How to Monetize from Apps- Free v/s Paid approach

Posted on Nov 12 2012 - 10:24am by Abhi Bavishi

There are no free lunches.  However, the sole concept does not apply when you’re developing apps for iOS and Android. When it comes to apps, people are mostly after free lunches.

When it comes to users, be it Android or iOS- an overwhelming majority is not willing to pay for apps- no matter how good it is. There are over 700,000+ apps on Play Store and App Store, and as ironic as it may sound, but over 83% of the paid apps on Play Store/ App store have been downloaded less than 1000 times. We cited the Top 50 Paid apps v/s FREE apps on iOS/ Android, and we deciphered that free apps were downloaded 10 times more than paid apps. Also, over 73% apps on Play Store were free, out of which, more than 30% apps have been downloaded more than 10,000 times. This is contrary to the fact that only a mere 0.2% of paid apps have been downloaded more than 10,000 times. That’s the reason why developers are increasingly shifting towards monetizing through ads. But is that the optimum strategy?

Developers often get caught up in the conundrum- which monetization model to use- Free, Paid or ‘Freemium’?

Paid is a lucrative option considering the fact that you swoop in heavy amount of money when you sell your app for a few odd bucks. However, on the down-side, you may risk losing humongous amount of traffic as less people would be willing to shell a few odd bucks to try a relatively new app. This decelerates the popularity of your app, eventually making it dwindle in the capacious app mansion.

According to an articulated survey, more than 80 % of the free apps on Play Store rely on advertising as a part of their main business model. The keyword “free” nevertheless is deceptive. Giving away your app for free helps you reach more users, and help you fetch some quality reviews- which are equally crucial to the success of the app. Hence, even while you’re giving it for free, you’re cashing on the thing which matters the most-popularity.

The Free v/s Paid approach is too articulated to be generalized. However, we’re going to point out some golden rules to efficient monetization:

1)      If you’re developing a game for Android/ iOS, follow this strategy:

If it’s a one-time play app- PAID.
If the game has progressive levels, integrate ads and make it FREE.
If the game is about building an empire or growing a farm, make it ‘Freemium’.

[Tip-off: Freemium is an in-app purchase model, which allows developers to mint money thorough in-app micro-transactions. Freemium is much more of a distribution model than a monetization model. When you’re giving away your app for free, you’re basically luring in the type of audience who would have a shady belief that you’re going to give-away everything for free. Hence, it’s very important to re-assess the genre and design the app in such a way that people won’t hesitate in instating micro-transactions (.10$-0.25$) for anything surplus you would offer to enhance the gameplay]

2)      If you’re developing an app for iOS/Android, and if you think it’s productive enough, go for the paid approach. For instance, if you’re developing an app which people are going to use for handful of minutes- like an app which showcases train timings, then a better approach would be to market it as a PAID app. However, if you feel your app is not aberrant enough to sell, market it for free and charge your users for the paid upgrade instead.

3)      If you’re making an app/game for iPad, never ever think of deploying an ad-monetization model. Pay-per- download strategy works better as the audience you’re catering to can afford to pay for your venture, and would have zero tolerance towards anything fluffy and annoying.

4)      If you’re making an app for Android, re-asses your genre. If there are too many apps which cater the same functionality, give it away for free and deploy the ad-monetization model. For ad-monetization to give sufficient returns, you would need to bring in heavy amount of traffic to your app. You can advertise with popular Ad-networks or join some affiliate programs.
[Tip-off: If you do not want to give those ad-networks big-bucks, develop an awesome app, give it away for free, make it popular, and use the platform to market your other paid apps.]

5)      Make sure you integrate ads that are relevant and intriguing. DO not annoy users with unrelated, buggy ads.

These are just some generic points to keep in mind. However, if you are after some really big-bucks, trash these points, and come up with an awesome business idea instead. There are plenty of free apps like Groupon, PayPal, eBay, Zillow, etc., which do not deploy any ad-monetization/paid/freemium approach, but continue minting millions of dollars every year. The key to app monetization is realizing that people won’t mind downloading your app if they actually need it, and won’t mind paying a few bucks, if they know it’s worth it.

Apps are nearly same as online market-places. Though apps do not have the sophisticated, high-level environment to match web-products, but it won’t be untrue to quote that whatever works on web, works on apps too. If you’ve a very well setup online business, you can develop an app as an extended channel to monetize your entire business.

There is no optimum strategy which works generically for apps. It would be naïve to say that ad-monetization model pays more than the pay-per-download approach. Perhaps, the “FREE” keyword is over-rated. When you’re monetizing your app, you would need to re-assess- the genre of your app, the target audience, app’s utility, the targeted market (iOS/Android/Windows) and the brand-image you wish to build.

Though there are ample ways to do it right, there’s no one precisely concise, and conclusive way to do it. The key to monetization is trying out different approaches and sticking to the one which is the most effective. The most important aspect to keep in mind while monetizing your app is to respect your audience’s preferences. The revenue you would generate would be driven by the user-experience and the underlying fan-base. Don’t screw it up.

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About the Author

Abhi is a tech-writer, a software engineer, a photographer, a traveler, and a coffee-lover. He’s passionate about everything that’s even remotely digital. He portrays his obsession with tech-toys in his reviews and articles. You can connect with him at [email protected] Don’t worry. We checked. He doesn’t bite.