Making Money from Mobile Apps
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Making Money from Mobile Apps

By Mainak Biswas March 26, 2012 - 1,126 views

Every now and then we heard stories about app developers making fortune from the app they developed. Though the news are hard to believe, they are in fact true, as mobile app market has untapped potential to make money. The other side of the story also laments that not every app developers make money with their apps, which is also true to the T.

Considering the fact that there are millions of apps in Apple App Store as well as Android Market, everyone into the app development cannot make money. Having a careful look at the top selling apps, we can see that all popular apps have few things in common which makes them popular and people do not think twice to pay money to have those apps in their smartphone. If you understand these distinguishing factors and incorporate those into your next mobile app, you can still win against the competition and your app will get visibility, more importantly it will serve as a money making machine.

Before we proceed further on “how to make money through mobile apps”, lets us have a look at the recipes for a successful mobile app. If our app is successful then it will make us money. If you are serious about making money from your app, you need to clearly understand the elements of successful mobile apps.

Researching the App Store

With infinite competing apps in the market, you need to do proper research to find out the niche that has very few apps or no apps at all. This will lead you to face less competition. Researching on the app stores will also give you insight on the current trend of the app usage. You will get to know about what is making people dissatisfied about an app and what are they looking for in an app.

Creating an Innovative App

It takes lot of efforts, time and money to create an app that looks good and performs. So do not waste your effort in replicating an existing concept, rather utilize that to come up with something new. The app market is flooded with all sorts of app, so if the app you develop is another archetypical app available in the market with a little twist, it will disperse in the vast sea of app store and you will hardly find any takers. On the other hand after a thorough research if you come up with something unique that solves certain problem the smart phone users are facing, you will have lot of takers for that app.

Performance and Loading Time

The success of an app depends upon how consistently it performs. The app has to be tested properly in all conditions before it is released in the app market. The app should consume less memory and CPU power so it can run on all kind of smartphones including the starter range.

The main reason people prefer mobile app is because they want to access information faster. Mobile apps which take long time to load are removed as soon as they are installed. Loading time of 5-7 seconds is fine but above that creates dissatisfaction.

Enticing User Interface

The main reason of success of a smartphone app is the user interface. If the user interface is appealing and has simple and easy navigation, it will be user friendly and hence will be popular among all kind of smart phone users. If the UI of an app is cluttered, it will fail to gain user acceptance. Apps like Feathers, Gowalla, Instagram are considered having the best User Interface.

Value Proposition

The mobile app has to be usable, that means it has to offer some sort of a solutions to something needed by the users and make life easier. Such an app will gain popularity quite rapidly. Such apps offer something extra then other app and engage the users. If you look at apps like Flixter, Gowalla, Echofon, Tripit etc. they all have what it takes to be a top selling app.

Now that we are done with identifying the recipes of a successful app, it is time to know how to make money from our app. Once our app is ready to launch, there are 2 important steps that need to be successfully completed.

Getting Approved in the App store

After your app is developed the only hindrance before it is available to public is getting approved in the app store for the respective platform. While it is easier to be approved in Android marketplace, getting approved in Apple App store is quite difficult. But if the submitted app complies with all the policies and guidelines, it will definitely get thumbs up. If Apple feels that the App is just a copycat and does not add any value addition to iPhone, contains pornographic and racial content then the app is likely to be disapproved.

Promoting the App

Once the app is approved and listed in the App market place your next goal is to let customers know about it so that they will download the app. The best promotion technique is to get features as a new app in the category or top selling app. But to be featured in the app market place you need numbers.

So there are external ways to promote the app and get the desired numbers and then automatically get featured in the app marketplace and you will see a sudden increase in downloads as soon as your app get featured in the marketplace. You can create a dedicated website for your app, utilize blogs in the same niche to write about your apps, Take help of influential people in social media to talk about your app in Twitter and Facebook. These methods will create a buzz about your app and information about it will reach to more and more people.

With good promotion and marketing, your app will gradually gain visibility and it is time to see the result in terms of monetary benefit you will gain. There are four ways to make money from a mobile app. Depending upon the type of your app, you can choose any one of the monetization method or combinedly use more than one of them.

Paid Downloads

There are 2 broad categories of apps, paid apps and free apps. So this method of monetization is the one used by paid apps.This involves only one time sale. Apps which are not expected to have many updates over time can utilize this method. Usually the app needs to offer something extra to attract users to pay for it. Generally paid apps have less number of takers then free apps, but there is guarantee revenue for each sale. If a paid app is priced competitively depending upon the value addition it is offering to the user, it can have a good number of sales.

Points to remember:

  • You will not receive the full amount paid by buyers for your app. A part of the payment will be deducted for the hosting, billing and maintenance of the market place for the app.
  • While pricing your app, be realistic. It should not be too high or too low as compared to similar category app in the marketplace. Hence conduct research before pricing the app.
  • As soon as your list your paid apps in the marketplace, actively involve and listen to what users are saying. Take each feedback seriously and implement the suggestion provided. Look for their reaction on the pricing and be open to decrease the price if more and more people complain about it.

Displaying Ads

Advertising is another big source of revenue for free apps. Through ad network like Ad mob the app developers can earn revenue by displaying advertisement inside their apps. You can display ads through the help of an ad network or direct ads. While the former method will deduct part of the earning as processing fees, you have all the money to keep in your pocket when you show ad through direct advertising. As developer you have all the flexibility to control how and where inside your app the ads will be displayed. There are various ad networks like AdMob, inMobie, iAd etc. which serve exclusively to mobile platform.

There are three primary types of  mobile advertisement:

CPC (Cost Per Click):
In this type, advertisers only pay when the displayed ad is clicked by a user.

CPM (Cost Per Impression):
In this type of advertisement, the advertisers pay for thousand or million impressions of an ad. Whenever an ad is displayed it is counted as one impression. The advertisers here just want their message to be displayed to as many users as possible.

CPA (Cost Per Action):
In this type, the advertisers pay only when an action is performed like a purchase is made or something is downloaded.

While considering an ad network, you need to consider the eCPM or Effective Cost Per Thousand Impressions. This is a standard measure to compare various ad networks. The eCPM is calculated as per the following formula:

eCPM= (Total Earning/Total Impressions)X 1000

Another important metrics while considering an ad Network is the fill rate, which is the amount of time an ad is served divided by the total number of requests and measured in percentage. So eCPM multiplied by Fill rate gives an exact figure of the performance of the network.

Generally revenue model through advertising is great for apps with frequent and regular usage like News, Weather and Social Networking. Moreover a large number of install base complement the earning potential from advertisement.

In app purchase

This method of making revenue is generally suitable for gaming apps where in virtual goods can be purchased from within the app. The apps can be offered as a free app and to use few features and upgrade the capability the users have to buy virtual goods. In Android market apps with in-app purchase revenue model are making almost 14% of the average daily revenue. In iOS Appstore almost 30% of revenue comes from in-app purchase. Gamesbrief has published a details study of revenue made from in-app purchase by various developers.

If you look at any of the App market place you will find plenty of Free apps and they are also featured in top grossing app. A larger chunk of their revenue comes from in-app purchase. According to GigaOm’s analysis 34 out of top 100 grossing apps in iOS were free app and were monetized by in-app purchase.

Social Cast has created a nice infographic which confirms that In App Purchase is the best method to make money from free apps.

Rovio, the developer of Angry Bird has now adopted in-app purchase offering “The Mighty Eagle” which is a virtual good and helps the Angry Bird player finish any level. So Rovio initially adopted the paid download model offering the app for just $0.99 so that many users will be willing to get the full version at such a nominal price. They also released Free to Try version and when it was released for Android they opted for display advertising model and now they are adopting this in-app purchase.

Free to Try, Pay for Premium Service / Features (Freemium)

You can release 2 versions of your app. One, a free lite version with limited features and another a full featured paid app. With the free lite version, users can try the apps before they decide to buy. This way with the help of the free apps you can build your audience faster. If your app is engaging they users are more likely to convert it to the full version. You need to make sure that your premium full featured app is offering significantly higher values then the lite version else you will lose users.

You can offer premium functionalities through a subscription based model. Generally content reach apps like News and magazines app can adhere to this model. The app can be downloaded for free and a summary of the news can be displayed for free users. If users want to read the details news they have to buy a subscription. Antivirus apps can also resort to this method where in for subscribed users the virus updates will be offered.

Another way, the premium functionalities can be added by removing the ads in the full featured free version. Anybody will agree that ads are a distraction while using the app. Hence, if your app is engaging users will be interested in an ad free version by paying money.


With billions of dollars in stake, the mobile app market has immense potential to make money. But it is not everybody’s cup of tea to be successful in making money through mobile app. It needs combination of creativity and hard work as well as luck and thorough knowledge of the mobile app eco system. Whenever trying any of the above mentioned monetization method, always try combination of them depending upon your app type. Successful developers like Rovio use a combination of monetization model. With the free app distribution it is easier to get wide audience and making money through advertisement. And if the app like Angry Bird is addictive, most of these free users will be later converted to paid users. The first priority of any developer should be keeping users engaged to the app, so regular updates and feature addition are very much essential.

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