Survive The App Marketplace By Effectively Monetizing Your Free App

Monetization of mobile applications is one of the hottest topics amongst app developers and app owners across the United States.  Especially when one considers how many companies are forced to offer their app for free in spite of the cost of development.  While the debate concerning the price of mobile apps is sure to continue, we have addressed many of the major questions relating to price points in a previous article; How Much Should You Charge For Your iPhone App?

Since free is the best price for most consumers, companies are still in need of covering app development costs.  Back in November we wrote about the best ways to monetize free apps; How to Generate Revenue From Your Free App.  The article stated that, subscription-supported apps, in-app purchases, ad-supported apps and sponsorships are the most effective methods to generate revenue from mobile applications.  Below, is an outline of each strategy in order to assist you in determining which one will work best for the app your company is developing. 

Subscriptions:

Subscription-supported apps are where users pay monthly fees to access and use features not available in the free version of the app.  Developers design apps with subscription-based services that provide access to updates, bundled services or other features that promise to enhance the user experience.  By offering special features not everyone is privy too, companies increase the real and perceived value of the mobile application.  Examples of subscription-based mobile apps include: Wall Street Journal, Rdio, and Soccer Champs.   

In-App Purchases:

One of the most popular and effective means of monetizing apps is through in-app purchases.  Both Apple and Google provide good descriptions of the fundamental components of in-app billing.    

An easy way to think of in-app purchases is to liken it to the following scenario.  Imagine you go out to eat.  Getting to the restaurant is free.  Once inside the restaurant you can stand and eat for free or pay to sit at a table and eat.  Lastly, if you want to view the entire menu instead of being served whatever the chef wants to serve you, you have to pay a small fee.  This is known as the velvet-rope approach, and it is very popular among professional developers and strategic marketers.  Essentially, the user is enticed to make purchases in order to increase their experience within the app.  Examples of in-app purchases include the top three grossing games: Candy Crush Saga, Clash of Clans and Pet Rescue Saga

Mobile Ads:

Ad-supported apps generate money from companies wishing to advertise within your app.  Similar to advertising on a website, advertisers purchase banner-ad space for a set price and can also be contracted to give your company a percentage of the sales that are generated from users clicking through.  Ad-supported apps are usually offered side-by-side paid versions of apps providing users with an option to tolerate non-obtrusive ads or have an ad-free experience.  Developing ad-supported apps maximizes a company’s reach and potential revenue stream.  While some companies prefer to attract advertisers on their own, the best method of finding advertisers is to connect with them via an ad network such as: Google Adwords, Millenial Media or Adfonic.

App Sponsorship:

App sponsorship is quickly emerging as a very effective means of monetizing apps.  Companies attract sponsors by directly linking user interests to the sponsoring company’s products or services.  Sponsorships make it easier for users to take action and/or receive more information by immediately clicking on the banner in the app.  The upside for sponsors is getting user contact information and sometimes making a sale.  App sponsorship is more effective than traditional print sponsorship because it offers a higher ROI to the sponsor.  Many companies have sponsorship submission forms on their websites.  Check Jack Link’s Beef Jerky and Subway.    

It might be tempting to think of one of the strategies listed above as “the one”.  However, knowledgeable strategic marketers and mobile app development specialists suggest utilizing a combination of the strategies and seeing which one fits best.  Some apps are better suited to sponsorship, others in-app purchases and so on.  Experienced developers can easily assist you in picking a couple of strategies that will suit your company’s needs.