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.
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
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:
- Sell in-app purchases
- Advertising – show banner or native ads
- Partner with a sponsor
- Offer a version with no ads that people pay to download
- 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
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 AdTapsy, Adsience 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:
how much can you make using app advertising?
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.”
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.
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
AdTapsy published the following eCPM by country and shows Australia at $7.24 for October 2015:
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.
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
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!
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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