Generating Revenue from Various Business Models

Abstract

As you learn more about the world of apps, you begin to understand that different types of apps require different business models. Most amateur appreneurs think that the only way an application can generate revenue is with the paid model (pay a flat, one-time fee to download the application; $0.99, $1.99, $2.99, and so on). This is the simplest strategy, but it doesn’t always produce the results you desire. Recently, I have noticed that free apps with in-app purchases, or “freemiums,” have dominated the market. Here is why: people do not hesitate to download free apps. You will generally get between 50 and 100 free downloads per paid download. That means (at the high end), if fifty people downloaded your app for free, one would have paid outright for it. Now, if this sounds like a very low number, that’s because it is. The freemium model changes this up in your favor substantially. Please note, however, for the freemium model to work, you need to have an application that is enticing and entertaining. If your application is not something of value, why would a user buy premium upgrades? Let’s go on a quick tangent to illustrate this point. When you think of the apps that generate the most money, which ones come to mind? Possibly, you thought of Angry Birds, Words with Friends , or Cut the Rope? You might be surprised to learn that of the top-5-grossing apps, all are freemiums.