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Releasing a successful mobile solution is not only about cutting-edge custom mobile application development and testing. Marketing and the way of generating income also play major roles in the overall performance of the application. However, businesses often struggle to find the best way to make money from the app without jeopardizing user experience.
Identifying which parameters to consider when choosing the right strategy can be quite challenging. Should you go with cross-platform development or native? How do companies use in-app ads while maintaining audience retention? Finally, how can you leverage the freemium model without depriving the app of its functionality in the free version? In this article, we will tackle the question of how much an app can make, explore different ways of generating revenue, and learn from market leaders.
The mobile app industry has been growing in popularity in recent years due to the widespread use of smartphones. With nearly 7 billion mobile device users across the globe, businesses cannot afford to miss out on the opportunity to expand their client base and boost brand awareness. Since modern mobile phones have become increasingly more affordable compared to their earlier counterparts, even people from generally poorer regions own at least one device.
Moreover, users state they check their phones 58 times per day adding up to more than 3 hours of active usage. At the same time, roughly 90% of this time users spend on various applications, including tools, games, social media, messaging, etc. This statistic gives app developers a vital window into audience engagement and allows them to grab their attention. The recent pandemic only empowered digitization by offering people an outlet to reach out to their friends, perform their work duties, and seek entertainment even in the midst of a lockdown.
But how much money can you make from an app, and is it worth it? App revenue is contingent on the sector, number of users, and the way it makes money. For example, YouTube made over $6.6 billion in the first quarter of 2023 alone. Obviously, new applications without an extensive user base will struggle to achieve such numbers at the beginning of their journey. However, with the right strategy, cutting-edge technology, and a reliable software development company on your side, you can find a way to generate income from your solution.
From leveraging ads to reaching out to affiliates to expose your application to a wider audience, there are multiple ways apps make money from their solution. In this section, we will dive into the eight most effective and widespread methods.
If you don’t want to charge your user base a fee, leveraging advertisements is the best method of generating profit from apps. In-app advertising refers to earning revenue by allowing third-party promotions within your mobile solution. By far the most ubiquitous form of making money from an app, in-app ads can be used throughout industries and user segments. There are several types of in-app ads:
Although any application can take advantage of an advertising strategy, it works best for applications with higher audience engagement. For example, social media and video streaming apps incentivize app users to browse for longer periods of time. The longer is the customer using the application, the more lucrative the in-app advertising method becomes.
Before choosing in-app ads to generate revenue, make sure you understand the concept of ad fatigue. Although it can be helpful to show an ad a few times to draw user attention, displaying it too frequently can lead to the opposite effect. On average, we look at 4,000 to 10,000 ads every day which has reconditioned our brains to develop a blindspot for them. To avoid this, create engaging ad content, rotate it regularly, and utilize user data to appropriately target your advertisements.
With a mere 5% of users spending their money on in-app purchases, this strategy may seem inadequate, but that’s far from the truth. In 2020, in-app purchases generated $72.3 billion in spending in the App Store alone. In-app purchasing provides users with the opportunity to pay for additional features, content, or services within an app. This method of driving revenue from apps allows businesses to get a steady stream of income. The key to success is to maintain app functionality offering extra bonuses, perks, and features in exchange for reasonable fees. The purchases include in-app currency, additional hearts, upgrades, and functions.
In-app purchases can be implemented in mobile apps that offer an engaging service even without additional spending. The trick is to make the application more attractive with the purchases but refrain from killing functionality.
When developing a solution with in-app items, keep in mind which platform you are using. On average, iOS users spend $1.08 on in-app goods while Android device owners spend $0.43. Additionally, make sure to identify the fine line between offering tempting bonuses and becoming a cash grab. In-app purchases should expand user experience, not define it.
Similar to in-app purchases, freemium apps also comprise free apps versions along with premium features. However, users pay a monthly or weekly fee to gain access to the expanded app version as opposed to purchasing in-app goods. The paid apps version may also be divided into several tiers that offer various features and perks. Freemium apps can be difficult to configure as businesses often struggle to identify which functions should be free and which deserve a charge.
Freemium applications are solutions that continuously deliver new and improved content. Mobile apps like video streaming platforms or business tools can be used over a long stretch of time while providing new features and content.
When employing the freemium strategy, it’s imperative to properly assess which features are essential for the app’s functionality and which are secondary. These functions will be translated into free and paid versions of your application. The free app needs to be engaging enough to intrigue users and convince them to try it out while preserving some of the features to include them in the paid version.
The oldest way to create revenue from apps, pay-per-download refers to selling your application on the Android and iOS marketplaces for a certain amount of money. Upon purchasing the app, your users gain unlimited access to all its features. Albeit a straightforward and simple strategy, pay-per-download is an outdated way of making money from an app. First of all, the competition from free apps is extremely high which complicates your marketing efforts. Secondly, users also expect a unique value proposition when paying a fee for an app.
The pay-per-download model is suitable for B2B services that provide unique business values, especially for niche audiences.
Incentivizing users to spend money to purchase an app they have never tried before can be highly difficult. Consider offering a free trial period with some or all features to allow users to see the real potential of your product.
Subscription-based apps offer services for a weekly, monthly, or yearly subscription. Mostly comprising several tiers, these apps provide additional mobile app features as the price tag grows. Similar to a freemium model, subscription-based solutions offer access to their features in exchange for a preset fee. However, this strategy does not provide a free app version. Instead, users can try out the app during a limited trial period. When the subscription expires, customers lose access to the app’s functionality unless they choose to subscribe again.
To maintain a regular income stream, subscription-based mobile apps need to continuously generate new content. For example, music streaming, social media, and some business-oriented solutions can benefit from this strategy.
Subscriptions seem to be the preferred strategy for app stores as both Apple and Google decided to lower their commission taken from subscription-based apps from 30% to 15% after the first year. It’s clear that subscription-based apps are the future of the mobile app development market.
Data monetization or licensing refers to selling user data to third parties. To comply with industry standards, data needs to be anonymized to protect your users. This strategy allows app developers to maintain a low price tag on their mobile apps while providing a great experience. User data includes age, location, purchase history, interests, occupation, and more.
Data licensing is a suitable method to generate income for applications that have garnered a large number of active users. Starting with at least 50,000 users, businesses may leverage the accumulated data to create cash flow.
When executing this strategy, be mindful of data protection laws in your area. For instance, data collection can only occur after explicit consent from the user. Additionally, consider adopting ASO techniques to maximize your ranking in app stores.
The transaction fees model is another way for businesses to deliver a free application to the end users. Every time a transaction occurs, the app owner gets a commission from it. For example, when a user orders groceries via an app, they are charged with delivery app fees that go towards the app revenue. This model allows app developers to provide great services without billing users for their solutions.
Transaction fees can only be taken in certain situations. For example, marketplaces can leverage this method of generating revenue from apps. Additionally, finance solutions can also charge a fee each time users send or receive payments.
In order to accelerate mobile app development, many businesses prefer to utilize a third-party payment gateway API instead of building a custom one. Consider hiring a seasoned IT partner to execute the integration safely and efficiently.
Affiliate marketing involves affiliates, a personalized link to the product, and a reward system. Companies offer their partners commission fees for every user they gain through the product link. This method is also often used in blogging and allows smaller creators to make some money.
This strategy can be employed for any type of application. A perfect way to boost brand awareness and expand the user base, affiliate marketing can be used for productivity, wellness, lifestyle, gaming, and many other types of apps.
When looking for potential affiliates, make sure their values align with yours. In a way, they will become the faces of your brand, so it’s vital that they represent your vision.
In the abundance of various ways to make money from your digital solution, you may be struggling to identify the right strategy. Let’s explore the core factors that determine the best method.
The best way to learn is by studying the biggest players on the market. What do Instagram and Zoom do right to achieve such incredible success? Let’s investigate how different mobile apps generate income.
After acquisition by Facebook (Meta) in 2012, Instagram grew from a $1 billion company to a $102 billion corporation, amassing over one billion active daily users. Generating most of its revenue from running ads, Instagram is a primary example of leveraging native and interstitial adverts. But does this strategy work well for the photo-sharing app?
Instagram executives know their audience: the majority of the platform’s user base comprises Gen Z and Millenials. These generations are more open to seeing advertisements in their feed and prefer interactive and creative ads. Furthermore, Instagram added shopping features to the app to allow users to purchase products without exiting the platform. As a result, this beloved social media has become an integral part of marketing strategy for any company. So, how much money can you make from an app like Instagram? Being an overwhelmingly successful product, Instagram’s annual revenue reached nearly $50 billion in 2022.
Another prominent application, the word Tinder has practically become a synonym for online dating sites. Reaching an impressive milestone of 75 million monthly active users in 2022, Tinder utilizes in-app purchases and subscriptions to drive revenue. Outside of offering different tiers with expanded features, this dating app also allows users to purchase various boosts and perks.
For instance, you can buy a set of five Super Likes for $8 to signal your match that you’re very interested. Boosts cost $6.99 each and enable customers to expose their profile to more users for 30 minutes at a time. Various subscription tiers offer these and other features as a package deal. Addressing the question of how much money you can make from an app like Tinder, the application accumulated a notable $1.79 billion in annual revenue as of 2022.
Spotify is a world-famous audio-streaming platform with over 500 million users as of 2023. With revenue steadily growing each quarter, Spotify exemplifies a masterful use of the freemium strategy. The biggest portion of the company’s revenue comes from subscription plans. Purchasing a subscription removes commercials and offers unlimited access to online and offline music and podcast catalogs.
However, the free version of the application generates income through ads. Ad-supported services also provide access to the app’s collections but with a few restrictions. On top of that, the listening experience is regularly interrupted by ads. In-app advertisement brings 12% of the company’s annual revenue. How much money can you make from an app like Spotify using the freemium strategy? In 2022, Spotify generated an impressive $11.7 billion in annual revenue.
A computational engine, Wolfram Alpha can handle complex queries required for financial, legal, and other forms of advanced data. The engine manipulates raw data to provide the utmost precise and deep analysis. Wolfram Alpha is an example of a company that sticks to the traditional approach while expanding to meet new market demands.
Outside of selling its products per download, the organization also offers subscriptions. These strategies allow Wolfram Alpha to use more sophisticated mobile application technologies and cater to researchers, scientists, and educators who are willing to pay extra for high-quality analyses. So how much money can you make from an app like Wolfram Alpha using the old-fashioned pay-per-download practice? As of 2022, Wolfram Alpha achieved revenue as high as $11.5 million.
An organization that disrupted the market during the pandemic, Zoom has become an integral part of any remote office. This video communication platform offers subscriptions to individuals and businesses, depending on their needs and size. Their incredible scalability features allow companies to host meetings with up to 1,000 participants as well as webinars with up to 50,000.
By providing a comprehensive suite of business communication tools, including calendar, chat, cloud storage, and even AI-powered features, Zoom attracted over half a million loyal customers. Even in the post-pandemic world, the video communication platform generates billions in revenue across continents. How much money can you make from an app like Zoom by applying the popular subscription model? In 2022, Zoom generated a remarkable $4 billion in revenue and is projected to surpass this number in 2023.
Strava is a Sweden-based social network app for cyclists and runners looking to track their activities using GPS data. Besides monitoring user performance like pace, distance, speed, elevation, heartbeat, and burned calories, Strava offers a sense of community via social features. Since the app naturally aggregates vast amounts of user data, the company relies on data licensing.
The reason behind Strava’s success lies in its thoroughness and selectiveness when it comes to data monetization. Working with trustworthy organizations and careful data anonymization has helped this social network tool remain ad-free and attract almost a hundred million registered users. How much money can you make from an app using data licensing practices? In 2022, Strava made $220 million in revenue.
Airbnb is a web and mobile marketplace app that connects hosts with travelers. Acting as a mediator, the platform offers safety and transparency for both apartment owners and renters. Having offered over 7.7 million listings from 4 million hosts worldwide, Airbnb is a trusted aggregator for tourists anywhere. The organization’s business model allows for the commission-based way of creating income streams.
Whenever a transaction occurs on the app, both hosts and guests are charged a certain fee that goes towards Airbnb’s revenue. The fees vary depending on the booking’s refundability, type of accommodation, and number of guests. Furthermore, hosts are charged a 3% commission on every completed booking to compensate for payment process expenses. How much money can you make from an app that employs this strategy? In 2022, Airbnb generated $8.8 billion in annual revenue.
A popular VPN provider, NordVPN is known to most consumers of YouTube content. Their strategy heavily relies on affiliates recommending their services in their videos. The company pays $50 to $1,000 per video depending on the size of the creator’s platform. Aside from this payment, affiliates get a commission on every new customer acquired through their link. NordVPN understands the power of video content and opts for affiliate marketing and sponsorships to expand its audience.
As of 2023, this marketing strategy directed 14 million monthly website visitors to the company’s website. Furthermore, their affiliate program allowed them to become the most popular VPN service provider. How much money can you make from an app like NordVPN? NordVPN reached $276 million in revenue in the last recorded year of 2020.
NIX is a software development company with a slew of successful apps and a large pool of seasoned IT experts. Our decades-long experience allows us to rely on previous cases to identify the most suitable strategy to create and promote your application the way to bring businesses more revenue. Below are some examples of successful apps developed by the NIX team.
Alienware Corporation is a computer hardware company that wanted to enrich its user experience by offering mobile access to the gaming portal. Besides gaming features, the mobile application should facilitate a community by allowing users to exchange messages, generate content, and customize their profiles.
NIX delivered a Swift-based iOS application as well as a Java-based Android solution with attractive UI and social media integrations such as Facebook, Twitter, and Discord. The Alienware Arena App can also be connected to the user’s Steam account offering a holistic gaming experience. Our efforts resulted in a high-functioning platform that brought new users to the app and increased overall engagement.
A global taxi aggregator reached out to NIX to help them achieve new heights. The company wanted to enhance the incentive program for taxi drivers to expand their user base, enrich app functionality and user experience, and accelerate feature release.
The NIX team built an Android application to expand functionality for taxi drivers by integrating video recording, GPS tracking, and data sharing features. We also boosted the driver experience by connecting the app to a map that shares relevant road information in real-time. The taxi app’s users can also benefit from the updated map function through increased GPS accuracy. Finally, we added customizability to the app features to control traffic and storage space.
As a result, the client acquired a large audience of app users by launching and marketing the product in the most efficient way. Now, this taxi application is one of the market leaders in its area.
Creating a popular and profitable mobile application is an immensely complex and intricate process. Besides flawless coding, rigorous testing, and advanced features, businesses have to worry about the ways of yielding income. However, a reliable IT partner will guide and accompany you through the stages of mobile app development to ease some of the burden. NIX is a company with a large focus on client success that strives to build high-performance applications. We deliver solutions that help you achieve your goals and generate a steady stream of income. Get in touch with our team to discuss your app idea and bring it to fruition.
Unfortunately, there is no simple answer to this question. The projected revenue is contingent on a number of factors, including app category, platform, business model, marketing strategy, and way of generating profits. For example, Zoom uses a subscription model and made $4 billion in revenue in 2022, while a smaller application, Wolfram Alpha, accumulated $11.5 million in the same period.
While gaming is at the top of this list, mobile apps for investments, traveling, fitness, and healthcare are also among the most profitable categories. Additionally, dating and video-streaming platforms also generate considerable revenues. However, the success of these applications also relies on app performance and way of making money from it.
To maximize the financial success of your mobile app, it’s recommended to investigate your core user base and identify the app’s goals. Examining what your competitors do to generate income is also a helpful part of the process. Finally, creating an MVP first can also help you discover what works best for your target audience.
With a vast background in business analysis, Roman is keen on identifying actual business challenges, defining tailored software requirements, and navigating IT projects to market success.
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