HOW TO MAKE MONEY ON APPS? MONETIZATION STRATEGIES OF SUCCESSFUL STARTUPS
Maybe not always from the very beginning, but at some point, every app owner has one goal he wants to achieve: making money. A LOT OF money. We are talking about Instagram, Snapchat (now the guys that invented it are worth 4 billion American dollars!) or Uber kind of money. And yes, it is possible to achieve that – with app revenue predicted to rise to $189 billion, you can definitely take a piece of that cake for yourself. How? Choose the best possible monetization strategy for your app and you will be on a straight road to becoming an app millionaire.
What does it mean “the best”?
It depends on so many factors like what is your app main purpose, who your target audience is or which platform did you choose to develop your app. To make sure that you will find a monetization strategy perfectly suited for YOUR app, we asked 7 successful startups to share their thoughts on the topic. The answers that we received was often very surprising even for us. Read their tips really carefully because who knows – maybe you will find there something, that will help your business truly thrive.
#1 Make your app truly useful
In a competitive mobile app market, there is absolutely no way that your product will achieve success if it’s useless. So if you are trying to sell something, that brings absolutely no value to its users you are not an entrepreneur – you are fraud. So think about it very carefully: what my app has got to offer that people would be eager to pay for? It doesn’t have to be anything groundbreaking – just suited for your target audience needs.
Wine is complicated. It's expensive, esoteric and there is a high quantity of wines out there. We wanted to make the decision process for choosing a wine simple and engaging. - Devon Ryan, Co-founder
UnWine achieves that through collecting data about its users wine habits like what brands do they like the most, how often do they drink and which wine varietals do they consume the most. Essentially, this data helps the users with understanding the palate profile better which in turn increases their odds of purchasing a wine they will enjoy. The app is for free but getting access to your wine consumption reports costs $4,99 a month. And that is it. That is UnWine unique selling point that guarantees, that apps carefully picked the target audience, consisted of wine enthusiasts will be eager to pay for.
Badger visualizes sales data, optimizes daily routes, and generates meeting reports - helping users drive 20% less and sell 25% more on average. We want to make field sales people's lives better by automating their busy work, so they can focus on what's most important for them - selling and closing more deals. - Steven Benson, Chief Executive Owner
There you have it: hard numbers clearly stating how much the quality of your professional life will improve if you decide to use the app. This is the thing the people are looking for in an endless sea of the mobile apps. An authentic value.
You know what else people truly love? When someone else is solving their problems for them. They are ready to pay a lot of money to make that happen! Guess the owners of the Pavemint knew about it, as their app main purpose is strictly connected with some massive issue, that many of the Los Angeles people struggle with every day.
The problem with parking in LA is that a majority of the city’s 18.6-million parking spots are on privately owned, residential or commercial properties where they are unavailable for general public use - that’s where Pavemint comes in. The peer-to-peer web and mobile-based platforms allow residents or business owners (“Hosts”) to rent out their spare parking space(s) to other users in need of a place to park their car (“Guests”). The app makes it easy to compare real-time prices, read reviews and get walk times to the Guest’s final destination so they can find the perfect spot, all while helping generate Hosts substantial revenue. Some Hosts are already making upwards of $100 in extra income per week on their spare parking spaces. - Sarah Zurell, Chief Brand Officer
To sum this part up bear one thing in your mind: your app has to answer an authentic need that your clients have. It can be anything: saving some time, money or having an access to something, that would be hard for them to get. If you will find that thing you’re home – your app will quickly start making tons of money.
#2 Carefully choose your target audience & respond to its needs
Now as you know (or at least you think that you know) that your app brings a true value, conduct a validation of your concept. What does it mean? Find the people that your app will be the best resonating with. Once you have them, just start listening to them. Monetization strategy highly depends on your target audience habits and wishes. Here comes an example.
2minutes2post mobile app functionalities are processing past performance data for horse racing and running the data against two algorithms. The monetization strategy changed completely from the time that the app appeared due to an unexpected market reaction.
Our monetization strategy shifted from selling analytical software to selling the algorithm output. People are more interested in the scoring system output, rather than looking at the fancy charts & graphs. Our mobile app had to essentially be redesigned to sell just the scoring system output.
- Pete Solano, Chief Information Security Officer
There is one important lesson you should take from Petes example: there is nothing wrong with faulty interpreting your target audience needs at the beginning. You can still easily fix that mistake, but only if you are willing to adjust to the new situation! Be critical to your work and look at your products with your target audience eyes, just like the Snapshop Camera owner did.
The aim of the app is to make photographing your shop products super easy. As its owner David Gregoire claims it takes down the time of making a photo from 15 minutes to… less than a minute! Nevertheless, he was brave enough to admit that selling a single photo in his app for $2 wasn’t a good idea.
Yes, I had a monetization strategy when launching my app - the same that we have right now. However, I realize it's not good and we will have to change it. I didn't want to be selling monthly packages and I originally thought client's preferred to pay on a pay-as-you-go pricing, but It's not sustainable for a startup. I was totally wrong.
- David Gregoire, Chief Executive Officer
So remember: don’t be stubborn. If you clearly see, that the monetization strategy that you picked is just not working with your target audience – change it. I can guarantee you it will pay off.
#3 Use benchmarking
There is nothing wrong with using the knowledge and experience of the people more experienced than you while setting up your own monetization strategy. If you clearly see that something that works for the other app could be also a perfect solution for yours – use it. It will also be very beneficial for your users, as they won’t be caught by surprise by the forms of payments that they have never heard of before.
Check the example of the GoShare to understand what exactly do we have in mind. The app main purpose is to connect truck and van owners with people and businesses who need help moving and delivering large items on demand.
Our monetization strategy was set from the beginning and we still use it today. For every GoShare project, the delivery professional keeps 80% of the total charged to the customer and the company receives the remaining 20%. This strategy is based on the strategies of Uber and Lyft who have comparable splits with their drivers and the company. - Travis Sevilla, Marketing anager
Uber and Lyft are perfect examples of apps recognizable worldwide – so referencing to them is a great way of explaining to your users what your monetization strategy is really about.
Sometimes benchmark is also a great way to see what kind of monetization strategy… you don’t wanna to choose. If you are pissed by the ads that are constantly screened on your phone out of nowhere – don’t force your app users to experience the same thing. Once again you need to have your target audience at the back of your head ALL THE TIME. Because even though some people can have nothing against mobile ads, other can be so allergic to them, that they will delete your app instantly.
Look at the example of the Heuro. The app goal is to to make the world more intellectual and creative. Sounds interesting? Check how its founder Akshay Bansal explains his point of view on apps monetization strategies:
Our hypothesis is that if you don’t know what to do with the traction, you end up monetizing through advertisement on the app, but the beauty of applications is limitless possibilities and for us the monetizing strategy is creating community and network of intellectuals around the world and do the freemium model on subscription basis and empowering users to select the only tools and services ( design specially to cater the intellection and creativity) she needs, rather than bundle of services and creating win - win situation for everyone and for phase one we are doing in-app purchase for our innovative feature. - Akshay Bansal, Chief Executive Officer
7 TIPS TO TAKE WITH YOU!
We have also asked our startups to give some general pieces of advice for companies that are planning their mobile app monetization strategy. This is what they have told us:
1. Think big, but take small steps when monetizing. Sometimes, you just need to prove you have a market. It’s OK not to generate a lot of revenue at first, but if you study your market you can project how much you can make if you market your product to a larger audience. This will obviously attract investors. – Devon Ryan, co-founder at UnWine
2. Think in advance about Apple Guidelines for payment. If they require in-app purchases for your business model, they take 30% commission. A lot! I’ve had this problem with another app that was selling physical services, and they considered I should use in-app purchases. Start NOW – David Grégoire, CEO at SnapShop Camera
3. Focus on creating the community around your service and always tinker with the big ideas for your app, that’s the only safest way of business model in today’s rapidly changing world. – Akshay Bansal, CEO at Heuro
4. Explain in heavy detail what the customer is buying with their payment. Our customers were asking similar questions, so we broke down our payment gateway as simple as we could. – Pete Solano, Chief Information Security Officer at 2minutes2post
5. Find the balance between how much your customers are willing to pay for your app and how much you need to scale your company. However, you plan to monetize, make sure it’s enough to keep the lights on as you grow. If your expenses require that each user pays $10 for your app, but they’re only willing to pay $1, you’ll need to focus on getting 10x more users. Pricing is a hard thing to get right the first time, so don’t be afraid to experiment and talk to your customers to find the sweet spot. – Steven Benson, founder and CEO at Badger Maps
6. Listen to your users for suggestions/ideas on how to improve your product. If your monetization strategy isn’t working, don’t be afraid to try a new strategy. Before starting out, make sure there is a viable market for your product – Travis Sevilla, Marketing Manager at GoShare
7. Target a demographic that can afford your goods and services, and accept all payout methods, including Venmo, Apple Pay, credit card, etc. Build a payment system that you can scale as you grow, so you don’t have to re-build or start from scratch. – Sarah Zurell, Chief Brand Officer at Pavemint
Making money on mobile apps isn’t a piece of cake. If it was – there would not be doctors, policemen or firefighters. Only app owners. But with just the right amount of effort, one mobile app can set you app for life. But remember – it requires a lot of work, time and sometimes, a small portion of luck. The most important thing is to be persistent in your action and not give up when the first problems occur. Do you feel that you have the stomach to do it? Wonderful!