Kyle St. Romain | BUSINESS | 11.22.2011 @ 7:11 pm
How much money will you make on your mobile app? How will you make it? Are you sacrificing ad dollars for in app purchases or visa versa? Wouldn’t you like to know?
According to Gartners, the worldwide mobile application industry is expected to grow to $15.1 billion in 2011.
A recent study conducted by Pew Internet and American Life Group concluded that less than half of everyone who downloads apps to their mobile devices pays for them. Ouch. Pew surveyed over 2,000 adults 18 years of age and older and found that a mere 16
percent of respondents who download apps pay for them. The study found that tablet users are more likely than their smartphone counterparts to pay for applications.
These numbers are more revealing as half of those respondents who pay for apps pay less than $5 for an app. A mere 17% were willing to pay more than $20. It’s clear the real winner here is Apple’s AppStore, which takes in 30% of all app sales.
With so much room to grow in the market, a novel application can take in a substantial amount of money. Angry birds takes in 2.2 million per month gross (less Apple’s cut and Chillingo’s cut) from both paid and ad supported versions of its app. Rovio, as a company makes 80 million per year (2011).
Regardless of how big you want to make it, having a killer app is a must. Pricing it right will also help. Promoting during its early days in the app store will help put it on the top 25 list, which also equates to higher revenues. You also need users to leave a lot of well-written, five-star reviews. But that’s largely out of your control. Also, keep the updates coming.
Developers disagree about how to go about monetizing an app, and the ultimate decision rests largely on the type of app you have and what your goals are. Lower-priced apps have to rely on repeat customers to generate additional revenue. Higher-priced apps are often designed to be sustainable on single purchases alone. Additionally, if your app is being downloaded at a high rate, your biggest focus should be on acquiring new customers and growing that number as big as possible. You’ll have opportunities to revisit the old ones after sales plateau.
For lower-priced apps, you need to consider how you’re going to convince repeat business. In-app purchases, mobile commerce, and advertising for similar apps are all viable ways to generate this income. One strategy that has worked well for NewToy’s “With Friends” series of apps is to concurrently release both free and paid versions of the app. The advertisements become so annoying for a regular user of the app, they are all but forced into buying the app. NewToy excels at finding a logical stop that forces users to interact with an ad (the time between hitting submit move and receiving a confirmation).
NewToy also advertises its other applications on its applications. Huh? What that means is that NewToy will suggest you download ChessWF while you’re playing WordsWF. Thus, NewToy figures regular users of Words With Friends may also be ideal customers for its Chess With Friends app and can generate additional purchases through direct advertising channels.
As you can see, there are lots of different ways to approach monetizing your app. So when you’re brainstorming and designing your app, you need to think about how it’s going to make you money. A little thought here before you launch the initial version can help you avoid a lot customer dissatisfaction (or low profits) later.