In-App Purchases and other App Monetization Models

(This is a guest post from Joao – Co-Founder of Wazza, a technological platform that helps mobile app developers to maximize their in-app purchase revenue)

So, you have built an amazing app, with a catchy design that your friends and family love. Now, it is time to start thinking about how to make money with it. The most common approaches to app monetization are:

  • Pay for the app

  • Advertisement

  • In-app purchases.

Before going any further, there is something you must have in your mind all the time: your app is going to be used by people. Although it may sound a little “captain obvious”, it is the most important aspect regarding building mobile apps or other type of software that will be used by people. Your monetization strategy must not, on any circumstance, degradate your users’ experience. That being said, let me tell you something about those three approaches.

Paid apps were the most used revenue strategy in the early days. It offered the lowest entry barrier and modest gains. Once you got a comfortable market share, you could sit and watch the coins twinkle. Why are companies and developers moving away from this model? A recent article from Mashable stated that 96% of the top-grossing apps on Google Play are free. The reason for this is quite simple. Would you pay upfront for something you haven’t tried and that you don’t know it is worth your money? Probably no. Guess what? Almost all mobile users think the same way. It’s also hard to get any market-share at all if there is a free and similar app-for-that (™).

Mobile advertisement is a very hot trend and you can find lots of companies putting tons of money on it!! Although you can drive some significant revenue from advertising, this approach has a key problem has not been solved yet: integration with user experience. Despite some crazy exceptions, like Facebook, it is very hard to use advertising as part of the user experience. No one likes to be interrupted by a video or to click an ad by accident. If this happens often, it is probable that the user will quit the app due to frustration. Remember that your most important asset are your users. You don’t want to piss them off.

The last strategy I am going to talk is in-app purchases (IAP). As the name says, this strategy consists on selling virtual Joaogoods within the application. Due to its characteristics, IAP have a set of advantages when comparing to the other strategies described earlier. The first one is that they add value to the experience since users can use what they have bought right away inside your app. Second, IAP integrates well with the user experience because the developer is in control of what happens in the screen, which does not happen in advertisement. The third aspect – and probably the most important – is that IAP can be used not only to increase revenue but to maximize user engagement. By offering the right items at the right time, you can make your app an addicting and exciting experience for your users. This is the “holy grail” for developers – increasing both revenue and user engagement.

Whatever revenue strategy you choose (or even any combination between them) always remember that your most precious asset are your users. Treat them well, make your app a pleasant and unforgettable experience and choose the strategy that best suits your app’s needs. If you do that, you won’t have someone saying “I find your lack of revenue disturbing!”.

  • A really worth reading article for app monetization. I have 1 confusion about IAP. Is IAP mean that you only sell virtual thing in the app or is it mean that you give option to user to buy your app or upgrade your app to pro version? or to explore more features.

    Thanks

  • Thanks for the complement Ehsan. In the way I see it IAP is the act of buying virtual goods inside the app. Those goods can be virtual items, upgrades or additional features. Hope I answered your question.

    Thanks
    João