more promising than for Android. In Google Play, paid apps are an absolute rarity and very few users are willing to pay for a download.
Other forms of profitable mobile apps
Some providers of apps don't even want to earn money with an app directly. Large corporations very often only have an app developed for image reasons. In order to increase your reach and achieve a marketing effect, a global player sometimes has a very complex app developed and invests huge amounts of money. The ROI takes place indirectly for you, as the app addresses potential customers, improves the image or reaches a new target group.
There is a special case with so-called non-profit projects. Here an organization wants to achieve a goal that has nothing to do with monetary or other material advantages. The purpose of the apps, on the other hand, is to draw attention to environmental protection, to educate children and young people or to educate society.
Yeeply’s tips for your success
After we have shown you how to earn money with apps, we would like to give you a few tips along the way that we always recommend to our customers.
Think about taxes and duties
Unfortunately, there are some providers who are running a project “for their own account” for the first time and are surprised that gross is not net. A special case is that the services used have to be obtained from other countries. Also keep in mind that other VAT rates may exist there. Also note the aforementioned taxes that you have to pay to the app stores, etc.
Choose the right model for your app
Not every monetization strategy fits every mobile app. Before you have your app developed, you should think about which model fits your app, your target group and your goals. At this point you can also carry out a simple market research: Just give 10 people a rough idea of your idea and ask them what they would be willing to pay for it. Even development departments in large companies do this.
Don't ask for money for basic options
A common mistake is to demand money from the user for features that he can actually use in the basic version. If the user does not get real added value, he feels cheated.
Set yourself apart from the competition with extra features
In order to be able to develop a successful app, the unique selling point is an important element. You can use additional paid features to set yourself apart from competing apps. The other way around, you can also see what the competition is asking for money and offer exactly that for free!
A mobile app is not a website
Clear! You can also have a responsive website developed instead of an app. But if you own a website and want to develop an app, you have to consider the special features of mobile applications and are not only allowed to offer a website with an optimized surface. With mobile apps, the effect of banner advertising, performance problems, user behavior, development costs, etc. are completely different than with websites. Therefore, your monetization strategy has to be specially adapted to your app.
We very much hope that you now have an idea of how mobile apps can become profitable. If you need more information for your app project, Just take a look at our blog! We have published many articles about perfect user retention and acquisition, optimized mobile marketing and monetization strategies and app design, which have valuable tips in store for you.
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