Appszoom for Developers

Business Models For Your App: Premium vs. Free vs. Freemium

Posted by on 07/14/2015

Money-Apps

Since Apple’s App Store came into play in 2008, apps have quickly become a huge component of the software market. The demographics for software users – whether for casual gaming, image editing, or any other category – have changed dramatically. In the middle of all this commotion, a few people have become ludicrously wealthy, and a few million others have tried their best to do the same.

Before you can make your first million (or, for the more patient among you, your first ten bucks), it’s important to have a realistic grasp on the current state of the app marketplace. You also must know where your app sits within that context.

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What the app marketplace is and is not

Firstly, you should know that the app marketplace is not designed to serve your app with any more favor than it will provide to your competitors. No matter how well your app works, you’re only going to successfully monetize it if it has been marketed properly and it actually provides intrinsic worth to the end user.

Make sure that you know why you’re developing this app and who it is going to appeal to. My strongest recommendation is that you do not begin a career in app development just to “ride the wave” and get rich. If that is the only reason why you’re developing apps, you’re likely to have a much harder time just breaking even. Instead, you should be making software that you believe will enrich the end-user’s life.

The app marketplace is designed to serve the user with minimal fuss. It has been thoughtfully put together so that it allows them to find software as easily as possible, whether or not they have a specific idea of what it is that they’re actually looking for. If you bear this in mind, you will have a much better chance of turning a good profit when your app is actually released.

But when will I be rich? App business models

How badly do you need to make money from your app? Can it wait? Or are you already running low on water and toast?

Regardless, you should really try to use a business model that suits your app rather than your immediate needs. You can start making money right away while possibly hurting your download figures, or you can opt to share your software for free while building up your userbase and potentially making a sizable profit later from ad revenue.

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Hell on Earth uses in-app ads to compensate the app developers

Remember that there are dozens of ways to monetize your app out there; this article is only an introduction to making money from your software. Nevertheless, the three most common monetization methods for apps are Paid (Premium), Free (Ad-Supported), and Freemium.

1. Paid Apps

You can slap a price-tag on your app and hope that people will part with their hard-earned dollars for it. Many developers choose to release feature-restricted versions of their apps for free while allowing you to upgrade for a one-time fee.

Paid apps are generally best suited to situations where your app is going to make someone’s life significantly easier. Whether you’re handling complex data, automating an arduous task, or providing a function that no one ever knew they needed, it’s safe to say that people are most likely to pay for an app when they feel that the reward will be equal to or greater than what they pay.

The model has also been well-implemented by game developers in terms of tiered-pricing as they release new versions of titles. For example, you can download Angry Birds Free for free (obviously!), but the full game (with extra stages and features, such as “power ups”) will cost you a dollar.

2. Free, Ad-Supported Apps

Ad-supported apps are also popular. This particularly suits software that people generally feel that they can live without. Perhaps they already have too many games installed on their device to justify paying for your latest puzzler; or they already have Instagram, so why pay for your photo filter app even if it does have a few more features?

People have nothing to lose when they download free apps, and so they are much more likely to download them and try them out. The developers might not see the same kind of instant revenue, but they most probably will witness an at least noticeable boost in download figures for their apps.

At the end of the day: people love free stuff. Adding ads to your app isn’t the most exotic idea, and it can frustrate users from time to time. However, used in the right context, they can be a worthwhile and very profitable compromise.

I personally have used the Doom: Hell On Earth Lite app for a while. Having adverts on the screen is a worthwhile compromise for the software being free in the first place.

3. Freemium Apps

The freemium model is most commonly seen in gaming apps. For example, you may find that a free game will allow you to purchase power-ups or other features (which will inevitably make the game easier or more enjoyable) for a small payment.

A great example of this is the free-running game Temple Run 2. The stand-alone app allows users to get a solid feel for the game, and at no point is a financial investment necessary. However, players do have the option to purchase extra lives rather than go back to the start of the game when they accidentally lose a life.

It might sound ridiculous that people would be willing to pay money towards a game that they essentially already have full-access to. However, people already pay good money for downloadable content for games, and they also were more than happy to pay to play arcade games over the years. This is just an evolution of gaming as a business, not to mention one that has seen incredible success over the past few years.

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Flurry boasts the largest set of app-related consumer data in the world.

Mobile Ad Networks

There are dozens – if not hundreds – of ad networks that can help you to start monetizing your app right away. Among these are Flurry, a company that boasts the largest set of app-related consumer data in the world.

On the other hand, AdMob is the advertising network owned by Google and is a great choice for your first attempt at making money from in-app ads.

Chartboost provides game-specific apps, alongside complex integration algorithms which allow for user-specific targeting.

There are many more ad networks out there, and we thoroughly recommend having a look around so that you can decide which one best suits your needs.

There’s no sure-fire way to guarantee your app’s financial success. However, if you have created something that benefits the end user and present it using the most appropriate business model, you will put yourself in the best possible position to start seeing good results.

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