When it comes to building a successful app startup, one of the most crucial factors is choosing the right revenue model. With so many options available, it's easy to get overwhelmed. But fear not! In this article, we'll take you on a journey through the top revenue models in the app stores, providing insights and examples to help you make informed decisions for your own startup.
Understanding App Revenue Models
Before diving into the various revenue models, let's first understand that mobile apps can serve multiple purposes within a company. Some apps are complementary products, while others are the core business. Since they cater to different needs, product owners often turn to different revenue models.
Free Apps with No Revenues
One of the most popular revenue models is offering free apps with no direct revenues. These apps usually don't generate significant income through in-app purchases or subscriptions. Instead, they serve as an extension of a company's core business or provide complementary services. For example, Philips Hue offers a free app that complements their smart lighting products.
Free Apps with E-commerce
Another common revenue model is offering free apps that allow users to purchase items through e-commerce platforms. Since these transactions don't go through Apple and Google, they're not reflected in the store's revenue estimates. Uber Eats, for instance, uses this model to facilitate food delivery orders.
Free Apps with Ads
Some apps offer a freemium experience, where users can download the app for free but are exposed to ads. The company generates revenue solely through advertising. Hyper-casual games often employ this strategy, as players' lifetime values are typically short-lived. Helix Jump is an example of an app that uses this model.
Free Apps with In-App Purchases
The next revenue model involves offering free apps that generate income through in-app purchases (IAP). Users can purchase digital products or features to enhance their experience. VSCO, for instance, offers a free image editing app with some filters available for purchase through IAP.
Free Apps with In-App Purchases and Ads
Some apps combine the previous two models by offering free downloads and generating revenue through both IAP and ads. For example, Candy Crush Saga allows users to buy extra lives or watch ads to continue playing.
Free Apps with Subscription
Another strategy involves offering a free app that requires a subscription to access premium content. The subscription can be an existing one (e.g., Netflix) or a new one created specifically for the app.
Paid Apps
In contrast, some apps generate revenue solely through paid downloads. However, this model has been declining in popularity as developers shift towards IAP and other monetization strategies. TouchRetouch is an example of a paid app that offers additional features through IAP.
Paid Apps with In-App Purchases
The "paymium" model combines the paid app approach with IAP, allowing users to purchase digital products or features within the app. Minecraft, for instance, offers a paid app with additional content available for purchase through IAP.
Other Strategies
Some developers combine revenue models to diversify their income streams and reach a broader audience. For example, Spotify offers a freemium model with ads and a premium subscription option.
Top Grossing Apps in the App Store and Google Play Store
When analyzing top-grossing apps, it's essential to consider that revenue estimates may not reflect e-commerce or ad-based transactions, as these don't go through Apple and Google. The focus is typically on free apps with IAP or subscription and paid apps with or without IAP.
Conclusion
In conclusion, the key to unlocking app startup success lies in choosing the right revenue model for your app. By understanding the various models, you can make informed decisions that align with your target audience's needs and preferences. Whether you opt for free apps with IAP, paid apps, or a combination of strategies, the most critical factor is finding a model that resonates with your users and generates sustainable income for your startup.