Monetise Your Free App

Making Money From Free Mobile App

Everyone wants an app these days…. But really, should we?  What do we want to achieve?  If it is to make money, is that possible or are apps simply a way to drive customers to a website or provide an extra service?  If making money from your app is your goal, this blog steps through how to monetise your free app.

Gartner Says

Less Than 0.01 % of Consumer Mobile Apps Will Be Considered a Financial Success by Their Developers Through 2018.

The vast number of mobile apps may imply that mobile is a new revenue stream that will bring riches to many,” said Ken Dulaney, vice president and distinguished analyst at Gartner. “However, our analysis shows that most mobile applications are not generating profits and that many mobile apps are not designed to generate revenue, but rather are used to build brand recognition and product awareness or are just for fun. Application designers who do not recognize this may find profits elusive.

Embarking on an app is just like any business decision, you need to know what it is you are trying to achieve.

  • Are you trying to make money just from the app? / monetise your free app?
  • Are you giving your customers a bonus for being a customer? / gain customer mindshare?
  • Do you want to drive business to your website to increase traffic/sales?
  • Are you providing a customer service via your app (ease of use/mobility)?Are you driving customer engagement?

All these are very valid objectives but each has a different driver and therefore different Key Performance Indicators (KPIs).

Below we will discuss a few options to monetise your free app.

First, lets review the top 20 iPhone apps in Australia: App Annie Index released: 2014 Retrospective – The Top App Trends of 2014. Paid apps are highlighted in grey

Top 20 Australian apps

source: App Annie

As at Sept 2015 there were 1.5 million apps available in the Apple Store of which 10,000 are available for the Apple Watch. According to AppBrain there are over 1.8 million Android apps available with over 40,000 being added per month. That’s a lot of apps out there that you need to share mind space with!

So how do you go about making money out of a free app? Is it worth it? I will discuss this in this blog. If you need assistance kicking off your app marketing, contact Results 2Day on (02) 8354 1554.

How to monetise your free app

The main ways to monetise your free app are:

  1. Sell in-app purchases
  2. Advertising – show banner or native ads
  3. Partner with a sponsor
  4. Offer a version with no ads that people pay to download
  5. Sell the app

Lets look at these in a little more detail.

1. Sell in-app purchases

In-app purchases are when you sell digital content, extra features or upgrades in your app.  According to Sensor Tower’s latest research “Of the top 20 apps, 17 earned their revenue through in-app purchases exclusively. The other three (Spotify, Pandora, and HBO NOW) received their revenue through in-app subscriptions to their services.” In-app advertising grew by 70% in one year, according to IDC and App Annie

2. Advertising

You can use a singular mobile ad network such as AdMob or MoPub. These companies have a number of ad networks that they supply to publishers. Alternatively you can use ad mediation companies, which essentially mediate between advertisers and publishers. Companies such as AdTapsyAdsience or AerServ provide ad mediation. These companies partner with multiple ad networks to optimise the best network to advertise to maximise revenue. However, you may not know which ads are being displayed on your app.

Alternatively you can use native in-app advertising, which is provided by companies such as Inmobi or MobFox or Millennial Media or use Google Native Ads. Native Ads allow you to match your app’s original look and feel via an SDK (Software Developer Kit).

Advertising is a great way to increase revenue. However, make sure you don’t overwhelm your audience with advertising. The latest Medialets research shows that subtle advertising works best:

best performing ad sizes for apps

source: MonitizeMore

how much can you make using app advertising?

Quora mentions:

“Assuming you have 10k active users (daily?) you can easily make 200-500 USD, per app on advertising. If you have the advertisements properly planned and placed.”

According to VisionMobile – Developer Megatrends H1 2015 “Most money in the app economy is not made from the app store, but from app-driven e-commerce. Selling offline goods and services via apps represents 71% of the app economy in 2015 – and it’s earned by only 9% of developers!”

3. Partner with a sponsor

The difference between advertising and partnering with a sponsor is that all ads are from one vendor. This can show consistency to your users.

4. Charge for ad-free version

Some people are willing to pay for an ad-free app. Why don’t you offer an ad-free version of the app and charge per download?

5. Sell your app

This really depends on your audience, your potential purchaser and how successful your app is. We can’t generalise here but we are happy to work with you to discuss this in more detail. There are a number of metrics you will need to focus on.

Once you think you are ready to sell your app, there is an App Price Calculator or you can see the value of an app at the Sensor Tower leaderboard. Check out AppHoldings they buy and sell apps. You simply fill out form outlining the number of downloads last month and the revenue you attained last month. The website says “We can generally offer around 6-24 months of last 30 day’s revenues and can purchase apps & portfolios in the $5,000-$1,000,000 range.”

Metrics

In the meantime, you should be focusing on tracking metrics. For example some useful metrics are:

  • What is your monthly user growth?
  • How many of the active users does your app have? (Active installs).
  • How many daily users do you have (DAU), weekly (WAU), monthly (MAU)?
  • How much time each users spend on their sessions?
  • What is your Average Revenue Per User (ARPU)?

Average Revenue Per User (ARPU) per month is calculated as follows:

Total revenue generated in a month

———————————————————–   =  ARPU

Total number of active users in a month

  • What is the average app rating score?

As a benchmark, the average app rating on the App Store is 2.9 and Google Play is 2.2 stars.  Study your competitors, are they making money? However, Make sure you are not providing a “me too” and that your app has a clear point of difference.

Where are most apps getting their revenue?

Statistica has researched the revenue distribution of apps.  What are the sources of revenue for apps?  The figures below are global figures.

App revenue sources

source: Statisica

How much is an active user worth?

One of the main KPIs to track is ARPU per month.  Knowing how much revenue you can assume per ARPU will help you understand the potential revenue to expect.  The graph below breaks up ARPU between the top apps  on the left of the graph (it’s probably not reasonable to benchmark against these guys) and the rest.

Examples of how much you can make with app advertising

The following example was cited on Quora. Note the following definitions:

eCPM are effective cost per impressions

eCPM = earnings / impressions x 1,000

revenue = impressions x eCPM

Lets say you had an app with 100,000 active users and they use it twice a week for 5 minutes.

From my personal experience, a usual banner ads have on average $1 eCPM, interstitial

(full-page banners) – $4 eCPM and videos – $5 eCPM. 

Lets say you set up 5 banner impressions and 1 video per user per session (better not to clutter app with too much ads). If you have 200,000 sessions per week, that will provide you with around $1000 from banners and $1,000 from video ads per week. Don`t forget that this model content a lot of assumptions: 100% retention rate, active users who spend a lot of time in app, banners will be placed somewhere where user will see them for sure, users will not close video ad at once. The good alternative to banners are native ads – they don`t distract users and their engagement level is high. 

Regarding ad providers, AdMob network provided best results, comparing to other networks. iAd works really good for iOS apps.

source: Quora

AdTapsy published the following eCPM by country and shows Australia at $7.24 for October 2015:

eCPM by Country

source: AdTapsy

How to launch your app

Spread the word

Advertise your app on your website, on your social accounts and send out email campaigns notifying your customers and prospects about the app.  Ensure it is easy to share and create a reason or incentive to share.

Review Sites

Submit your app to be reviewed by review sites to help get the word out. Some sites to consider may be: 148 Apps, Android Tapp, App-Apes, Fresh Apps

Promotional services

Companies such as AppShout or AppPromoter help you promote your app. They are like a marketing company for your app.  They expose your app to many viewers including reviewers and journalists

If you have an Android app, products such as AppBrain can help you market as well as provide advertising services.

Some useful sites to track your app

Some useful sites to track the performance of your app are: SearchMan, Apptopia, SensorTower

Good luck!  I hope if you do decide to develop an app it is successful and meets your objectives.

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Please contact us if you would like assistance with your mobile app on (02) 8354 1554. We’d love to help!

ABOUT US

Results 2Day’s aim is to help you maximise your digital marketing potential.  We focus on results, hence the name, Results 2Day.  We combine our extensive sales background with our deep marketing knowledge to provide a process that is compelling. The ultimate objective being a serious positive impact to the business’ bottom line. We strongly believe a good digital marketing strategy can transform a business and we look forward to assisting you with yours.  Please contact us on (02) 8354 1554 to see how we can assist you.

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