How Apps Make Money: Paid App vs. InApp Purchases - Convertify

How Apps Make Money: Paid App vs. InApp Purchases

Mobile Apps are one of the most developed digital businesses in recent times and are expected to become a key form of customer service for businesses in the coming years. But how do they make money?

How do Apps make money?

It’s true, most of the apps you have on your mobile phone are free and you don’t pay a single cent to download and use them.

Many people wonder all the time how apps do to monetize and have income on the march. To answer this question we can talk about approximately five different app revenue models, which are the most used. These models are:

  • Paid Apps

  • Advertising

  • In-App Purchases

  • e-Commerce

  • Services Sales

But in this article, we will only develop two of the main ones (Paid Apps and In-App Purchases), and whether you want to know out of curiosity or if you are thinking about turning your website into an app and start monetizing, this post will be useful.

Also, if you want to know how to make your own app and why would you want to convert your website into an app, contact us. Now, let’s get into it!

Paid Apps

How do apps make money with paid downloads

Paid App is a business model in which users must pay for downloading your mobile app, so the revenue is related to the number of downloads you receive.

It is a model widely used by companies that provide a unique and professional solution through their product, such as professional photo and video editors.

Other examples of this type of application could be services dedicated to measuring and giving specific feedback on aspects of a person’s health, or for carrying out activities that need assistance from some type of software.

All those who use WhatsApp from the beginning, we can remember that to download it in AppStore it was necessary to pay 99 cents. Other times…

The truth is that this revenue model was very popular in mobile apps development, but it’s slowly falling behind. We will see later why.

In-App Purchases

How to create an iphone app and make money

This model is one of the most used in the market of applications and with just reason since it has characteristics that make it very profitable. It consists mainly of users making the download for free and enjoying some functionalities without paying.

OK, and where’s the revenue?

The profits in this model are from purchases made by the user within the application, usually to access premium features or to have some other kind of benefit. Let’s look at two possible cases:

  • Let’s imagine downloading an app to study languages from our mobile phone, but during the learning process and as the levels pass, we have to see a lot of advertisements that end up being annoying. The app offers us to make a one-time payment to eliminate those ads, and there’s the revenue.
  • In this case, imagine that you are a basketball player and want to improve the mental part of your game. You download an app that has podcast tips and episodes to train your mind while playing, but to access all the most personalized tips you must pay a monthly subscription of $20. And in this case, the app income is there.

The fact that users enter for free and know your product before paying for it gives you a huge competitive advantage.

It’s like walking into a cell phone store and being lent a week the one you want, you probably end up shopping for it to be yours.

Which one is best for you?

We think that the Paid Apps model only works for you if it’s a very exclusive service that gives a lot of value to your clients and that there is no free alternative on the market that is close to your product or service in quality and value. So, if you’re trying to get into a market with a Paid App model, be aware of those things.

On the other hand, the In-App Purchase model is a good way to think about your app business, as the conversion flow could be bigger and much more interesting. Being able to take into account more statistics and improve from them.

But to succeed in this model you have to make a good analysis of what your ideal customer is and how the market works.

Also tell you that if you already have an online business with your audience and website, you can start by converting your website to an app and offer your customers a service that is more at their fingertips and with a better user experience.

Advertising? Of Course

Another variable to consider is advertising. This is a fundamental ingredient when making money with an app and we will have a full blog post talking about it since there is a totally independent and very interesting model to use in free applications.

As we saw in the first example of IAP, advertising is an important and complementary factor, so we recommend that you always consider it in a mobile app business.

Most people who have an online business use this ingredient to generate revenue.

Final Considerations

Not many people are willing to pay for something they cannot try before, that’s why Paid Apps are falling behind in the apps market. This also generates a lot of free alternatives, so it’s a positive thing for other app models and the client too.

We believe that in the face of these two models, in most cases the IAP is convenient, but there will certainly be many cases where the Paid is the right one.

This guide is not enough to finish introducing the different models of how to make money creating an app, so we suggest that you stay tuned for the next few weeks to learn more about digital businesses with Convertify Blog.

We already saw how apps make money, and more importantly, how free apps make money. If you have any doubt about the process, we invite you to visit our FAQ page to learn more of how to make apps for iPhone and Android.

Of course, you would need good app design software.

We hope you enjoyed this post and if you can share it or tell us what you thought we would be grateful! Start creating apps to earn money!

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Content Marketer Team