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Making Money From An App. How Do The Big Guys Do It?

BY Scott Bryant

{Blog Writer}

21 August 2015

Reading Time: 3 minutes

Making Money From An App

This morning we received an email from a student doing a project about apps. I was impressed to see that kids were learning about the very software many take for granted every day.
The way I saw schools buying tablets up when they were first released could only be compared to an arms race. It seemed that there were no plans in place other than to beat the school down the road with technology. It’s good to see some schools are taking initiative to teach about the technology they’re giving their students to play with.
Moving on, the young lady asked us how apps make money, especially apps which didn’t cost anything (or so it seemed!) This blog entry is pretty close to the actual email I sent back to her, plus a bit more. It’s a very basic overview for anyone wondering what’s involved in making money from an app, with questions from a year 12 student. It’s not a get rich quick blog or a tips and tricks post.

Ways Of Making Money From An App

Q: How do companies make money from a free app?

A: There are a few ways in which people can start making money from an app:

Advertising

The app itself can host advertising. Eg. There is a banner promoting a product which generates revenue for the owner of the app.

In-App Purchasing

The app could include in-app purchases. One example is ‘Candy Crush’. The app itself is free, but you can purchase extra turns once your free ones run out. In this example the user is often close to completing the level and feels compelled to buy more turns to finish it off.

Providing a light edition or trial version of the app

The other way a person can go about making money from an app is to provide a simple version of their paid app. An example here is a photography app that allows you to take photos in a certain resolution in the free version, but requires the paid version to take higher resolution photos. It gives the customer a chance to try the app, and often convinces them to purchase. Some apps give you a couple of months free to experience the full version before paying to continue.

Simply making customers’ purchases easier

The app can aid businesses in purchasing items from their company. An example being Amazon and Ebay. The apps are free and it makes it easier for their customers to purchase products. The cost spent developing the app is far outweighed by the extra purchases customers have made because of sheer convenience. This is one of the best ways of making money from an app indirectly

Brand Presence

Some companies choose to have an app simply as a marketing tool. The app might be fun, or informative, but generates a positive attitude toward their company. You might be a school looking at making life easier for the parents, and it’s a selling point when talking to a new family interested in your school. You might be a business trying to appear established in the marketplace, so you’ve got a brochure style app for your potential clients.

Her next question related directly to Social Media apps.

Q: Social Media: How did companies like Facebook start making money from an app?

A:The most valuable information that social media applications acquire are browsing habits and information about users.

The way they make money is by targeting advertising and using information about their users. Virtually all social media applications study psychographics (personality, values, opinions, attitudes, interests, and lifestyles) to market content to their user. It could be that they’ve posted about an environmental issue for example, or searched for places to study. The social media application could then target advertising to you based on thi, such as showing you advertisements for university enrolments in environmental studies. Pretty powerful stuff. The advertiser also has power to control the audience for their ads as well.

An interesting article regarding making money on the App Store by Macworld UK.

Q: What future prospects do you think there are for applications such as Facebook, Snapchat and Instagram? How will they continue to make money from an app?

A: The most important thing for these companies is to continue evolving with their customers.

I think the only rocks left unturned for these companies might be in the way of less intrusive advertising and more subtle, effective advertising. There are a bunch of interesting products out there marketing to people without them even realising it. Who knows what the future will hold?

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