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Monetizing your mobile app is a big decision.

 Most people build mobile apps with a certain business model in mind in order to make a profit. However, these models each have caveats and should only be used in certain situations. Here’s a quick breakdown on the 5 main ways to generate money through your mobile app and when they are appropriate.

Charge per Download

The most straightforward way to try to make your app generate revenue is to charge users just to download it. You see this a lot with utility apps that provide valuable functionality for a certain group of people. This works well when you have an established user-base that is familiar with your products and leave good reviews for new users to read and build trust. This doesn’t work well for apps in categories that users are used to getting for free, like entertainment and shopping.

Advertisements

Many popular apps have a free version where the user will have to look at small banner ads or short videos in order to generate revenue. You see this a lot with Android apps, because the Play Store tends to get a ton of downloads, but not many in-app purchases. This won’t make you very much money unless you have a huge amount of active users driving advertisement view counts.

Take a Cut

Some apps are able to create a marketplace between two interested parties and then take a small percentage of the transactions. This really only applies to eCommerce type apps where money is being exchanged through the app. The app also needs to provide enough value or convenience to make users willing to pay a small fee to the app maker. This will require users to accept certain agreements so that you are covered legally.

Promotional Spots

If you can get enough users in the right demographic, a smart way to make money from your app is to get relevant businesses to pay for a highly visible spot in your app. An example of this would be Yelp, which places promoted restaurants prominently in the directory, regardless of filters. This won’t be a viable option for brand new apps, only for established ones that have enough users to appeal to business owners.

Freemium

This is becoming a pretty popular business model for apps. The idea is to make the app available for free and then charge money for additional features. This is wildly successful for gaming and dating apps, where users get hooked and eventually fork up the cash for a premium account or in-app purchases. The tricky part for the app maker is figuring out what to give away for free in order to hook users as well as how much users are willing to pay for additional features.

If you are an entrepreneur and are looking for more information about building an app, feel free to download the following Entrepreneur App Checklist.

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