Making money from apps

There a two main ways to make an app pay, firstly you can charge for its download and usage and secondly there is an Ad model that can be used.  The current average price for a paid for an app download is around 99p, that said this price point is seeing decline.  The number of apps available are on the increase and total number of people installing are on the increase but choice will outweigh the number of participating users.

All time top iTunes apps.  Predicting success is hard, if you study the rankings the list is quite random, interesting the top paid app is actually the most expensive one in the store at $5.99, it does appear that people will pay more for better products.    Assuming you have built an app that is truly useful then the best path is to take is pay to download, if you take the free model and want to monetise it though advertising you will need to be in the top 5% to get close to making the same amount of money as you would from a paid download.  The problem is that you probably won’t know how successful you app will be until you release and test the market.  If you release it for free initially you can’t really start to charge once it is successful.  One way around this is to release a ‘lite’ version first.  For example ishoot is one of the most successful iPhone apps achieving 2.4 million downloads of the iShoot Lite.  From this free product they then promoted an upgrade to the full game iShoot which saw 320,000 downloads at 99p a go.  If you can start broad and create appeal and advocacy amongst an audience then asking them to pay 99p for more is very acceptable.  Our recommended approach is to either release a lite version first or if there is nothing inherent about your app that screams free then sell it, if you are hugely successful and heading for the top 5% of the market then you can switch to a ad funded model to gain more users.  For example a free newspaper vs a paid for newspaper in the real world would have a tough job asking someone to pay get that content on the iPhone unless the product was very compelling.

As of 21st May 2009 the top 2 paid for apps are the Moron Test and a game called StickWars, the top free apps are ‘What’s your Sex Appeal and Brain teaser.  The lesson here is not to aim to high if you want to be popular!

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