How developers can use free apps as an income generator

CC image credit to Campaign Monitor of flickr.com

As illogical as it may seem, the highest grossing apps on the market are those that come free of charge. The simple fact is that by putting a price tag on an app, however low it may be, it is likely to deter somebody from buying. So while young and eager app developers are chomping at the bit to make a killing from their first app they could actually be pricing themselves out of a much more lucrative market and greatly inhibiting their prospects of future growth.

The most successful apps are those which facilitate sales either through free and easy to use apps, generating revenue from in app advertising or by taking advantage of the ingenious ‘freemium’ method. This is where users can download and access the app free of charge but pay for extras. Here’s a few ways in which people successfully release free apps and generate income from them for any budding developers out there.

Freemiums

Apps

CC image credit to Ash Kyd

Freemiums are the most popular way to generate income from apps. If you look at the stats in the app store the numbers speak for themselves. Currently, the top 20 apps available in the Apple store are making their money from in app purchases rather than charging for the app itself, and this is how they do it.

In short, there are four main ways in which these apps generate revenue.

  1. The free app the user downloads is actually a trial version and they are then offered the chance of upgrading to the pro version for a price.
  2. The trial version expires after a set, and short, length of time so users purchase it to keep playing.
  3. Users get the chance to purchase extra features which will obviously enhance game play. There are some legal considerations to be aware of for this route.
  4. The users will be offered a paid subscription that allows them to access more and more content. This will be for a nominal amount but with the top apps having millions of users every month it soon adds up to a very lucrative business for developers.

Mobile Advertising

Although this is pretty self-explanatory, it is hugely popular and for good reason. Marketers are keen to reach a mobile audience, they also recognise that by advertising on free apps they are going to reach a much larger audience than advertising on the paid for apps. What better way to reach a highly engaged audience?

The other revenue opportunity is to give the option of removing all advertising from a game or app, by paying a price, so you are effectively being paid by your app users to not see adverts whilst earning revenue from adverts for those that are happy for them to stay. As long as the users of your app are seeing and clicking on the advertising you’re on to a winner. The key of course is ensuring adverts your app users will be interested in are the one’s shown.

Product Delivery

Another, and even more straightforward, way of generating income through free apps is with product delivery. For example, Amazon has done a superb job of developing an app that makes it easier than ever to their products using a mobile device with features like one click ordering. A real win win situation for both consumer and company. The extra revenue and increased customer loyalty from offering added value customer service and convenience makes  a big difference to the bottom line.

User Acquisitions

We left this until last as this is possibly the most difficult of all the free app business strategies to get your head round. There are loads of companies who are more than happy to create apps based around social networking and media sharing that involves no in app purchases or advertising. So how are they making money? The simple answer is that they don’t.

What happens with this business model is that the profits come further down the line when the company has worked out how to best monetise their user base. The alternative is to sell both the company and its user base to a competitor, in the same way as Whatsapp did when they sold out to Facebook. Although some well-known apps have gone down this route it’s a very competitive market to crack, you need to develop an app that meets the needs of an extremely large user base to make it worth anything for potential buyers, Whatsapp for example had over 600 million monthly users when it was sold to Facebook for a cool $22 billion.

Author

Mike Scotney from Applause IT, a specialist IT recruitment agency sourcing IT talent across the UK.