How Do Apps Make Money
Are you in the process of developing an awesome new app? Are you wondering how to make money as an app owner?
There are lots of different ways that you can see a return on your investment and make your app profitable. The following are some of the most common steps app developers take to earn money from their creations.
Monthly subscriptions are one of the most popular options for developers who are looking to create a profitable app. The monthly subscription model is easy to scale, and it also provides you with a predictable stream of income from your app.
Not only is this second point great for you and your budget as an entrepreneur, but it’s also a good selling point for investors. If you’re looking for funding to help you develop or expand your app, introducing it and also mentioning that you use or will use a subscription model can make it more enticing.
A potential downside to this option, though, is that you might not have a lot of success asking users to pay a monthly fee for your app right out of the gate. You’ll probably need to start with a free trial to get people interested before they’re willing to pay to keep using the app.
Speaking of free trials, another, similar, way to make money from your app is with freemium upsells.
When it comes to app development, the freemium model involves offering your customers certain app features for free. Then, you charge them to upgrade if they want access to more advanced features.
A great example of the freemium model in the app world is Zoom (AKA, one of the only winners of 2020).
When you start to use Zoom, it’s free to set up an account with and use the Zoom app. However, a free account only gives you access to certain features, such as a time limit on calls. To avoid the time limit, you’ll need to upgrade to a paid account instead.
If you don’t want to charge people to download your app but do want to make money from it, you may want to consider offering in-app purchases.
In most cases, in-app purchases give a user access to special content or unique features that aren’t available using the free version of the app. These purchase options are very popular among gaming apps and can be used to provide players with things like powerups, extra lives, and access to new levels.
Research shows that in-app purchases are one of the highest revenue generators for app publishers, second only to subscriptions. This is a good fact to keep in mind when you’re creating your business plan and getting ready to pitch your app.
Of course, we can’t forget about in-app ads when talking about ways to earn money from your app.
Ad revenue is a tried and true way to make your app profitable. The key, though, is to choose the right kinds of ads.
The following are some of the most popular options to consider:
- Interstitial Ads: Full-screen pop-up ads
- Banner Ads: Smaller ads that show up at the top of the screen
- Video Ads: Automatically displayed videos that often yield some kind of reward for the user (extra lives in a game, for example)
- Native Ads: Integrated ads that blend right into the app’s interface
You can also combine the in-app ad approach with the freemium and/or subscription approaches. For example, you can use in-app ads to earn money from free app users while also allowing users to upgrade to an ad-free version for a monthly fee.
With referral marketing, app developers promote third-party products and services from affiliates to create new revenue opportunities. There are lots of different referral marketing strategies you may want to use, including these:
- Cost Per Acquisition/Action: This option allows you to earn money by promoting different apps or products through an in-app store
- Cost Per Click: Through this model, you can join a network like Adfonic, which provides a variety of advertisements to help you earn money
- Cost Per Install: With this approach, you get paid for each install of an advertised app on your free app
Referral marketing does have the potential to be lucrative, but it can also be time-consuming to set up a referral program. If you don’t have time to set up and track a program, it may not be the best choice for you.
Licensing to Another Company
Sometimes, once you’ve developed your app, you might find that a larger company wants to sign a licensing deal and partner with you to use it.
For example, let’s say you created an e-learning app for elementary school kids. A school district could learn about your app and then decide that they want to make a deal. That way, they can pay you in exchange for being able to share the app with their students.
Selling to Another Company
Finally, remember that you don’t have to retain ownership of your app forever after you’ve created it. People sell their apps to larger companies all the time.
Depending on the type of app you’ve created, there’s a good chance that a business may want to buy it from you because it solves a problem they’re trying to solve or adds value in some other way.
If this is the case, you can make a significant amount of money by negotiating with the company and selling for a price that’s fair to you. Once you make a sale, you can use the money to get started on a new app, or a completely different project. The choice is yours!
Are You Ready to Build an App?
Now that you know more about how to make money from your app, it’s time to get back to work (or get started working) so you can start building up your bank account.
As you’re putting together your business plan for your app and getting ready to meet with investors, be sure to consider these different money-making options. From in-app ads to licensing deals, they’re all great practices that can help you at Digital Engage to establish a profitable business. Contact us today for more information on our app development services or to get a quote.