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Opinion holder entrepreneur Contributors are their own.
The continued rise in popularity of mobile apps is not surprising given the ubiquitous nature of smartphones. This scenario will probably lead many companies to consider creating their own apps targeting both the Apple iOS and Android platforms. Your app’s goals can also include promoting your business and driving engagement from your customer base.
However, in many cases, companies are simply creating mobile apps as a revenue stream. In situations like this, it’s important to fully understand the potential revenue models available to any app. This understanding informs the process of evaluating which model is best suited for your business.
So let’s outline the different revenue models available to entrepreneurs when building mobile apps and how to evaluate these models to determine which ones offer the best opportunities. Remember, this analysis should be done before designing an interface wireframe or writing a single line of code. Ultimately, your app’s successful launch may depend on this initial effort.
Related: How can app makers improve revenue and keep users engaged?
In-app advertising
Embedded ads within mobile apps offer one obvious approach to generating revenue. However, displaying ads in paid apps is likely to hamper the growth of the app’s user base, so this revenue stream really only applies to free apps. It is common practice to use in-app purchases to remove ads.
In particular, the market for in-app advertising continues to grow significantly around the world. According to Absolute Market Insights, the in-app advertising market reached $66.78 billion in 2018 and is projected to reach $472.64 billion by 2027. Again, any app needs a large user base to generate significant ad revenue. So consider making your app free to attract users.
A “freemium” app approach
Freemium apps are somewhat related to in-app advertising, but they also play a role in attracting large user bases to engaging app experiences. Purchasing in-app purchases unlocks additional content and features. In fact, we highlighted the fact that users are turning off in-app ads using this approach.
This revenue stream strategy is common in gaming, music production, and musical instrument apps, with the latter niche being more common on the iOS platform. A user may own a free beat-making app and have access to a new synthesizer or drum machine after purchasing an IAP. Some music app developers use this revenue model to provide new sounds and synth his patches to their user community.
Related: How to build an app for your business with zero coding experience
Offering Revenue-Generating Subscriptions
Additionally, other developers use subscriptions to provide a repeatable revenue stream for mobile apps that are typically offered on a freemium basis. Not surprisingly, magazines and comic books may leverage this revenue stream strategy. However, please note that Apple and Google Play receive a portion of the revenue generated using your subscription. This also applies to in-app purchases.
The subscription model is also very useful for B2B apps. Creating mobile apps that integrate with your SaaS solution is a great way to extend your platform to more users and deliver more value. This justifies the monthly subscription fee.
Monetize your mobile app data
Depending on the nature of your mobile app, its potential data can serve as a valuable revenue stream. Of course, this assessment ultimately depends on the size of your app’s user base and the nature of your data. Any use of data monetization as a monetization strategy should be clearly stated in the app’s privacy policy and terms of use.
This is one of the best examples of why you should decide on your revenue model. Previous developing your product. GasBuddy is an example of an app that has created a strong user base. A very tenacious venture with no plans to monetize the mobile app. When users started noticing the extra resource and battery drain from GasBuddy collecting location information, they got into trouble by covertly (i.e. illegally) selling user data.
Data monetization is not the most common monetization strategy, but it works if done legally and with full transparency from the start.
Related: Building an App? Follow these 4 steps to see things through
Traditional Paid App Revenue Model
Of course, you can easily generate revenue by actually charging for your app. Paid apps should provide users with the best experience and engaging features. As such, these apps tend to be mobile games, music creation apps (including synthesizers), and productivity apps such as video editing and graphic design software. You can also take advantage of the freemium model with certain features unlocked through IAP, but paid apps also he offers IAP. Again, this approach depends on the overall quality of your app and the features it offers.
Familiarize yourself with the Apple Store and Play Store regulations and how they affect your revenue model. Last month, Apple updated its App Store rules to make him receive 30% of sales on “boosts” on social media posts. This is the first time Apple has directly taxed ads in iOS apps and is just one example of recent changes that can have a significant impact on revenue.
Which revenue model is right for your mobile app?
As mentioned earlier, before writing a single line of code, you should decide on the best revenue model for your company’s mobile app. This analysis includes understanding the potential size of your user community and how much revenue you need to break even. These factors directly affect your potential to use in-app advertising and data monetization as a revenue stream.
If your app needs to generate millions of users, you need to set realistic goals to reach those milestones. Personally, I have more success with subscription-based app revenue models that require fewer users to achieve profitability. However, charging a hefty subscription fee doesn’t cut it for all apps.
Ultimately, entrepreneurs should adopt this analytical approach to ensure their mobile apps really make an impact. Anything that doesn’t doesn’t generate enough interest or revenue.
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