In this blog, we will review what are the variables on which app earnings depend and how you can enhance it.
With close to 8.97 billion smartphones in the market, there are more of these devices than the global human population. That figure in itself is a clear indication that businesses need to establish a presence where the world currently is: on smartphones. And statistically speaking, developing an app is the best way of doing that.
Android’s Play Store, as well as Apple’s Appstore, boasts of more than 2 million apps each, with the former inching closer to 3 million now.
All these number points towards one thing, every business needs an app.
But app development comes with a price tag. So, why do businesses still opt for app development? Why not just make a mobile browser version for their website?
The answer is simple. App development is an investment, not an expense. And with investment comes revenue.
In 2018 alone, the user spending on apps through Play store and Appstore combined was close to $72 billion. The figure is predicted to double in the near future. This entails, apps are a new way for businesses to make money.
How much though? How much money can you or your business make through your App?
The answer depends on a lot of different factors.
The platform you choose. Your initial investment. Your app quality. The nature of your business. The business model for your app. All these play a role in deciding the revenue you generate through your app.
Let’s go over some of the major factors determining how much money you can make through your app.
The platform you choose
The two top app distributors, as mentioned earlier, are Android’s Play Store and iOS’ Appstore. Now the two systems have two vastly different sets of users.
The iOS users have been noted to spend a lot more on the apps, be it through subscriptions or in-app purchases or anything else. In fact, average iOS users’ spending on apps is almost twice that of Android users.
So, does this mean iOS is the better of the two options? Not exactly. Because the number of Android users greatly surpass that of iOS users. A study showed that out of the total smartphones sold, close to 85% were Android supported while the rest constituted of all the operating systems, including iOS.
So, when it comes to choosing the platform, you need to understand your business’ target market and do a study about what platform they are using more often and which system are the most likely to buy from.
On an easier note, both platforms have a similar commission rate of 30-70. That means, out of whatever the user pays, the platform keeps 30% and you get the other 70%.
The payment methods for both the platforms differ slightly though. Some of the key points of each are as follows:
Apple Store:
- Payments are released within 45 days of the last working day of the month of purchase.
- You should have the minimum threshold earning before payments are released to you
- 70:30 payment distribution ratio
[We offer iOS app development services. Check it out to get more information on it]
Play Store:
- Payments released in a 30 days cycle
- No minimum earning the threshold
- 70:30 payment ratio
Apart from the Play Store and Apple Store, the app industry is expanding further. Though less than these two top players, other platforms like Windows store or apps for Smart Gadgets like a Smart TV also have a substantial base. They will be an excellent option if your business belongs to a niche that does well on these.
[We offer Android App development services. Check it out for more information]
Fun Fact: Interested to know how much revenues do each of these platforms generate? Check this infographic out:
The business model for your app.
Apps, no matter on which platform and belonging to which business, have several business models they can opt for. Some of the popular business models are
- Subscription-based
- In-app purchase
- Freemium
- Advertisements
Each of these models is being used by some of the top-earning apps and is applicable in many different industries. As a developer or a business owner, you need to understand each of them and decide which one is the best option for you. We have gone over each type in short with a few examples of how some of the biggest names in the industries are using them to make money.
Subscription-based: As the name suggests, users need to pay a recurring fee to continue using the app. This is a great option if your app is providing services of some kind. Some of the popular business using this method are:
- Hotstar: INR 129.5 Crores in FY 2017
- Netflix: USD 1579.4 Crore in FY 2018
- Tinder: USD 800 Million in FY 2018
In-App purchase: Another extremely popular revenue model, the in-app purchase allows users some extra features and benefits of your app at an additional cost. This is perhaps one of the most popular options in the gaming industry. Even apps marked as ‘FREE’ on the store generate a high amount of revenue this way. Some good examples would be:
- Fortnite: USD >1 billion in FY 2018
- Pokémon Go: USD 800 Million in FY 2018
- Candy Crush: USD 930 Million between July ’17 to July ‘18
These three are also some of the top-grossing games on the app store currently.
Advertisements: If you go online, you will see the advertisement. And every time you look at that advertisement someone is making money. So, why not make that ‘someone’ you? Advertisements are great, though a risky way of monetizing your app. You collaborate with other companies and display their ads on your app. In return, they pay you according to the terms of the contract between the two of you. This is an extremely popular method of making money for social media apps. Some corporate giants making money this way are:
- Facebook: USD 35.6 Billion in FY 2017
- Instagram: USD 595 Million FY 2018
- Google: USD 95 Billion in FY 2018
If you opt for this method though, you need to be careful not to bombard your users with advertisements as that may ruin their experience with your app.
Freemium: This is similar to the subscription-based model but is fast emerging as a popular option in itself too. Here, you have two versions of your app: Free and Paid. The free version has some locked features and all of them can be accessed through the paid version. The paid version can be availed through an upfront fee or through a subscription. Brands using this technique are:
- Dropbox: USD 1.3 Billion in FY 2018
- Skype: USD 2 Billion in FY 2013
- Tinder: USD 800 Million in FY 2018
As you can see, each of these apps is making a substantial sum, no matter which model they have opted for. So long as it is a well-thought plan and is suitable for your industry, you can make money off of it. These days apps are using more than one revenue model within their app. A good example of that would-be Tinder.
Your app investment and quality
This is perhaps the most straightforward factor. If your app quality is not good, people will not pay for it. People pay when they receive something in return. Hence, your app’s service and its quality have to be good enough to encourage people to pay for it.
The best way of ensuring this is to invest in your app. And don’t let that investment be limited to money. Plan out your app. Research the target market. Find out the best revenue models. Put in time effort and money.
The more you invest, the more you will earn.
The Nature of your business
The nature of your business greatly influences the amount of money you will be making. It will also be a key point to keep in mind while choosing a revenue model for your app. For example, apps providing video or streaming services do better in a subscription-based model while gaming apps’ highest revenues come through in-app purchases.
To determine how much money you can make through your app, you need to understand your industry, your services and revenue model best suited for it.
Now another point that is pointed out while talking about the financial turnover of the Play Store or Apple Store is the fact that most of the earning is by the biggest few apps while the remaining together make a meager portion of the total turnover.
That is true but there is a ‘but.’ The top earners are some of the biggest names in the industry with a massive market. As a business, you have your own target audience that may or may not be as huge as theirs. Their investments too run in millions while others’ do not.
So, a company investing 100 million in its app and earning 200 million in revenue is just as good as one investing in 5000 and getting 10000 as revenue.
Another example debunking this myth that high app revenues are only possible for big corporate houses is that of Kayla Itsines. An Australia based personal trainer developed an app ‘Sweat’ that not only brought her and her husband’s net worth at USD 46 Million but also got her an almost cult-like following of fitness enthusiast. Hers is an example of how even something as local a job as Personal Training can be scaled monumentally by proper use of an app.
There is no limit to how much you can earn through an app as long as you know how to properly utilize its potential.
If you are not sure how to create an app specifically developed to maximize your profit, get in touch with our mobile app developers and get adequate help from some of the industry’s most talented professionals.
