How To Monetize Your Mobile Startup – App To Revenue
- By Rahul Varshneya
- December 31st, 2012
It’s fantastic to know that you’ve decided to launch your mobile startup. (Otherwise, you wouldn’t be reading this article, would you?) But have you given the monetization a thought?
You probably have, but do you know all the options that exist? How do you know what is best for your mobile app?
Do you know that you need to think about monetization the moment you start working on your app idea? A good monetization strategy plays a crucial part in determining the success of your mobile app.
While there are many options to monetize, the way to achieve any kind of revenue growth, you require repeated transactions. Think about how you can constantly get your users to pay while they use your application.
Option #1 – Free App
Not really an option, but something you’d put your bets on, not just for the success of the app, but for getting revenues, if any. This is the Instagram model.
You create a free app, get a whole host of users (typically, at least a million engaged), and hope to arrive at a monetization later on, an option wherein you could even sell your mobile startup. Just like Instagram did (sell), or Twitter did (figure out and monetize later).
Both are very high-risk strategies as you really need to be lucky for someone to consider buying out your mobile startup. Also, you’ve got to have a sizeable number of engaged users, month on month to be able to monetize from at a later stage like how Twitter is doing and so did the social app Path.
This strategy does not suit all. Only if you’re building a social app or where you expect users to stay engaged and interact with the application (not utility ones or the ones which run in the background), is where this strategy would work best.
Option #2 – Paid App
It’s as simple as that. You put up a paid application on the app store. Herein, the users pay just once to download the app and don’t pay anything anymore throughout the lifecycle of the app, even if you have several updates and feature additions.
Think hard before you choose to use this strategy. Is your application compelling enough for users to pay to download the app? Is your application compelling enough that users will choose to pay for the download even without sampling it?
If you’ve got a must-have app, then sure, you can pull this off. But if you’ve got a nice-to-have app, it’s going to be difficult unless you build enough hype that makes it seem like a must-have app.
The kind of apps that do best in this are personality driven apps such as Glenn Harrold’s or utility applications such as Clear, which was a hugely successful to-do app that launched in an already crowded market. This also works with many game apps.
Option #3 – Free App With Advertising
This option is where an application that is free to download and use, but displays advertising in the app so that the developer can make money while users get a free experience.
Many game apps use this strategy and so do many apps that are complete versions with ads for the entire lifecycle of the app, even if there are feature additions or upgrades.
See this example, Sleep Easily Meditations by Shazzie. This author has many paid applications in the app store, but has given one of her apps as a free download with ads in it for users to sample what she has to offer. If they like, they proceed to buy more. Her Sleep Easily application received over a 100,000 downloads within a very short span of time since launch.
A point to note though: you only make money when a large number of users download and use your application on a very frequent basis. So choose this option wisely as you only make money when users click on ads in your app.
Here, the iOS apps draw larger revenues than Android apps, generally.
Option #4 – Free App With Paid Upgrade For Ad-Free Version
These are apps that are basic versions with ads and require the user to purchase a version that does not have ads in it for an un-hindered experience.
This is a very good dual monetization strategy to adopt. Especially, when you’re not very sure whether to go in for a free app or a paid one. Or that you want a user to experience your app and then if they want a better experience, they have the option of removing the ads.
Here you earn when the app is used for free and you earn again if the user upgrades!
Another great example of this is the Hanging With Friends game. Go check it out how brilliantly they have used the ads in the game app.
Option #5 – Free App With In-App Purchase
This is the most popular option used by game apps. Free games are available in plenty, which require you to pay (once you’re hooked) to get virtual goods that help you play the game better. See Mega Jump and Jetpack Joyride.
The way apps use it is that they offer basic features for free and require the user to pay through within the app (in-app purchase) to download and use premium features in the application. See Pandora Radio and Emoji>.
If you feel you’ve got a compelling app, but will take some time for a buy-in from your customer, you can then offer a free basic version and let them buy specific features independently from within the app or a group of features for a price.
These are some of the most widely used monetization strategies and there are some others, which are an offshoot of these. Which means that you can get creative even with pricing your app.
Most importantly though, think about monetization right at the beginning so that the entire product offering can be structured accordingly so that you get feedback on pricing as well at the prototype stage.
All of these above tips will define whether your app is successful or not. If you’ve gone through this process, I would love to hear your experience in the comments below.