How do apps make money?

Business Growth

So you are interested in how apps make money. Perhaps you have an app idea of your own? Perhaps you are already on your app journey and are looking to monetise your efforts. 

Well, as I’m sure you know, there is more than one way to dig for gold. Because, let’s face it, without money your app idea could be facing some early problems. 

Who are we to advise you?

Konnect Digital started as Konnect App - basically the app was a directory that focused on promoting the latest deals that were going on in the local community. And for some time the app saw success, for a small business in the Manawatu of New Zealand. We had a few thousand downloads, some solid businesses on the app and everything seemed rosey. 

Except it wasn’t. 

Our financial system was all over the place and ultimately it was one of the factors that led us to close doors early. But it all worked out in the end! It would seem that our journey down a different road had already begun. 

Now as an app development agency, we work with a variety of businesses including start ups and enterprises. Both have unique challenges and advantages when it comes to achieving a return on their investment. So we have put together a few different options that we have seen work over the years!

Subscription Model

Perhaps the most popular, the subscription model works for start ups and enterprise apps alike! 

But how does a subscription model work in an app context? Well you just have to look at some of the biggest players in the world. 

Netflix. Apple. Audible. Google. It goes on. 

In a subscription model, customers are charged on a recurring basis for a product. The customer will agree to pay for the product for a period of time and the business will fulfill the offer as long as the customer continues to meet the recurring payments. It’s brilliant! 

With the subscription model, you want to focus on the lifespan of the customer. Don’t pick a subscription model that breaks the bank and has them looking at their account every month thinking, ‘I could really live without that.’ 

Pick a palatable amount that helps you achieve your ROI, but also is reasonable to your app users. 

In-app purchases

Think of in-app purchases like Gems and Coins in games. This is the purchasing of goods within the application itself. 

In app purchases really suit industries such as gaming, fitness, nutrition, any business where there is a considerable amount of information or advancement that can be made through an additional purchase. 

Often times the app user is in an emotional place. They have downloaded the app for free, they have had a look around the user face and been sold the contents, all they have to do now is actually make a purchase. 

With in-app purchases it is super easy too. It’s just the click of a button in some circumstances.

There are only a few downsides to in-app purchases. Firstly, they can be annoying. People can bounce off a product very quickly if they feel they are unable to progress any further and haven’t been shown the value of the app before making a purchase.

Secondly, the Apple and Google Play store will take a commission from any in-app purchase. So you will need to factor that percentage into your price. 

Sponsorship deals

When thinking of sponsorship, think of MyFitnessPal. My FitnessPal was acquired by Under Armour in 2015 for $475 million USD. 

Now there was obviously some leg work that went into this before they negotiated this price, but sponsorship can be a great marketing tool for larger organisations. 

Sponsorship works when organisations give you support (most likely cash) in return for recognition of their association with your brand. 

If your business is suited for a sponsorship, let's say you are a nutrition company, they are a supermarket, start thinking about how that sponsorship could be mutually beneficial. 

One thing to consider is large sponsors will not likely look at you until you have some runs on the board. It is very unlikely that a big business will take a bet on a small company. The risks are higher, but the rewards will be too. 

Digital Marketing

A few years ago, an Instagram influencer wasn’t even a thing. Now, it is a full blown job for some people. Some companies rely on using digital marketing and influencers to promote their product and pay alot of money to make sure they are being seen by the right people.  

Instagram and Tik Tok are great examples of platforms who have initially focused on getting users on their app, and then have introduced paid advertising. 

Why is this so appealing to businesses, because Social Media can guarantee eyes on their products. They have powerful analytics systems that can target users and tailor advertising. 

Final thoughts

It is honestly crazy sometimes what apps make the most money. You could be surprised. 

Some apps can be duds and make no money, but I hope that you would have an app development company that would challenge you on your ideas if they thought it was a no hoper. 

But some apps can rake in millions, even billions. What is important is that you want to make money off your apps, make it easy for the consumer to understand and use the right method of money making for your product. 

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