How mobile apps make money

Making money from building mobile app’s is a very lucrative business. Here I will walk you through different methods of how app developers monetize their apps and why different methods are preferred over others in certain circumstances.

Unfortunately no one can say what is the right way or the wrong way of monetizing and it is up to the developers logical thinking as to which steps he or she will take to hopefully generate the most income without annoying the users or loosing them all together in the process.

Advertising

Mobile advertising can be a win-win situation for all involved as the user gets a free ride, the developer gets paid, the marketer gets ‘eyeballs’ and the ad network ‘middleman’ get’s their cut of course.

The problem here is that no one likes ads. But if we want something for free then I guess advertising is a good compromise. Some developers offer In-App-Purchases where these ads can be removed for a small fee. But we will get to IAP further on.

There’s a risk when placing ads into your app when they’re placed either in inappropriate areas or just using too many ads altogether. This can have a very negative affect and can even ruin the app completely. Not to mention all the bad reviews and ratings you will be hit with.

Ad networks

There are many ad networks out there and it may be a good idea to try different companies and see how they compare.

It’s also a good idea to diversify and certainly use more than one network as it is very possible for an ad network to stop serving your apps advertisements and even suspend your account all together. The last thing you want is to have all 100% of your income stopped until you rectify some issue to satisfy the ad agency.

There may be legitimate reasons for this but you need to be on the ad agencies good side and look at creating what I call ‘Happy smiley apps’ like rainbows and unicorns. I don’t think something like an email spammer tool would get very far in terms of an ad network supporting your work.

The most popular ad network at the moment seems to be Google’s Admob. This is what I have started with at the moment but I don’t have any other network to compare it to as of yet.

My next choice would be Amazon as they are also a very popular ad network and when my Admob account reaches my personal threshold I will be jumping on the Amazon band wagon and diversify.

Facebook ads is another good choice and I would expect a high revenue from them.

 Facebook gets paid very well as there is a high demand for marketers to do business with their platform and where there is high demand in anything then the cost also rises. That’s how the free market works I guess.

There are a lot of other ad networks out there such as Lead Bolt but I would certainly be starting with Google, Amazon and Facebook before I explored any other alternatives.

 

Banner Ads

Banner ads are those ads that are usually placed across either the top or bottom of a screen and yes, they resemble a banner (stick with me).

I haven’t yet seen a banner ad used on both the top and the bottom at the same time but this is very possible.

These are probably the least intrusive of all types of ads and can generate quite an income on their own. However, I have found that using a banner ad alone doesn’t generate enough and is usually accompanied with another form of advertising to make the app worth while in generating revenue from advertisements.

Just to give you  general idea on figures, I was seeing around £20GBP per month with 1000 installs from my first real app with only one banner ad placed onto the main screen. However, this app was a productivity type ap and not designed to be engaging like a game is. I’m certain that a gaming app would generate significantly more in revenue, so if you plan on creating a game then make it a good one as you will no doubt be spending quite sometime building it.

 

Banner Ad

Interstitial ads

I still, to this day have trouble pronouncing this word ‘interstitial’ and I’m guessing I’m not the only one.

These adverts are the one’s that take up the whole of the screen and seem to appear randomly. The best practices for using these type of ads is when there is a natural break point in the app such as when a level has been completed in a game or when a new screen is opened for example. The problem with these then is when the developer doesn’t comply with this ‘best practice’ and it can create a big problem for the end user.

So much so, that it could damage the reputation of the app and give an all-round bad experience to anyone that has the misfortune in using the app.

This would drive down users and user engagement with the app, and thus your income revenue would be much lower. 

However, if this type of ad is implemented correctly then this could bring in quite a substantial amount of cash.

 Usually I see three to four times the amount of revenue from an interstitial ad than I get from a banner ad and definitely worth considering. But just be cautious on how it is implemented.

Rewarded ads

Have you ever played a game where you have been offered to watch an advertisement and as a reward, you will be given x-amount of gems or gold coins or dollars etc? These are rewarded ads.

For me this seems to be a very rare type of ad to implement unless you are creating a game of which you would use some sort of monetary system.

I have never published a game at the time of writing this, although I do have a half finished game that has been sat in a dusty corner of my linux file system for quite some time and I hope to revive it some day and using a rewarded ad component would work very well in it’s situation I think.

Other than gaming I can’t see many (or any!) other uses where this ad could be implemented and if you have an idea then shoot me an email because I would really like to know.

I have also witnessed other app developers grow envious of others that have rewarded ads in their apps and I must say, I really want to try it too. I tend to stick to apps that have a purpose and bring real meaning so games are not my thing at the moment.

 

Using the Admob console for example it is possible to restrict the amount of ads/rewards that is offered to the user over a time period.

This limit is used on occasions where you would not want the user to acquire too much wealth in a game over a rather short time frame and thus, the user completes the game quicker than anticipated and moves on to something else.

Developers need to keep the user engaged for as long as possible and continue earning an income so this restriction is usually always wise to implement.

 

Buy at a price

Of course there is always the traditional sale with an upfront price tag. 

Sometimes it might make more sense to monetize your app with this method. Unfortunately there is no right or wrong answer when it comes to monetizing, but I always think strategically about how I approach this. 

For example – I developed an app called ‘Locate Me: GPS by SMS’ where I put a price tag on it. The purpose of this app was to send your GPS location over an SMS text message in a situation where you have little to no internet connection.

In this scenario then, the ad network would find it difficult to serve ads to the app when the app has no internet connection and then I would not be generating any revenue for myself.

But what I had done was I created two versions of the app. The first version had a banner ad and it was released to all countries except arabic nations.

Then I released a paid version only to the arab nations.

The reason behind this was my logical thinking. Using Google’s analytics I noticed the app was very popular among these arab countries. But I don’t think they would have great 4G coverage at the pyramids in Egypt! So it made sense to me to place a small price tag on this version of the app.

 

There are some countries around the world that do not allow Google play to sell your app for less than $1 USD. I really do not know the reason behind this and it does sound a little strange. So I guess the best price to place on your app is $1 if you were to sell it at the cheapest your willing to go as to get the best coverage.

The highest price then that Google play is willing to allow you to place on your app is around $600 but don’t quote me on that. Its around that ball park but I will check the next time I’m at that stage of publishing another app and may return here to update this.

 

In-app purchases

Have you ever played a game where it offers loads of in-app purchases? These are usually referred to as micro-transactions and I have seen many people get very frustrated with this kind of monetization method. 

The trouble here is that it doesn’t take very long to put a user off your app for good if they’re charged for every tiny bit of extra functionality in an app.

You can only push your customers so far. A few in-app purchases are OK if the extra functionality is worth the cost but people don’t want to spent ten times (or a lot more in some cases) the amount of what an average game would cost if the game was bought out-right.

 

In-App Purchase (IAP)

Subscriptions

A subscription service is when you would pay a monthly fee for example to use the app.

 

I remember back in the day well before Google maps was around for GPS navigation I was using a free Sat Nav app which worked beautifully. Then one day the developers of the app decided to charge a monthly subscription.

I really wouldn’t have minded if they charged a one-off fee but this introduced a big problem for me and in the end I had to uninstall that app and look for an alternative after about a few months of introducing this payment method.

The problem was that I only needed to use the Sat Nav once or twice per month. Some months I didn’t need it at all. But when I was charged a monthly subscription for using the app one time, for a matter of minutes, I knew I was done with this app as this was just not a sustainable payment method for me at all. 

The light vs pro model

Have you ever seen two apps that look exactly the same as each other and they usually appear side-by-side? 

A light version of an app usually has less features but is offered for free where as the pro version is a paid-for app with extra functionality.

The light vs pro model gives the user the chance to try the free version of the app and if they like what they see then they may just find out what extra features the pro version has to offer and maybe even make a purchase.

A thing to note here though is that not all light versions of an app has an accompanying pro version that has a cost. Sometimes it makes sense to create a small, more lightweight app with the most common and basic features such as Facebook’s messaging app for example.

As you can see there are many different ways to make money from a mobile application. I’d like to think that I’ve covered everything here but if you find that I’ve missed anything out then please send me a mail and I will add it in here! Thanks 

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