Opinions expressed by Entrepreneur co-authors are their very own.
The recognition of mobile applications is continuously growing, which will not be surprising given the ubiquity of smartphones. This scenario is prompting many corporations to consider developing their very own app, possibly targeting each Apple iOS and Android platforms. Sometimes their goal with an app is to generate publicity for their business and even increase the engagement of their customer base.
Nevertheless, in lots of cases, corporations create a mobile application simply as a income. In this example, it’s crucial to fully understand the potential revenue models available for any application. This understanding then informs the strategy of evaluating which model makes essentially the most sense for the corporate.
So let’s take a have a look at a general overview of different revenue models available to entrepreneurs constructing a mobile app and the way to evaluate these models to provide help to resolve which one provides the perfect opportunities. Keep in mind that this evaluation must happen before designing the interface skeleton or writing a single line of code. Ultimately, successfully running your application probably will depend on making this initial effort.
Related: How can app developers increase revenue and keep users engaged?
In-app promoting(*5*)
Mobile app embedded ads offer one obvious approach to generating revenue. Nevertheless, this revenue stream really only applies to free apps, as displaying ads in a paid app is probably going to hinder the expansion of the app’s user base. In truth, it is not uncommon practice for mobile games or other apps to use in-app purchases to remove ads.
It’s price noting that the in-app promoting market continues to generate significant growth globally. According Absolute insight into the market, the in-app promoting market reached $66.78 billion in 2018 and is projected to reach $472.64 billion by 2027. This growth represents a combined annual growth rate of 24.4% over this 10-year period. Again, any app needs a large user base to generate significant ad revenue, so consider making your app free to attract users.
Approach to “freemium” applications.(*5*)
Barely related to in-app promoting, a freemium app can be used to attract a large user base to an appealing app. Additional content or features are unlocked by in-app purchase. In truth, we just highlighted the incontrovertible fact that users use this approach to disable in-app ads.
This revenue stream strategy is common in gaming apps in addition to music and instrument production apps, with the latter area of interest being more common on the iOS platform. The user can own a free beat making app and access recent synthesizers or drum machines after purchasing an IAP. Some music app developers also use this revenue model to provide recent sounds and synthesizer patches to the user community.
Related: How to create an app for your business with no coding experience
Offering subscriptions to generate revenue(*5*)
As well as, other developers use subscriptions to provide a recurring income for their mobile apps, often offered on a freemium basis. Not surprisingly, magazines and comics sometimes use this revenue stream strategy. Nevertheless, consider that Apple and Google Play take a portion of the revenue generated from subscriptions; this also applies to any in-app purchases.
The subscription model will also be very worthwhile for B2B applications. Creating a mobile app that integrates with your SaaS solution is a smart way to extend your platform to more audiences and deliver more value – justifying monthly subscription fees.
Monetize your mobile app data(*5*)
Depending on the character of the mobile app, its data potential can potentially function a worthwhile income. After all, this pricing ultimately will depend on the dimensions of the app’s user base and the character of the info. When using data monetization as a revenue strategy, it’s essential to clearly state this within the Privacy Policy and Application Terms of Use.
That is top-of-the-line examples of why you wish to define your billing model before developing your product. GasBuddy is an example of an app that has generated a strong user base with a very sticky enterprise and no plans to monetize the mobile app. They ended up secretly (i.e. illegally) selling user data and entering into trouble when users began noticing extra resource and battery consumption from GasBuddy’s location gathering.
While data monetization will not be the preferred monetization strategy, it might work if it is finished legally and is totally transparent from the beginning.
Related: App development? Follow these 4 steps to review all the things
The normal revenue model for paid apps(*5*)
After all, actually charging for the app provides a straightforward way to generate revenue. Paid apps must provide users with a top-notch experience and compelling functionality. As such, these applications are typically mobile games, music creation applications (including synthesizers), and productivity applications similar to video editing or graphic design software. Using the freemium model with some features unlocked by IAP also works, but paid apps also provide IAP. Once more, this approach will depend on the general quality of the app and the functionality it provides.
Be certain that you fully understand the Apple Store and Play Store policies and the way they affect your revenue model. Last month, Apple updated theirs App Store Policy take 30% of sales to “boost” social media posts. That is the primary time Apple has taxed in-app promoting directly on iOS, and this is only one example of a recent change that might significantly impact your revenue.
What billing model is sensible for your mobile app?(*5*)
As mentioned earlier, before a single line of code is written, you wish to determine which revenue model works best for your company’s mobile app. This evaluation involves determining the potential size of your user community and the quantity of revenue you wish to break even. These aspects directly influence the potential of in-app promoting and data monetization as sources of revenue.
If your app requires thousands and thousands of users to develop into profitable, you wish to set realistic goals to reach those milestones. Personally, we have had more success with subscription-based app revenue models that require fewer users to break even. Nevertheless, charging high subscription fees doesn’t work for every app.
Ultimately, entrepreneurs need to take this analytical approach to be certain that their mobile app is absolutely making an impact. Anything less simply won’t generate enough interest—or revenue.