February 22, 2011

Monetizing your application

  1. free app with ads
  2. free app; make money on additional services
  3. free app with in-app purchases
  4. free limited offer; paid full version
  5. fully priced version

The first way to make money is to offer your application for free with advertisements. You should not consider this option, especially using services like AdMob, if you are not having millions of session. If you want to try advertisements, there are several options to choose from: 

  • up to 3 full screen splash screens
  • targeted advertisements sold at premium 
  • generic AdMob style ads  

Another good approach is to provide free application and make money from additional services, which is not that different from the previous approach, except that you are advertising yourself. This option is particularly attractive for a consulting businesses, or physical goods sales organizations. The way to achieve this is by advertising your service, or product in the application, and having a clear offering in the “About Us” page. This approach is not recommended for application-as-a-product company — if you are selling your applications as a product you should charge money according to the market demand.

One of the most successful way to make money is to provide a good, free application with in-app purchases. This option is popular with games where you can purchase currency, weapons, etc., it could also be applied to digital publishing where reader purchases the full version after the content preview. Some authors sell books per chapter in this way.

The least recommended approach is to offer the limited version for free and a fully priced version. Very often basic functionality, or limited time functionality application is released separately from the fully featured, paid version. This approach has a very low conversion-to-paid ratio as it requires the user to go thru extra steps of buying and downloading of an extra application.

Finally when there is a strong market demand for your application you should not hesitate to release fully priced version. This option is attractive if you as a publisher already have the brand recognition and/or the value of the product is obvious and in demand. There are various schools of thought regarding the pricing: you can go for maximum market share at a low price, or get the similar profit at higher price with a limited number of buyers. Some companies prefer the second option as the amount of customer service required is lower and customers who pay more are generally more satisfied with the product than customers who receive it at a deep discount, or for free. The prestige of the company with higher price could also be elevated, but it should be a case-by-case decision with a consideration for competition offerings , market maturity and other relevant factors.

Uki's Google Java Technology blog