Beginners Guide to Mobile App Monetization #2: Monetizing Through Paid Apps & IAP

App Monetization Paid Apps
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Last week’s first part of our mobile app monetization series focused on using mobile ad networks to monetize your app. This article will focus on charging the user through paid apps, in-app purchases or subscription fees.

Whether you decide to directly charge your user or monetize your app through advertisements can be a tough decision. With more than 50% of apps in Apple’s App Store being free, charging users can be a huge download barrier. This part of the guide will help you to make the best decision for your app by considering different factors.

Pricing Strategies For Paid Apps

Charging the user a fee for downloading your app is a standard approach to monetizing an app. Typical prices on the App Store and Google Play range from $0.99 to $2.99, with $0.99 being the most frequent one in the App Store.

When considering whether to charge for an app or not, put yourself in your consumers perspective and think about reasons why you would pay for an app:

8 Pricing Strategies For Apps

  1. The user liked the free version and wants to support the developer
  2. The user liked the free version and wants to get rid of the advertisements
  3. The user wants to unlock premium features that are not available in the free version
  4. The app is so unique and valuable that the user has no problems with paying for it
  5. The user knows the product (or the developer/publisher) and knows that the app is worth a few bucks
  6. The app was recently promoted by a trusted source or has a top ranking
  7. The user wants to use the app`s features and there is no free version available
  8. The app is currently on sale and the user is willing to pay a small amount for a premium app

You can summarize the reasons into 3 categories:

  1. Offer a free version of your app with advertisements, limited features and charge users for a premium version
  2. Offer a unique app experience for which users are willing to pay without testing it
  3. Have a strong brand or product that is well known to its loyal audience

Different customers have different reasons to pay for an app directly. Try to find the most common ones for your target group. Every app is different and so is its pricing- and selling strategy. Especially the app category plays an important role. Is your app a game? Does your app offer a hotel booking service and make most profit from transaction fees? Think about it! There is no golden rule!

In-App Purchase Approaches

In-app purchases (IAP) are a nice way to directly charge users for additional features in a free app. When offering a free app with in-app purchases you circumvent the download barrier set by offering a paid app. Users are able to test your app and can decide whether to pay for some premium features or not. You can always monetize through advertisements, and in-app purchases are a nice way to generate additional revenue. I’ve listed a few examples below:

Currency

With most games offering some sort of currency to progress in them you can add a second, paid currency, for progressing faster. Although it’s not a rule set in stone, don’t offer your paying customers an overpowered advantage. Many gamers don’t like such “pay-to-win” games and will give you negative feedback and bad ratings.

Freemium

Freemium is a well-established online business model that can also be applied to mobile apps. Offer a free app and let people unlock premium features such as additional levels for games or more exercises for a workout app.

Customization Features & Skins

Especially with online games, users want to personalize their appearance. Charge users for customization features like character skins or new colors for their car.

Subscription

Depending on your app, subscriptions for newspapers, magazines or other content through In-App purchases can be a great way to create an additional income channel to your on- or offline business.

The examples listed above are obviously interconnected and can be mixed. For instance, you could charge users for custom features with your premium in-game currency. There are many possibilities and it’s up to you to find the best strategy for your app and target group.

Conclusion & Outlook

It’s not easy to decide whether to monetize your app through directly charging the consumer or using advertisements. I would recommend to use a mixed approach because it will give you more channels to monetize your app. As I already pointed out, there is no golden rule and you have to do proper research before deciding which way is the most profitable for you.

In the next weeks I’ll tell you about more creative ways to monetize your app. Make sure to subscribe to our newsletter and social media channels to stay up-to-date!

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Philipp Greitsch is a mobile enthusiast with great interest in the latest trends and developments in mobile, technology and things that make our everyday life awesome. You can find him on Google+ and Twitter.
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