Just a few short years ago, the concept of an app for a mobile phone was completely foreign. But as smartphones have become ubiquitous, the app business has boomed into a multi-billion-dollar industry, with hundreds of thousands of products and millions of daily consumers. Given the nature of mobile apps, this young industry remains very fragmented; there are a few large players who have experienced multiple successes, and some of the most popular products have been launched by relative unknowns on a shoestring budget.
Of course, launching and monetizing an app in the current environment is no slam dunk. Developers are facing an unprecedented amount of competition for downloads and ad dollars. Despite the challenges, the opportunity remains massive; millions of dollars change hands in app stores every day, and mobile advertising budgets continue to swell.
Below we discuss the many ways app developers can make money from their products, and highlight some of the best free resources for anyone looking to develop and monetize a mobile app.
Keep in mind that starting an app is much more complicated than starting your own blog. If you’re not ready for that kind of commitment yet, click here to start a blog instead.
At the risk of sounding incredibly obvious, one of the easiest ways to make money from an app you create is to charge each time someone wants to download it. By now it’s no secret that there is big money to be made on app downloads. Earlier this year, Gartner projected that app sales in 2013 would reach $25 billion. And Apple has now paid out more than $10 billion to app developers. According to a report by Distimo, as recently as November 2012, Apple’s App Store was bringing in $15 million per day in revenue, while Google Play brought in daily revenue of $3.5 million.
Of course, it’s tough to convince customers that they need to fork over money to buy your app–especially when there are so many out there that are completely free. This monetization method requires great planning, execution, and (most importantly) marketing.
In most app stores, products are listed as either “paid” or “free”. In reality, however, there’s a third category that lies somewhere in between and includes some of the most profitable of all apps. Many apps are free to download, but require an upgrade (i.e., payment) to unlock the full features, accelerate the progress of a game, or turn off ads.
In general, less than 5% of an app’s audience will ever pay special features or upgrade to a paid version of the app. So commercial success with this model requires a fairly large audience, especially since the prices charged for in-app purchases are often relatively small (usually under $5).
Candy Crush is a great example of a “free to play” app that makes money by giving players an option to buy items within the game. Candy Crush features multiple levels (hundreds of them in fact) that must be solved in order to advance to the next one. The levels are relatively easy to start, but escalate in difficulty as the player progresses. As the game becomes more difficult, users have the option to purchase “boosters” that make it much easier to beat the level.
Another classic example is Words With Friends. Unlike Candy Crush, you can’t buy an advantage in this game. You can, however, improve the experience by paying a small fee to have ads disappear. This speeds up the game play, and results in a better experience; in the free version, you’re forced to wait through a brief ad after every play.
Another primary app monetization technique involves showing advertisements to users of the app. While rates for mobile ad inventory are generally much lower than traditional online placements, there’s still a major opportunity here for apps that generate a significant number of pageviews or offer access to an attractive and targeted audience.
There are several different implementations of ads on mobile devices, but they generally fall into one of two categories:
Banner: A banner ad served on a mobile app works just as banners function online. Here’s an example from the CNN app, with an ad for Progressive appearing within a news article:
Interstitial: This term is generally used to describe an ad that takes up the entire screen (as opposed to a banner that appears alongside the app’s content). The ad for The Lorax shown above is a good example of an interstitial ad in a mobile app.
4. Find a Sponsor
Many non-game apps don’t lend themselves well to the freemium model, and are instead better suited to be monetized through ads. If you elect to give your app away for free, there is still a major monetization opportunity; you’ll be relying on your users to engage with the ads that are served to them to drive revenue.
The most predictable mobile advertising earnings will generally come from an exclusive sponsor–an advertiser who wants their messaging to be displayed whenever someone uses your app.
A good example of an exclusive sponsorship features perhaps an unlikely combination: Major League Baseball and Dunkin’ Donuts. Here’s the welcome screen for the “Beat the Streak” iPhone app, which lets players pick a player who they think will get a hit each day:
Partner With Mobile Ad Network
One of the most obvious ways to make money from your app involves including ads within the product. While the most lucrative way to sell ad space involves direct sponsorship deals with advertisers, many app-makers don’t have the connections or time to set up those types of arrangements (at least not initially). A more immediate and less involved route involves partnering with an ad network who will sell your ad inventory for you and take a portion of the total revenue in exchange for their services. Here are some of the biggest mobile ad networks:
Adfonic. This network gives app developers control over the types of ads shown, and has some major companies signed on as advertisers. It can also be used to monetize mobile versions of websites.
AdMob. Now owned by Google, AdMob is one of the most widely used tools for mobile app monetization. It’s relatively easy to integrate the needed features into your app, and you’ll get relatively detailed reporting that lets you track your earnings.
Airpush. This platform is dedicated to Android apps, offering a variety of ad formats including standard banners, icons, and “smartwalls.”Airpush also offers weekly payments and detailed analytics that include crash reports.
AppFlood. This service claims that it is able to generate $2 – $4 eCPMs for app publishers, achieved in part by no commission being taken out of revenues generated. AppFlood lets publishers connect to multiple demand side platforms and customize deal terms to maximize earnings.
AppSpot. Flurry AppSpot claims to be able to have publishers making money within about 10 minutes, using takeover, banner, and video ad units. The AppSpot dashboard also lets you allocate traffic across multiple ad networks:
Chartboost. This platform allows game developers to engage in cross promotion, run direct deals they may have negotiated, or tap into an ad network to monetize ad inventory.
Greystripe. This ad network, a division of ValueClick, offers access to a number of premium advertisers. Greystripe has some impressive results for some of its larger advertising partners.
iAd. The official Apple mobile ad network, iAd lets publishers keep 60% of the total revenue generated from in-app advertising. Brightcove has a great summary of everything you need to know for monetizing via iAd.
InMobi. This network also works across various platforms and boasts a relatively easy-to-install program. InMobi also publishes frequently to their blog with features that include best practices for mobile app monetization.
LeadBolt. This network is unique in that it offers ten advanced ad units, and also allows for monetization at multiple points in the “app usage cycle.” In addition to the traditional ads displayed when users are engaged with the app, LeadBolt can offer app makers the ability to monetize at download and also when the app is not in use.
madvertise. Based in Europe, madvertise claims more than 10 billion monthly ad impressions and a number of premium advertisers. Their features include real time reporting and advanced ad formats (such as Rich Media).
Millennial Media. This network is used to monetize tens of thousands of mobile apps, making it one of the bigger players in this space. Millennial offers a self-service advertising program and lets app makers reinvest earnings into promotional campaigns if they like.
MobFox. This tool features built-in mediation to more than 20 ad networks, as well as a eCPMcontrol function that lets publishers set a floor for the rates they’re willing to accept. MobFox cites some relevant metrics for their two ad types: 1) Mobile Banners (89% fill rate, CPMs from $0.50 to $4.50) and 2) Mobile Video Ads (55% fill rate, CPMs from $5 to $25).
MobYD. The MobYD network offers real-time reporting of results, and claims to feature both CPM and CPC campaign opportunities.
Mojiva. This is another smaller mobile ad network that app publishers can use to compete with the larger opportunities listed above.
MoPub. In addition to their MoPub Marketplace, this hosted ad serving solution also offers advanced analytics, ad network mediation, and custom ad serving capabilities.
PlayHaven. Though this platform features an ad network option to monetize users, the primary feature is a virtual goods promotion function that allows you to display special offers and targeted messages on devices that have downloaded your app–even when the app isn’t open.
Playnomics. This platform offers technology designed to maximize revenue from all types of users, maximizing spending from active paying users, creating new paid users through targeted campaigns, and serving advertisements to non-paying players.
Tapjoy. This system works a bit differently than traditional ad networks; users are able to unlock items within their apps (such as coins) by electing to engage with a particular ad.
There will generally be a strong correlation between your app’s popularity and the revenue you earn. Regardless of the exact method or methods you choose to monetize your app, more downloads will most likely equate to more traffic.
If you don’t have the backing of a huge company and distribution behind you, odds are your marketing campaign will rely on word-of-mouth and grassroots promotion efforts. Several companies have popped up to effectively act as hired guns for app makers seeking attention; for a fee, they’ll promote your app, get it a few reviews, and theoretically start it off with a decent bump up the charts.
We’re generally skeptical of the ability of these promotional companies to actually drive qualified downloads; they often farm out download and review tasks to overseas teams. The most valuable attention your app can get will be organically generated, and there are a number of effective promotional tasks you can do on your own (more on this below). But if you have the budget and are interested in getting some additional momentum behind your app, here are some of the services you might consider:
AppBrain. Pay-per-install marketer AppBrain functions a bit differently than many promotional services; you set the maximum amount you’re willing to pay for a download, and they charge you for each new customer they’re able to bring you.
Appshout. This company will send out a press release, write copy for your app store listing, and produce a microsite and demo video. Promotion packages start at $455.
APPSPIRE.me. Austin, Texas-based APPSPIRE.ME offers a variety of packages, including one-time promotional services, launch plans, and recurring monthly advertising and promotion.
Appversal. This platform focuses on social media, offering Twitter followers and Facebook in their packages. Appversal can also provide press releases, reviews, banner ads, and even web site design. Their products come in flat fees ranging from $269 to $1,469.
BombAppromotion. For fees starting at $320 this company offers promotion packages for iOS and Android apps. They also sell app store and iTunes ratings and reviews; 10 independent iTunes reviews will cost you $65.
ComboApp. This company offers a number of a la carte services, including an “app release boost” and a press release. They’ll also guarantee coverage on ten review sites for $1,150. There are more than 40 individual offerings, ranging from $75 to $6,000.
Split Testing Tools
Mobile app makers regularly utilize split testing throughout the production and marketing process, allowing users to tell them the optimal settings for some of the variables that are a part of this process. If you’re looking to bring a bit of the scientific process into your app development and maintenance plan, here are some potentially useful tools:
Apptimize. This platform can be set up in just a few minutes, and allows developers to see results for their variations in real time. The Community pricing level allows for up to a million downloads for just $50 a month.
Arise.io. This split testing platform, available for both iOS and Android, allows features within the app to be changed once it’s live in the app store. You’ll also be able to set specific distribution levels for the variations and set up and track goals.
heatma.ps. This program does for app developers what Crazy Egg does for webmasters. The heatma.ps interface lets you see how users are engaging with your app, including stats on button clicks and time spend on various sections.
Optimimo. This split testing software lets developers see which version of their app is more effective at accomplishing the stated objectives. Users can be segmented based on geography, screen size, and operating system.
Pathmapp. This service, currently available only for iOS apps, lets developers try out different versions of their app without resubmitting to the App Store. Pathmapp starts at just $19/month, and has a “Ranger” option that includes the CEO’s personal cell phone number.
Newsletters, Tools, Forums, and Free Memberships
There are a number of great free and paid resources out there for app developers and marketers; check out these publications and memberships for ongoing support and assistance during the app monetization process:
App Developer Magazine. This publication isn’t free, but is very affordable at just $18 for a one-year subscription (or $28 for two years). The site also features a weekly blog and semi-regular podcast.
App Viz 2. This software program from Idea warm lets iPhone appmakers track sales, rankings, ratings, and revenue in one central location. A single subscription costs just $49, and five packs are available for $99 (there’s also a free trial option).
Distimo. Each month Distimo releases free reports covering the app industry; recent publications have touched upon the volumes needed to climb to the top of the app store rankings and habits of the most successful developers.
FierceDeveloper Newsletter. This free weekly newsletter focuses exclusively on topics of interest to mobile developers, including mobile platforms, operating systems, and other features. The distribution list is currently over 30,000.
Gamasutra. This site, devoted to “The Art & Business of Making Games,” has a ton of great information for anyone interested in building and selling an app. A free membership gets you access to a bunch of additional information on the site.
iPhone Dev SDK. This forum is free to join, and features an extremely active community that can be useful for troubleshooting problems and getting inspiration for new strategies.
Mixpanel. This anlalytics program lets app developers take a deeper dive into their products to see how their app is being used, which features are driving engagement, and which marketing campaigns are working. The free platform allows for the collection and analysis of up to 25,000 data points a month, so it’s easy to try this tool out with no risk.
Mobile Marketer Newsletter. This e-newsletter is dedicated to the business of mobile marketing, including features on tactics to boost app downloads and earnings.
xda developers. This site focuses on Android app development, with dozens of different forums covering topics such as development tools, coding practices, and even marketing and monetization.
Further Reading: Pricing Your App
If you’ve decided your app is good enough to command a paid download, you still have some important decisions ahead of you. Most importantly, you’ll need to come up with a price point (or ideally, a plan to test multiple price points). Here’s some additional reading to help you come to a price tag that will make you the most money from download fees:
Thriving in an App Store World. The author of the above series, Michael “Jury” Jurewitz, gave a nearly hour long presentation on the nuances of app store pricing strategies; if you have the time and are serious about creating a paid app, this is a must watch.
App Pricing: How to Price Your iPhone or iPad App to Sell. This article walks through some helpful tips for arriving at the right price, including suggestions on customer tracking and competitive research.
Hacking the App Store – Pricing. Carter Thomas gives an explanation of “price cycling,” the process of switching from paid to free and back again, as a way to boost downloads and overall revenue.
Top 148 Paid iPhone Apps. 148Apps keeps a list, updated, daily, of the most popular paid apps in the iTunes app store. If you’re wondering where your competition is pricing or what a reasonable price for your product might be, this is a good place to start your research.
Top 200 Paid iPhone Apps. AppShopper keeps a similar list, ranking the top paid iPhone apps while also showing how many days each has been in the top ten, peak position, price, and star rating.
There are various ways to set up “freemium” apps, and several important decisions to be made in order to properly incentivize (without overly frustrating) your users to fork over a few extra dollars to get through a level. It helps, of course, if the app you create is particularly addictive; power users are more likely to spend to continue their progress or improve the experience.
A Majority of the Top-Grossing Apps Are Now ‘Freemium’. Paul Resnikoff lays out some impressive stats about the profitability of freemium apps, including that more than 70% of the top 300 have some freemium characteristics.
The Top F2P Monetization Tricks by Ramin Shokrizade. This article and interview discusses the psychological concepts many “free to play” games and apps use to generate revenue, explaining why so many apps that are free to download (such as Candy Crush) are able to earn huge sums of money.
Why is Freemium So Powerful? This article lays out the theory behind a freemium app, while also examining some of the factors that go into freemium success and the risks that come with this choice.
Monetizing Freemium Apps. Eric Seufert offers up his thoughts on how best to monetize a freemium app, including the relationship between in-app purchases and advertisements.
Three Steps from Paid to Freemium. This incredibly detailed article from Michail Katkoff highlights the questions developers should ask themselves when considering the conversion to freemium, and gives a roadmap to getting there.
Freemium vs. Premium: Developer Point of View. Bruno Didier offers a fresh take on the freemium model, concluding that it obviously works well for many but might not be perfect for everyone.
Further Reading: Network Reviews and Mobile App Advertising
Above we highlighted some of the networks available to app-makers looking to generate money via display advertising. But that’s really only the tip of the iceberg; there are so many different networks that cater to mobile apps (and mobile web traffic). Below is some additional reading that examines the numerous different options for generating ad revenue with a mobile app:
Top 50 Mobile Advertising Platforms in 2013. Richard O’Connell has a more exhaustive list of mobile ad networks; if you really want to test out different options, this should keep you busy for a while.
mobiThinking guide to mobile advertising networks. This guide is just tremendous; it includes some high level tips as well as detailed reviews of more than a dozen mobile ad networks that app makers can use to monetize their product.
The Mobile Ad Network Roundup. This list includes both types of mobile ads as well as highlights of some of the more popular networks.
Mobile Advertising Directory. This page has an extensive list of nearly 200 mobile marketing companies to contact if you’re serious about finding a sponsor for your app.
Classic Guide to Mobile Advertising. This lengthy PDF report includes more than a dozen insightful articles from various mobile marketing experts.
Further Reading: Promoting Your App
Building an app is only the first step on the road to profitability; a great concept and flawless execution is relatively worthless without a decent marketing game plan. There are countless channels and strategies for getting the word out about your app; take in the articles below for some insights into which work and which won’t really move the needle:
The iOS App Marketing Strategy Guide. A detailed guide from the Apptamin blog covers all aspects of an app marketing strategy, from planning and building to promotion and analytics.
Email Marketing For Mobile App Creators. Ros Hodgekiss has written an incredibly detailed and informative article on email marketing as a core component of a mobile app release strategy. Marketers can learn a lot from this article, including specific tasks for the pre-launch, beta testing, launch, and post-launch phases.
The Art of Launching an App: A Case Study. This lengthy case study by John Casey chronicles the launch of a David and Goliath app, highlighting tactics to gain attention in an increasingly crowded marketplace.
Need help with spending my $25K marketing budget. This forum thread offers a glimpse at an actual “burst” app marketing campaign, from a developer expecting to spend 25,000 in just a few days. The plan, as well as the suggestions offered up, sheds some light on how real life appmakers function.
Before you dive in to the the split testing, consider all the different aspects of an app that can be the subjects of experiments. Below is some useful reading covering both in-app features as well as features such as icons and names that can have a big impact on overall performance.
Split-Testing Your App Icon Design. Peter Tanham walks through the process for testing an often-overlooked aspect of a mobile app: the small icon that potential purchases see when browsing their store (yes, that little image can have a big impact).
How To Successfully Split-Test Your App Name. This article walks through the process for split testing a mobile app name, another often-overlooked aspect of the product that can have a major impact on downloads.
Roundup: A/B Testing Solutions. Alex Curylo highlights even more mobile split testing platforms, as well as several projects on Github that perform similar functions.
Further Reading: Building an App
Before you can worry about split testing, promotion, and pricing strategies, you’ll obviously have to get through building the app. There’s a lot that can go wrong here, especially if you’ll be hiring a developer or team of developers to execute your vision. Here are some helpful suggestions for getting through this process as efficiently as possible:
How much does it cost to develop an app? This in-depth breakdown of app development process gives entrepreneurs an idea of the hurdles, timelines, and expenses they can expect in turning their idea into a live app available for download.
Use of Flat Design in Mobile App Interfaces, Best Examples. Nataly Birch highlights several examples of apps that effectively utilize the recently reborn “flat style” that can include “emphasis on typography, roomy widgets, muted color palette, one-colored or blurred background, grid or horizontal stripe layout, inornate graphics, 2d illustrations.”
How Much Does It Cost to Make an App? (Infographic). This feature shows approximate costs for various development tasks (such as enabling in-app purchases) as well as design, marketing, and other miscellaneous tasks. Following the infographic are examples of different types of apps, along with estimated costs.
They Make Apps. This site functions as a director of app development companies; you can filter by platform, budget, location, or several other metrics to find someone who can build your app.
GetAppsDone. This service also functions as a matchmaker for developers and entrepreneurs looking to build an app. Users can post details about projects and get applications from developers with matching skill sets.
Further Reading: Mobile App Success Stories
With countless apps now available (and more launching every day), making your product stick out from the competition and gain traction with your target audience has never been more difficult. Below are articles that include both generic advice for making your app a success, as well as some specific case studies of developers who turned their app idea into a cash cow:
7 iPhone App Millionaires. This presentation highlights a handful of successful developers, including their backgrounds and strategies for developing and promoting their apps.
My last Android app sales figures, and why it’s still great to start a mobile app business. This post from the blog of Edward Kim chronicles his ups and downs (including a month with $57,000 in sales) as a developer of Android apps.
Further Reading: iOS vs. Android
Many apps are developed for and launched on multiple platforms, but often developers won’t necessarily have the resources to build out products for both. If you’re facing a decision on this front, the articles below will hopefully help you to make up your mind:
BONUS: We have an interview with the Founder of Nibble Apps, a successful app company who teaches about creating, marketing and profiting from apps. Read the interview for some insider tips or check out the course.
As the competition has increased over the past few years, making and launching a profitable app has become a challenging pursuit. But the opportunity in this industry remains massive, as the countless success stories illustrate. There are several attractive monetization routes, an abundance of free resources to make the process easier, and endless case studies and pieces of advice available online. If you’re in the process of turning your app from a clever idea to a profitable reality, take advantage of every available resource!