Which Revenue Model is Best for My Mobile App?

When it comes to making money off your mobile app, there are three main possibilities to choose from:  paid download, freemium, and ad-based.  Each of these comes with its own advantages and disadvantages, and since this really isn’t something you want to get wrong, deciding on which is best for your own app can be difficult.  Today we’re going to take a look at the pros and cons of each.

Before we get to that, however, the first thing you need to know is that if your app is poorly designed, poorly implemented, or doesn’t provide a pleasant user experience, the question of monetization models is moot.  Bad apps don’t make money, so make sure that your first priority is to develop a quality product.

That said, choosing the right revenue model can vastly improve your chances for success, depending on which one you choose:

  • Paid download:  Paid downloads allow you to realize income immediately, which makes it by far the most tempting option for developers who have costs to recoup.  However, the app market is a much more crowded place than it used to be, and setting up barriers between you and your potential customers might not be the wisest choice if your app is an unknown quantity.  If you don’t have an established brand name to build on, going with the paid download model could hamper your potential for growth.
  • Freemium:  The freemium model involves a free download, after which users have the option to purchase additional content.  Traditionally, this has proved to be the best money-maker of the three choices, particularly for game, entertainment, and productivity apps.
  • Ad-based revenue:  This is essentially a bet on the future.  Mobile ads are slowly but surely growing more sophisticated with their targeting, and it’s only a matter of time before they’re as sophisticated as the desktop ads that have performed so well.  That said, patience is required; ad-based revenue is the slowest money maker, as it requires a significant user base before it starts to perform well.

Of course, you might want to mix it up a bit and using a combination of these revenue models.  If you consider a service like Pandora, which relies on ad revenue for its regular service but offers a freemium, ad-free upgrade, it’s clear that you can get creative with the revenue models and still make decent money.

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