As we approach the new year, many app inventors are starting to think about what they can do in the coming year to make money from mobile apps (monetization).
Most people understand they can make money by simply selling their app to other users in the Android or Apple app stores, but there are actually many different ways to generate revenue from your mobile app.
In fact, you may be surprised to learn the most profitable apps make money in the least obvious ways.
Continue reading to learn how to reap the sweet harvest and enjoy a return on your investment of all the money, time, and emotions invested on making your app.
1) Sell For Fixed Price
Enabling users to download your mobile app from the app stores for a fixed price is a straightforward method of making money that is easy to understand.
We have found that selling your Android or iPhone app for a fixed price often works best when you have already created a reputation or recognizable brand name for your app through extensive marketing efforts.
However, this monetization method may also be effective if your app targets a specific niche audience.
When your app solves a problem for a specific demographic of users looking for a solution to their problems, users will pay anything to have it on their phones.
For example, I am so tired of scanning documents.
I have to turn on the PC and then turn on my big, old scanner.
I wait for everything to boot up, manually scan all the pages, save in a PDF file, and create an email to send it to whoever needs it. The whole process takes quite a bit of my time.
But last week, I found a cool scanner app for my phone.
I downloaded it for free and discovered all I had to do was take a picture of the file and the app automatically converts it to a PDF file that looks like it really is scanned (and not a photo).
Once done, I simply tap a button to send it via email. The whole process now takes up no more than 2-3 minutes of my valuable time.
After a few uses, the app told me I’ve used up all my free credits and needed to pay $4.99 for unlimited use.
I did not think twice about it!
Instead, I simply paid for the app and never looked back.
Another example of an app that fills a specific need are those quick photo-editing apps.
Mobile photography has risen to an incredible level with the birth of high-end camera phones.
It seems like everyone has a smartphone these days, which means selfies are no longer that special or exciting on their own.
As such, people are now willing to pay a buck or two to edit their photos and try to outdo their friends.
Finally, one of the most popular YouTubers, a user named PewDiePie, has created his own gaming app.
Due to his status as a famous YouTuber, his viewers and users alike were willing to pay $5 just to get to play his game.
He marketed the game on his YouTube page and the app sold like hotcakes (more than 10 million downloads).
The app has no “niche” value, but people were willing to pay for it because of the brand-name association of PewDiePie (note that app is now free to download).
Like I mentioned earlier, people will not mind purchasing your app if you have been successful in creating hype or developing a specialty niche app.
2) In-App Purchases (IAP)
Many apps can be downloaded and used for free, but special “upgraded” features are only available for purchase.
This is known as In-App Purchasing (IAP) and is probably the most common way for app inventors and developers to gain revenue.
If you have ever downloaded and played a game on your Android or iOS device, you have most likely encountered IAP.
When a gaming app asks you to purchase 100 gems for $4.99, or unlock new characters for $2.99, that’s in-app purchasing.
When you need to pay $1.99 to use an awesome new filter on your favorite photography app, that’s another example of IAP.
Your app’s success with in-app purchasing often depends on how dedicated your userbase is, or whether your app offers something to purchase that is unique.
An in-app purchase can be in the form of holding back certain features that enhance the usage of the app, or releasing new updates to the app if user pays for them.
One example of an in-app purchase that enhances usage is in the form of messaging apps that allow you to send text, videos, and photos to anyone using the same app.
To enhance the chatting experience, these apps usually offer cute stickers as an IAP, so that users can pay $0.99 and have more fun expressing what they feel.
IAP for app updates can be used, for example, if you have a gaming app and want to release new “chapters” or “unique levels” as in-app purchases.
If people enjoyed your first few levels, or are hooked on the story in your first few chapters, they won’t mind paying a bit for the next ones.
If you are considering this monetization model for your app, carefully think about answers to the following questions: How can the user gain more with this purchase? How can you encourage your users into purchasing an item? What do you have to build in your “freemium” (free app version) to hook the current users and reel them in for a few in-app purchases?
Many ads are free to download and do not require (or offer) in-app purchases, but they instead require you to view strategically-placed advertisements throughout the app.
These ads are often in the form of small graphic banners that appear on the top or bottom of the app screens.
However, they can also be in the form of mini-video or full-screen static pop-ups within your app (known as “interstitial” ads).
Sometimes, these ads are “inline,” which means they can be seen in-between posts for apps that use “post scrolling,” such as Facebook or Twitter.
You would be surprised how much companies are willing to pay to popular apps for placement of a 15-second video ad within the app.
Although you may be familiar with how an ad is displayed within apps, you may be wondering exactly how app inventors and developers set up these ads and earn money from them.
The good news is that it’s actually easier than you may think.
All that’s required to display third-party ads within your app is to sign up for a Publisher account with one of many popular ad networks.
In most cases, recommend Google AdMob to our clients who desire ads within their apps, but there are countless other choices if you don’t like Google for some reason.
The only requirement is to open an account with a stable ad network that is reported to pay out a fair share of revenues on a timely basis (great customer support is a bonus).
After getting approved for your account on an ad network, you only need to inform your app developer that you wish to display ads on your app (banner, interstitial, or both).
All you need to do is pass the username and password to your developer and they will make the rest of the magic happen for you.
You will start earning money every time your ad is displayed to a user of your app.
If a user taps on an ad, you also receive revenues.
The exact amount of money you make from each display, or tap on your ad, is highly variable and automatically calculated by the ad network.
However, as with most other monetization methods, your app’s download count is directly proportional to the total amount of money you will make from displaying ads.
With regards to which type of ads to use, it’s completely up to you because each type has its own pros and cons.
For example, banner ads are less invasive and do not require user interaction. They just display in your app and continuously change advertisements.
If a user taps on your banner ad you earn a bit of money, but not much.
On the other hand, interstitial ads are more invasive because they require the user to close the pop-up screen in order to use your app.
If you overdo the user of interstitial ads in your app, your users will be annoyed and may stop using your app.
Therefore, it’s a good idea to only display interstitial ads once or twice each time someone opens your app.
Although interstitial ads are more invasive, they are currently the most popular type of ad because they typically provide a substantially higher payout rate than banner ads.
Finally, you may also consider avoiding ad networks altogether and instead focus on advertising by directly contacting relevant companies and offering to display logos, links, etc. of their company on your app.
This involves quite a bit more effort than simply signing up with an ad network, but the potential income from a direct advertiser relationship is usually much higher.
Furthermore, after your app becomes popular enough, companies will instead reach out to you about advertising (not the other way around).
This is where marketing comes in handy. If you’ve properly marketed your product to its potential, such as with a BrainyBlitz package, that means you’re creating noise.
Companies that want to advertise their products are attractive are attracted to this kind of noise.
The more hype you create for your app, the more possible it is that companies will beg to showcase ads in your app.
When you have big companies queuing at your front door, you can name any price you want.
4) Memberships or Subscriptions
Memberships are different from subscriptions, but you can gain money from either one.
Memberships come into play if you make a gaming app and decide that people who pay to become members have server priority, access to exclusive content, and perhaps look cooler in the game.
In these cases, people who like your app may be willing to pay to become a member.
In this case, just make sure the perks of being a member are worth the membership payment.
Otherwise, if payment is not worth the membership, you will end up losing out on an easy way for revenue.
Commonly, a member pays a one-time fee to get all the perks of membership.
Subscriptions are different because they grant access to a particular feature or content of the app within an allotted period of time.
For example, a user can pay a monthly subscription fee to gain unlimited access to an app’s online magazine collection or receive exclusive newsletters through the app.
If a user fails to pay for the subscription, then he or she loses future access to the exclusive content.
When providing a useful service that fills a need, it’s not a bad thing to ask for donations.
A lot of great websites that offer real services have small “donate” buttons on their home pages because many people are charitable enough to donate to a cause they believe in OR a service that makes their life better in some way.
The same is true of mobile apps.
A monetization method focused on donations can be more effective for apps that are connected directly to charities or fundraisers for causes.
For example, I know of a messenger app that allows you to make your face into an emoji.
When the app starts up, there’s a small message that says, “A portion of donations earned through this app will be sent to Children of the Earth foundation.”
As a user, I am inclined to make some donations because it makes me feel good to help out some children while enjoying the app for free.
More of your users are more likely to donate when they know they are doing it for good, rather than not having a real cause.
If you don’t have a charity, then tell people their donations are meant to help maintain the app and continue making it free for those who can’t afford to buy the app.
This, in itself, is also a form of charity.
The Best Way To Monetize Your App
Now that you have a basic understanding of the top five ways to make money from your mobile app, you may be wondering which way is best.
Different monetization methods exist because there is no “one size fits all” approach to making money with your app.
A creative, talented app development firm (such as BrainyApps) should discuss with you and suggest the recommend way to make money from your app while in the design phase.
Your long-term goals, type of app, target user base, marketing budget, and other factors all help to determine the best monetization strategy for your app.
There are even more advanced ways to make money from your app that were not discussed in this article (HINT: One such method enabled the creators of WhatsApp to rake in a jaw-dropping 9 billion dollars).
In a future article, I will detail some of the more advanced app monetization strategies here on this blog, so be sure to follow us for updates via your favorite social network (see right sidebar).
In the meantime, these five excellent ways to make revenue from your app will definitely get you pointed in the right direction.
If you have any questions or comments about this article, please drop us a comment below. We love chatting about apps with creative app inventors like yourself.
Helping you find your inner genius,
Deron | co-founder @ BrainyApps