Every month, Apple’s app store makes nearly a quarter of a billion dollars in sales of their apps and games. Everyday people are each raking in hundreds to thousands of dollars on a daily basis by creating and selling these very same apps. I’m sure you’ve heard the stories of people like Ethan Nichols, the creator of iShoot, making $600,000 in a month, or the brain behind iFart making $27,249 in a single day. The numbers are both astounding and inspiring to say the least, but such figures naturally lead the curious and logical person to ask, “But how exactly do these people make money with iPhone apps?”
When looking through the eyes of the consumer, there are two types of apps: paid and free, with each having its own advantages, and each being equally lucrative. The paid app revenue model is quite straightforward. Apps are offered for sale at a set price, usually somewhere between 99 cents and $2.99, which may seem modest at first, until you realize that these numbers could easily translate to $1 million to $3 million in revenue for a popular app cash app money free.
The free app revenue model, on the other hand, has its basis in advertising, which it relies upon to bring in profits. Advertising itself is a multi-billion dollar industry monthly, and with the number of iPhone and iPhone app users currently at over 70 million and growing, companies are realizing the value in advertising through apps. Google AdSense and AdMob are two standouts at the forefront of serving mobile ads, which often take the form of banners running across the top or bottom of the app screen space. In its relatively brief lifespan, AdMob mobile ads have resulted in over 474 billion impressions, which translates to lots of happy advertisers, and therefore lots of happy app developers with even happier wallets.
An advantage to offering apps for free to the consumer is that they get a chance to first test out your app, risk free. An unknown, independent app developer may have trouble getting people to pay for their apps, since there may be some uncertainty about the app’s interface, usefulness, or potential bugs or technical glitches. But when the app is offered for free, the consumer can be more at ease, and the developer can gain the trust of a new customer who could pay off in the long run, which introduces a new revenue model that is growing in popularity that merges the free and paid revenue models. This “freemium” model entails offering the product for free initially, then charging later, which should be easy after the consumer has already established their necessity for the app. This way, app creators get a chance to cash in on profits through both advertising in the free app and backend purchases.
There are multiple ways of offering an app free, then making money later. One can offer the ability to unlock additional levels (for games) or features (for apps) for an extra price, which can sometimes mean offering a lite or demo version first. Or, some apps offer the entire app for free, then the ability to remove ads for a price. Many developers also make money offering a free app with “in app” purchases, which allows the app user to buy items using virtual currencies that help them to better use the app or advance in the game. Facebook’s Mafia Wars is one of several games they offer that implement this model. This model can be tricky, however, because developers must balance providing an additional purchase that enhances the app or game experience, while simultaneously not cheating people who opt not to upgrade by making them feel as if they have an incomplete, unusable app.
One final step in making money with apps, is capitalizing upon the success one has already achieved. Once developers make money and gain notoriety with a popular app, they can advertise within that app for a new, upcoming app that they have created. They can leverage their company’s notoriety and release and market subsequent apps, taking advantage of their wide user base of already happy app users.