In this article I shall be discussing the above-stated topic. By 2020 the worldwide app revenue is projected to exceed US$100 billion dollars. Apps usage is very high these days with the average person spending at least 6 hours a day on mobile devices. With such a high usage level & need for apps it’s inevitable that many people might contemplate going into the business of developing apps. Particularly here in Zimbabwe, there are still very few home-grown apps that are now widely main-stream – so it’s a huge untapped market. I will be focusing on detailing just exactly how app companies make money to better equip prospective app developers.
Outright App Purchases
The idea here is to drive paid downloads of the app as the main revenue stream. This is a huge earner if you can foster a lot of downloads of the app. Principally, you can price the app reasonably low so as to lure people to download – you then push for numbers to realize more revenue. Suppose you place the price at $1 and you get 200 000 downloads, that’ll be $200 000 in revenue. This is basically how some app companies make their money; they then can also incorporate further revenue generating mechanisms in-app. Let me point out, however, that this isn’t a very effective revenue model. Global statistics have revealed that the likelihood for people to purchase apps outright as opposed to accessing them for free is approximately 6% – the odds are not favourable.
The revenue model here is primarily premised on the freemium model. So essentially people get to download the app for free and have limited access to use some of its features. The app will have more exciting & convenience-offering premium features which people will only get to access after paying a certain amount. Some can offer to have ads removed as part of the premium package. For gaming apps, it can entail the unlocking of subsequent levels. The idea here is to bait people by enabling them to experience the goodies for free first; this then sets a precedent for them to be more inclined to pay for an enhanced experience. It can also entail the offering of other value-added services or related apps for sale in-app. In-app purchases are the most prevalent revenue model employed by app developers globally with 5 out of every 10 developers adopting it.
Obviously this is a function of how popularly used an app is – the higher the usage the higher the likelihood of advertisers approaching you for ad placement. How the ads get integrated into the app is broadly varied. It’s always advisable to ensure that the ads aren’t intrusive as that has adverse effects on user experience. The most commonly used ad types are banners, videos or interstitial stills (these are ads that pop-up and float on-screen prompting you to either close them or respond to them).
This revenue model is mostly used by apps that offer streaming services, content provision or service provision. This has the advantage of generating recurring income once a loyal user base has been built. Ideally, initial usage is usually offered free (for the majority of cases in the form of what are termed “trial periods” – usually a month long). Afterwards there will usually be differently constituted packages with different monthly subs payable that one can choose from.
Donations Or Sponsorships
What normally happens with donations is that the app is offered free but with in-app CTAs (calls to action) to donate any amount to further develop the app. If the app is found to be highly convenient & useful, people can actually make substantial donations. Sponsorships come in many various forms depending on the terms of agreement. Here is one way: an app developer can approach a pre-existing brand that already has a significant, established & loyal following. Then they offer to develop an app that brings value to the brand thus creating a symbiotic relationship between the app developer & the brand. For instance, an app developer can get into an arrangement with a fast-food chain to develop an app with services like off-site ordering, product catalogue etc. The app developer then gets once-off or periodic payments for developing &/or sustaining the app.
These are the most common ways in which people make money from apps or software. Globally, surveys have shown that gaming apps or software are the highest earners of revenue. Another interesting thing you might want to know is that of all global in-app purchases, apps on the Apple App Store rake in 200% more sales than apps on the Google Play Store.