The mobile app store is a powerful place to get in front of customers.
The mobile app stores have never been a better way to get in front of new customers. According to Statista, there are 7.9 million apps available between the Google and Apple app stores, and according to App Annie, there were 204 BILLION apps downloaded in 2019.
Let’s face it: People want to engage through mobile apps and if you don’t have a mobile app for your business you’re likely missing out on sales, leads, transactions, and revenue.
If you take nothing else away from this article, let it be this: You should be thinking about how you can get on the app store.
Just having an app live on the store doesn’t mean that you’ll magically make money.
First, the app needs to solve a real need for your customers or potential customers. We talk about this at length in our podcast, How To Build An App.
Second, you need to have a solid monetization strategy or you’ll be leaving money on the table.
A quick word before we dive into different monetization strategies: Don’t be afraid to make money from your app!
We talk with a LOT of new app founders and I am always surprised by how hesitant they can be to charge for their service or content.
I think there are two causes to this:
Like I mentioned above… If you have done your research and you know your app is solving a REAL problem, you shouldn’t feel embarrassed to charge for it.
This is a common misconception from app founders — they watch The Social Network and hear Mark Zuckerberg talk about how he doesn’t want to let making money distract them from making a great product and they think, “Yeah me either!”
While this may have been the right move for Facebook, times are different now.
So, now that you’re all pumped up and ready to go charge money, let’s answer the next question you might have: “Do apps make money?”
The answer is a massive YES.
According to Statista and App Annie, there was a record $188.9 BILLION in revenue through combined in-app advertising and app store revenues.
Here’s that number again in case you were sleeping… $188,900,000,000 in revenue JUST in 2020! And that’s not even counting purchases through e-Commerce apps or secondary revenue.
So yes, your app can make money if you do it right.
So how exactly do you monetize your idea? That totally depends on your specific strategy, but I want to run you through a handful of different options you can think about. We’ll cover 13 strategies below and I’ll walk through the SIMPLE economics of how your app could generate $1,000,000 with that strategy.
(A quick note… None of these simple estimates include the fees you would have to pay to Apple if your app makes money through in app purchases. This is meant just to get the ideas flowing in your mind and have you start thinking through things on a bigger picture.)
This is the most straightforward model. You make something that people would be willing to pay $4.99 for in order to download and use.
If you sell 200,401 downloads at $4.99 each, you’ll make a million dollars.
Let’s say you have something that would be valuable to a user month after month (think Netflix or Daily Burn). Maybe your app is worth $7.99 per month and once users download it they will stick around for 9-18 months.
If you have 10,430 subscribers paying you $7.99 per month, you’ll make a million dollars a year.
Also called the “Freemium Model,” this is a popular approach with games and other utilities. You could, for example, offer a free game and then charge for upgrades, extra lives, extra pieces, more levels, etc.
If you have 1,000,000 users and only 10% of them spend $10 with you on upgrades, you’ll generate a million dollars.
This is also called the “Hub and Spoke” model…
Maybe you are a high-level business consultant and you’re looking for new clients for your management consulting practice.
You come up with a really useful idea that your target market would love. You could give away your app for free to get leads if you have a clear way to convert those leads into paying customers down the road.
If you get 680 people to use your app, you would create 34 new phone calls, close 17 new clients and make a million dollars in revenue over the next year.
Let’s say you are creating an ecosystem where users can pay for services through your app in exchange for paying you a percentage of their transaction (think Uber, Lyft, or a classifieds listing app).
Let’s say you make 18% of the revenue generated from a sale on your app.
If you process $5,555,556 in transactions and you take 18%, you’ll make a million dollars.
Maybe you are building an app for your internal team and it’s not for the end consumer. If your app is built to streamline a business process with your employees, add up how many hours per employee this could save for your company.
If your app saves one employee 5 hours per week and the average employee at your company is paid $35 an hour, then your app saves your company $9,100 per year, per employee.
If 110 people in your company use the app it will save your company a million dollars per year.
If you have an app that serves a lot of content, or is a really “sticky” service you might want to think about showing ads.
There are a lot of ways to place these ads and they are usually sold on a CPM basis. I won’t give you an estimation on what it would take to make a million dollars with ads, but here are a few resources that go much deeper on this topic:
Think Spotify or YouTube. This is pretty straightforward and you could charge a one-time upgrade fee or a monthly fee.
If you had 8,300 people paying you $10 per month for an ad-free experience, that would come out to a million a year.
Let’s say you have an app that a specific group of people use religiously — like a meditation or golf app. You could partner with other companies who want access to your audience and make a small fee each time you suggest their products to your audience.
This is really hard to estimate, but this could be insanely profitable if you have the right audience and the right partners.
Ah, let’s not forget shopping. When you have your app on someone’s phone, you basically have your entire store in the palm of their hand.
When asked why he was losing money on every Kindle device, Jeff Bezos famously said, “I’m not losing money, I’m investing a little bit to have a shopping cart right in everyone’s hand.”
If you don’t know who Jeff Bezos is, he founded the little internet startup Amazon.com. :)
But in all seriousness, according to one study, the Apple App Store was responsible for $519 BILLION in e-Commerce revenue in 2019.
People love to buy stuff, and an app makes that process much easier.
Ok, are your wheels spinning yet? Hopefully these 11 strategies gave you some ideas of how you can monetize your app.
Want to chat through your strategies with a pro?
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If you want to chat about your idea, click here to schedule a free strategy call with us.