Making money with apps? It’s possible. Developing an app can be very lucrative, but you do need a strong concept with the complimentary revenue model. Which revenue model fits the best with your app idea? In this article, we’re going to list all the possibilities.
Can you make money with apps?
The smartphone’s prominent role in our life keeps increasing. Meanwhile, about half of all Dutch people use their smartphones in bed and are on their phones for more than 2 hours per day, this is more than a month per year (Simyo, 2019). This increase is also visible in the market, the app market is a booming business. The demand for apps keeps growing, whereby we also see an increase in the demand for mobile solutions. The increase in use and market growth offer potential.
Selling an app in the app stores
It’s good to know that the app stores (the Apple App Store and the Google Play Store) always get 30% of the selling price, the remaining 70% is for you.
Different types of app revenue models
What is the best way to earn money with your app idea? Below, we mention the most popular app revenue models.
Maybe it sounds odd, but free apps are valuable. An app can be a great platform to serve as a promotional tool for services or products. App development is a good investment that enables you to promote your product or service uniquely. This could possibly lead to new revenue that in return covers the money that went into the investment.
An example of DTT is Koning Pinguïn - Greenpeace AR app. This app was developed to raise extra awareness to protect the Southpole Sea, the habitat of penguins.
Earning money without the user paying for your app, that’s possible with in-app advertisements. This model is used for example with games, they show ads in between levels. This is possible with little banners on the bottom of the screen or with ads that pop-up on the screen for a few seconds. Every time a user watches an ad (views) and clicks on the ad (clicks), the owner of the app gets a small compensation. A banner in general renders fewer views and clicks in comparison to video- or interactive ads. With this revenue model, the user experience is a tradeoff. Besides, ads have an impact on the overall visual design. Middleground would be to combine ads with a premium revenue model. users can download the app for free but they have to buy the premium subscription to remove the ads.
With paid apps, the user has to pay for the app itself, without payment they are unable to download the app. An obvious revenue model and before even very popular, but it also knows disadvantages. Only 10% of apps these days ask for payment beforehand, and this percentage keeps descending every year (Statista, 2020). Only a part of users are willing to pay before they can download your app: users are more likely to buy your app if they can test it first. Hereby, the popularity of alternative revenue models has grown and apps most of the time go for a more forgiving model that lets users test the app first.
However, this revenue model is for some apps still successful, how is that possible? When users are already familiar with the brand or platform, this makes them willing to pay to download the app: popular examples are the Procreate app from Apple (€10,99) and the Minecraft app (€6,99). DTT has also had successful experiences with this revenue model, the KNHS Dressuur- en Menproeven app (€5,49) has meanwhile been rated more than 2000 times in the app stores.
Where paid apps ask for money to download the app, the freemium models’ principle is ‘’try before you buy’’. Users download the app for free (Free) and then pay for functions they want to unlock (Premium). The freemium revenue model is accessible and doesn’t require an initial payment, this makes downloading the app accommodative, which results in more users. The advantage of a freemium model is its flexibility, you pay when you want to, this can mean an add-free version of the app or for example extra chances to play a level in Candy Crush. The income of this revenue model is variable because users can use your app with this model, without ever making one purchase, but don’t be mistaken! Every download of your app is valuable, downloads give you data, analytics, ratings, and reviews, which results in feedback, insights, and organic growth. With this information, you can improve your revenue model.
DTT has applied the freemium revenue model to its apps as well, for example, the Doula Bevallingcoach app. The Doula apps offer support when having contractions, all of this for free. Users can unlock different functions such as breath coaching or different types of background music or unlock the complete version in one go for €2,99.
Subscriptions are unremovable from our daily lives, almost everybody these days has a Netflix or Spotify subscription. With a subscription, you pay periodically a fixed price. This causes a fixed income source, which results in security and liberty to further develop your app. In the first year, you pay 30% per user, but after the first year, you only pay 15%. This way app developers are stimulated to optimize their apps to keep their users as long as possible. The subscription revenue model is also combinable with the freemium model.
An example from DTT where we make use of the subscription revenue model is applied to the Edu Play Book app. Children can play free mini-games and listen to stories with the Edu Play Book app. For unlimited access to all stories or games, enthusiasts can pay for a subscription.
What is the best app revenue model?
As you have read, there are a lot of ways to make money with apps, but what is the best revenue model? The answer often lies in the middle and is dependent on what strengthens your concept. To decide what revenue model best fits your app, we will define your target group, the marketplace, and determine how profitable it will be. Drawing up a business plan for an app idea is the first step to figuring this out. At DTT we often get called by people with nice app ideas, but often don’t know how to make money out of it or if it’s even profitable. Would you like to know more about the costs of making a solution? Read our article ‘’What does it cost to make an app?’’.
Curious about the best way to make money with your app idea? Feel free to contact us.
Are you still doubting about what kind of app or on what platform you want to release your apop? Then read one of our otther articles: