App Monetization – How do apps make money?

After the big app idea is hatched, usually one of the main questions entrepreneurs have is how they can monetize and profit from building this app. There is not one full proof way of making money as every app is different, it really depends on how it engages with the users. It is up to the entrepreneur to find the right balance of providing a useful service to the users and not scaring them away with payments.

Some of the most common monetization techniques include freemium services, recurring subscriptions, paid app, advertisements or a combination of any of those options. One very important thing to keep in mind while reading further about each of these models, is that Apple (iOS) and Google (Android) need to make money as well. To do this, they actually keep 30% of each transaction which occurs via an app in their app store.

What is freemium?

Freemium is a monetization model where the service is initially free but may have limited functionality. In order to ‘unlock’ premium features the user will have to pay a fee.

For example, consider LinkedIn. Although LinkedIn is free to use, you have the ability of paying a fee which gives you the ability to message users who are not in your connections. This is considered a premium feature, which must be paid for. Hence the term freemium.

At Alias Apps, we are big fans of this model (again, this depends on the app you’re trying to build). However, the reason we like is because you can show your users what your app can provide for them without any risk to them. This in turn makes them more willing to try it out, and hopefully if they deem your service worthy, the will make a payment to get even more functionality.

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