App Monetization Guide: Earn Money with Your Own App

Introduction to App Monetization

In this article we will NOT discuss the apps with the help of which you can earn small money (if you search for them, you will find some interesting apps here), but how you can do app monetization as an app publisher.

The structure of the App Monetization article:

• Success stories
• The situation on the market
• App monetization
• Paid apps
  Advertising networks
  In-app purchases
  Sale of tangible goods and services
  Affiliate marketing
  Custom banner ads and third-party content
• Mobile business models
•      App Reskinning
  Web/Offline to Mobile
  Royal road
• Conclusion

First, a few success stories for inspiration:

• “Yo” – “It’s that simple”, or a story of how to get 1.5 million in investment from a silly idea and then even make the app useful.
• iShoot: Ethan Nicholas needed money to pay medical bills. He learned a little C programming language and started writing iPhone apps. Result: the app
• iShoot brings in a million dollars within the first 7 months.
• “Tap Tap Revenge,” developed by Bart Decrem. The app made its developer $100,000 within 3 months.
  Everyone is familiar with apps such as WhatsApp, Snapchat, Tinder, etc. The founders of these app startups have all become billionaires.

This list could go on and on. There are thousands of companies and individual developers who made a fortune during the mobile gold rush. And many more will follow – maybe you will too…

…and Reality

… But back to reality. The two most important app stores (Apple’s and Google’s) each offer more than 1.3 million apps today. You will most likely find some app for every idea you can think of spontaneously. Most apps are so-called zombies: they don’t get downloads, reviews, or make money for developers.

The gold rush has attracted a few many amateurs who 1. don’t have an interesting idea of their own, 2. don’t have the technical know-how or experience needed, 3. don’t have enough budget to pay good developers and “growth hackers”, and 4. can’t do any marketing themselves. As a result, you can find a lot of useless apps in the App Store.

But even apps that have been well received by users haven’t made the money the developers expected. Here can the detailed figures to find such a story.

The mood among developers fluctuates between euphoria and gloomy anticipation that “the old days are over”. But is it really so? Is it even worth getting into app development anymore? The answer is “yes.”

Namely, app development is still worthwhile today for the following reasons:

• Even if there are significantly more apps today than there were a few years ago, the number is still significantly smaller than the number of websites on the same topic. For example, search for “buy clothes” in the App Store and on Google. In the App Store, you will currently (02.04.15) find 10 results for this (more in the Google Store, as the search algorithm works differently), while in Google.de there are 13,500,000 direct and related search results.
• The search algorithms of the app stores are not yet mature and can be influenced relatively easily, which has both advantages and disadvantages. However, you can use this fact to your advantage. All in all, it is much easier to achieve a good position with ASO (App Store Optimization) than with SEO (Search Engine Optimization) on the web.
• The stronger growth of mobile traffic vs. web traffic will continue in the coming years.
• Despite great competition in the market, there are still many niches that are much less competitive than the “star niches” such as mobile gaming.
• New mobile technologies always offer new opportunities to compete.
• You can very easily app monetization nowadays, there have never been so many opportunities for it!
• Download app development cost factsheet from here.

All in all, it’s worth getting into app development if you:

• Understand that “the old days are over” and be prepared to do some marketing for the app instead of waiting for everything to run itself.
• In addition to the pure development costs, the marketing and further development costs can be stemmed. By the way, you can learn more about app marketing in our guide!
• Decides to focus on a specific, undervalued niche instead of trying to develop the next Facebook, Tinder and co.
• Has professional or technological know-how that cannot be easily imitated by others.

Conclusion: Mobile business is becoming more mature and is subject to the same laws as other, traditional businesses. But growth and potential are immense – and so are the opportunities to earn money with apps!

Opportunities for app monetization

So you’ve decided that you want to become an app developer after all. But how do you actually make money with apps? There are now numerous ways to app monetization. We’ll show you just a few of the main models for doing so.

Paid apps

The “self-evident” business model, which unfortunately is not so self-evident anymore lately. The idea is quite simple: downloading an app costs something, e.g. 1 or 2 euros.

Advantages:

• You earn a fixed amount per download ( -30% for the stores)

Disadvantages:

• Your app gets significantly fewer downloads than the free apps.
• This makes it difficult to achieve rapid popularization and large download numbers.
• Most of the sales are made in the release week, after which the sales drop significantly.

Suitable mainly for apps with a clear benefit for users, especially professionals, business people, etc., which at the same time have little competition.

Advertising Networks

Admob, iAD etc. Similar in structure to Adsense. So you show your app visitors banners in various forms, users click on them and are redirected to another app or website. You get credited money for each click. You can also count various mobile affiliate networks to this category. You register there as a publisher and make your app available for the publication of advertising.

Advantages:

• You don’t pay 30% to the respective stores.
• Works well for free apps, so you give users a way to use the entire app for free. For more traffic-intensive apps, you can also earn good money with advertising.

Disadvantages:

• Many visitors find the advertising a nuisance.
• Often a too low CPC, in many cases you earn just 1-2 cents per click. Especially if the clicks come from abroad.

To increase the number of impressions and click-through rate, you need to greatly increase the amount of ads in the app. This, of course, lowers the satisfaction with your product.

In-App Purchases: App Monetization

You are selling an intangible asset in the app.

Advantages

• No annoying advertising
• Based on IAP, you can develop a real business model where users have to/can buy in-app goods again and again (very important – again and again, instead of once). In Candy Crash, for example, you always have to unlock new levels.

Disadvantages

• Apple and Google collect 30% of all sales revenue!
• Very often, models with IAP (In-App Purchases) are abused and the user experience suffers greatly.
• Stinginess: many users are not willing to spend even one euro for IAP. There is always only a small percentage of users willing to make the in-app purchases.

The so-called paywall model works similarly to IAP. This is nothing more than a subscription, where users pay money at certain intervals to be able to use the app’s content. An example of this would be the app Umano.

Sale of tangible goods and services

Zalando’s app, for example, is nothing more than a mobile commerce app that lets you buy clothes just as you do on the website.

Advantages

• Enables the offline or web-pure business to operate in the mobile market as well.
• Gives the possibility to build a business model without restrictions by IAP, pricing tiers, “store tax” and others.

Disadvantages

• Need for an app not always given. The typical dilemma: mobile website vs. mobile app.
• Hardly usable without Internet.

Offline effort, the model doesn’t run on its own (like advertising or IAP), you have to build offline logistics.

Affiliate Marketing: App Monetization

Just like in the web area, you can do app monetization with affiliate marketing as well. You sign up with one of the affiliate networks (or many), register for various affiliate programs and list the products in the app. Users click on the products and are redirected to third-party stores. If the users buy something in these stores, you get your commission. Examples of such apps: MyBestBrand, Drezzoo

Advantages

• No advertising, no IAP necessary, all functions are freely available to users without being bothered by advertising.
• Clear, scalable business model and (very important!) many users tend to order something again and again

Disadvantages

• Dependent on advertisers, typical problems encountered in affiliate marketing.
• Own content only limited, mainly offer third party content.

Tiresome to register with many vendors and maintain product lists.

Custom banner ads and third-party content

Another way to app monetization. Here, as a publisher/developer of the app, you integrate the content or banner ads from other providers and collect the money directly from the advertisers. For example, as a diet app provider, you publish the news, promos, banners or content from a “healthy food” chain. Example: Nutrino

Advantages

• As a publisher, you choose which ads you publish and in which format. This allows you to choose the optimal format and content for your app or users.
• Users often don’t understand at all that this is advertising.
• You can negotiate prices directly with advertisers and don’t have to share the income with anyone (especially not with app stores).

Disadvantages

• This form of advertising is available to you only after you have gained a certain number of users and popularity.
• Searching for the partners and negotiations involve effort, as well as publishing the custom advertising. With AdMob, on the other hand, the whole process is fully automated after integration.

These are the main ways to do app monetization and make money with it. But what strategies can you use to put this knowledge to practical use?

Three sample strategies and mobile business models

App Reskinning

A plague for the app stores, but at the same time a good way to quickly build up a whole fleet of apps and ensure a constant flow of money.

App reskinning means nothing more than releasing an existing app (yours or a third-party app whose source code you bought) over and over again under different names and with marginal adjustments. You’ve probably often wondered where all those “flappy” apps come from. This is one of the best examples of app reskinning. Someone created an app that did well. Someone copied that idea. Then another developer released the source code of a similar app for sale, and as a result, there are dozens of flappy apps available for download today.

Advantages

• A way to get your own app quickly, easily and cheaply.
• It is possible to build up a large amount of your own apps relatively quickly and thus reach the wide audience.
• Each app will generate cash and as a result one comes to a stable monthly income.
• You can sell the fleet!

Disadvantages

• Not very innovative: You don’t create new apps, but copy the existing ones.
• Only rarely do you get a “killer app” that runs really well. Instead, you get a lot of inferior apps as a result, which you might as well spare the world.
• After the first few days, when the app is downloaded the most and generates 90% of the revenue, downloads and activity drop off sharply and the app
• ends up in the horde of zombie apps.
• No app in itself is a sustainable business model, each app is just a small part of the reskinning concept
• A new WhatsApp or Tinder is not in it….

Learn more about reskinning here and here.

Open a mobile channel for a running business

Mobile is for web what web was for offline in the 90s: if you didn’t want to be there, you lost! In the same way, every eCommerce operator MUST consider how to deal with the mobile trend. Many leading eCommerce companies have already developed their own mobile strategy, many are in the process, some are lagging behind and saving money in the wrong place (more on app development costs and here our app cost calculator).

Of course, this strategy is only relevant for those who already have an existing off- or online business. For those individuals or companies, a great new opportunity is open to enter new markets and reach new customer bases.

The silver bullet: app monetization

But the big money lies elsewhere: Tinder, Snapchat, Instagram, WhatsApp… All of these apps have a few things in common:

• All are heavily VC funded.
• The apps are growth-oriented, meaning they invest big money in growth and run for a long time without revenue – and thus, of course, without profit.
• They focus on getting the widest possible distribution.
• The main currency in such apps is the number of users, user interaction and virality.
• Network effects play a big role!
• Very often, the operators do not have a clear business model and start thinking about the monetization of the apps only after a certain (in most cases – global) distribution has already been achieved.

How you develop such apps and how you get VC funds is another story and is beyond the scope of this article. But I would like to refer you to some inspiring articles: to WhatsApp, an interesting blog about IT trends and a helpful read (disclaimer: these are NOT affiliate links!).

Conclusion: App Monetization

Despite a certain “app fatigue” among consumers, mobile development and mobile marketing is still a rapidly growing market. The initial euphoria may be over, but the new Facebooks, WhatsApps and Snapchats are certainly waiting in the wings! With a smart strategy and the choice of a suitable app monetization form, you can still earn good money with mobile apps in the coming years.