Everyone has heard the stories about how a single app has generated millions of dollars over a short period of time. These stories tend to awaken the dormant entrepreneur in many of us. Apps like Angry Birds & Flappy Bird were able to amass a cult following in a short period of time and generate a large amount of money. But how does an app make money? In general, there are three widely-used methods to make apps generate income.

Paid App

You can charge users a set price to download your app. This method is the easiest to implement, but has some drawbacks. This method deters users from downloading your app at the door because it places all the risk and cost of an unknown app on the user. Let’s face it, free apps are downloaded far more often than paid apps for this reason. One way to get around this is to have a free version with fewer features and let users decide if they want the full-featured version. One strategy is to ensure that your best feature is free and your second best feature is in the paid version in order to convert free downloads to paid customers.

In-App Purchases

You can offer products within your app for users to purchase. These can include unlockable features or consumable products like “more lives” for a game. With this method, you can release your app for free and generate revenue from within the app. This is where big-name games make a large percentage of their income. There are stories of Candy Crush users spending hundreds of dollars on In-App purchases, however, it may be best to generate some loyalty among users prior to focusing on income generation, or make the purchase price of In-App options low enough that it does not pose a significant barrier.

Ads

You can place ads within the app which generate a small amount of money on each view and click. This is the safest method but requires many more downloads than the previous two methods to generate any significant income.

Income Generation

When creating mobile apps, monetization is more about what the market will bear than about how much time and effort it took to produce the product. Before placing the app for sale to the public, think of every possible way to search for what your app does (if you have not already done so) and shop your competition. You should actually purchase what your competitors are selling in order to determine what, if any, changes you need to make to be more competitive and to understand how you should position your product, both from a descriptive sales point of view and from a pricing point of view. Then, depending upon where your product falls within the marketplace, and how you stack up against the competition, make your income generating decisions. If there is nothing remotely similar to your product, choose the category in which you believe your product will fall and thumb through some apps of a similar scope and size based on their descriptions and popularity. Remember, your perception is colored by the positive and proprietary nature of the app’s creation, which is not necessarily the market’s perception or willingness to pay.

At Palm Beach Software Design, we create custom apps every day, from the simplest apps that help users get through their day, to complex custom apps that help run large business concerns. If you have an idea for an app, but lack the technical know-how to make it a reality, we’re here to help, and we have a great deal of experience in pricing and marketing strategy, too. Give us a call at 561-572-0233. Thanks.