So you’ve got a stellar idea for an app. You know your audience, what they need and what they want. And you’ve secured the investment needed to design and build your ingenious app. But unfortunately, the costs don’t end there.
Running an app costs money. Running the servers, paying for maintenance, analysing your user’s behaviours to enhance your app, it all adds up. And after all that investment that went into it, you’re going to want to get something out of that app.
So we’ve compiled a list of 10 ways apps can make money:
Paid Apps
An app is just like any other product, like a toaster or a jet ski. So the most obvious way to generate revenue from the app is just to sell it. On average, paid apps cost between £0.99 and £9.99, depending on the complexity or usefulness of the app.
Now getting someone to pay for an app is quite a tall order. In fact, according to Google, only 1 in 2 people have ever paid for an app. But if your app fulfils a clear market niche or has a well-established brand (or ideally both) you’ll find plenty of people willing to purchase. Games in particular is a genre of app where most people would be happy to spend a couple of pounds to try it out.
Not being able to get a feel of your app will be the biggest barrier to your potential users, especially if there are other competitor apps out there for free. But one way to compensate for this is to offer a free trial, so you can give your users a taste to tempt them to purchase.
The top paid apps are pretty much all games like Minecraft or Geometry Dash, but there are some non-gaming apps with a specific enough niche to draw in paying users, such as the Official DVSA Theory Test Kit app.
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Freemium Apps
As of 2023, over 94% of the apps on the Apple store and over 96% of the apps on the Google Play store are free at the point of download. So obviously some people have figured out a way to make money from an app without charging upfront.
Freemium apps are free to download, use and enjoy, but have premium features that you can purchase within the app. These features enhance the way the app works and are designed to tempt free users into upgrading.
Examples of these premium features could be extra ‘super likes’ on a dating app or a more in-depth analysis of your workout routine on a fitness app. Dozens of top apps use this model, including; Spotify, YouTube and Duolingo.
During the development of Freemium Apps, there is a temptation to hold back crucial functionality from the free version in order to pressure users to upgrade. But the best implementation of the freemium model delivers a solid and enjoyable free version of the app that gets users regularly opening the app and then offers substantial premium features to entice them. If a user has already gotten a lot of value out of the free version, the upsell to the premium version is much easier.
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Paymium
If you want to take the paid model a step further, you can opt for the Paymium model, which charges users to download and offers premium features within the app. This is rare option apps take as it relies on users who were willing to pay multiple times during their use of the app, but some apps are able to pull this off.
The Heads Up party game app has found enormous success despite being a paid app with additional premium features. However, Heads Up did have a bit of a head start as it came from the team behind Ellen Degeneres’ show.
If you believe your app is captivating enough (and if you have a multi-million-pound brand behind it) then the Paymium model can be a very lucrative option. But for such a high price point, high-quality design, engaging content and seamless functionality are critical.
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Ads
Possibly the easiest and most common way to generate income from an app without charging your users. Ads offer a steady revenue stream and are relatively easy to set up and run. And there is a lot of flexibility in how you use them, allowing you to pick ads that work best in your app.
Banner Ads - Ads that sit at the top or bottom of the screen that are unobtrusive so as not to block the flow of the app, but which as a result have a low click-through rate
Native Ads - These ads sit within the app as if they were just another piece of content, like a sponsored post in your Instagram feed
Interstitial Ads - Full-page ads that are placed at key points in the app flow, usually after the completion of a task like after checkout on an e-commerce app or after you lose a game of Tetris
Reward Ads - Primarily used in game apps, this ad is optional but if the user chooses to watch it they are rewarded with some in-app credits, lives, or virtual goods.
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In-App Purchases
There’s a bit of overlap with the Freemium and Paymium models here, but In-App Purchases can be a very effective source of revenue for free and paid apps.
In-App Purchases can range from new features that alter the way users interact with the app, down to much smaller changes such as a new colour scheme for the app. By far the most successful use of In-App purchases is by game publishers who sell bundles of in-game currency for a range of different prices going up to hundreds of pounds. Candy Crush Saga generated over $606 million in-app revenue during the first half of 2023, almost entirely from in-app purchases
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Paid Subscriptions
Some apps can be considered more as an ongoing service, for which users will be willing to pay an ongoing subscription. Apps like these need to be feature and content rich in order to keep their users engaged and willing to continue payment.
However not all users are the same, and so quite often subscriptions are broken down into multiple levels at varying costs to accommodate a wide range of users. And a free trial subscription, or even a free subscription with limited access to features can be a great way to draw frugal users in.
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E-commerce
Put simply, your app becomes a new platform for your online marketplace. And this isn’t just for online retailers. Any app with a strong brand and loyal users can sell merchandise through the app to generate revenue.
Rovio Entertainment, the company behind the Angry Birds game series, supplement its revenue with a range of branded swag. Other companies like Uber, Asos and Dominoes all use their apps as a platform to sell products directly to their customers.
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White Labelling
New, innovative apps can hold a lot of value even if they’re not making a lot of money. Improved technology, novel features and/or a loyal user base are all highly sought after by big brands that lack the agility to innovate themselves.
Some of the biggest apps on the market were once independent, only to get bought up by one of the larger tech giants, including Instagram and WhatsApp (which are both now owned by Meta).
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Data Licensing
A decidedly more politically charged method of monetisation, but still a very popular option for apps with a large user base. Almost all apps will collect a huge amount of behavioural data on their users, primarily to help them understand their users better and improve their apps. But there are other companies that will pay top dollar for that data.
Data on users’ purchasing habits, daily activities, preference for media content and a dozen other factors that apps can track is gold dust for companies looking to understand their customers better. But those walking down this road must tread carefully. Governments around the world are clamping down on the practice of user data collection to ensure people have more privacy and control over their personal information. Clear, unambiguous user consent is required nowadays, and in the future, there may be even more regulations to adhere to.
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Transaction Fees
Some apps are the intermediary between buyer and seller. A platform where customers can browse products and services and purchase all within the app. For the facilitation of this transaction, apps like these add a fee to each transaction.
Just like any online marketplace or brick-and-mortar store, this is an accepted price for doing business and can be a lucrative revenue stream. Apps like Deliveroo and Just Eat have become massively successful purely from the small (or lately not so small) transaction fee they take from someone ordering a pizza.
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So which to choose?
Ultimately, the choice of which monetisation method is right for your app will come down to which can generate enough revenue to maintain and grow the app, without driving away users.
Here’s some valuable advice to follow:
So now you know, go out there and make some money.
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