To date, the main sources for downloading applications for mobile devices on iOS and Android are the App Store and Google Play, respectively. From the point of user’s view, the principle of using these stores is quite understandable – the user finds the category of interest, selects the application he likes, downloads it for free, or pays for it and enjoys it. Placing materials on the App Store and Google Play brings profit to their authors. But do they really get the amount that the user paid for the application and how do they earn on free applications? We bring to your attention an overview of the various types of revenue that developers can get from mobile applications.

Monetization Strategies

By placing the development on the App Store or Google Play, its author must develop a strategy for monetization in such a way as to catch the balance between the loyalty of the user audience and the profitability of the application. Therefore, to begin with, he must decide whether the application is paid or free for download.

Paid version

In the case of a paid application, the charging principle for both the App Store and Google Play is the same – the developer receives 70% of the original cost of downloading, respectively, the stores get 30%. This is the simplest, but not the most effective way. The problem is that the user must decide to pay for what he has not used yet. In this case, an marketing of this application plays an important role. Either it should be a brand, a recognizable name (for example, Grand Theft Auto, Hitman), or in the description of the application, its advantages should be clearly outlined (especially in comparison with free applications), screenshots and demo videos that would prompt the user to purchase your application are provided.

If the application is available for download for free, then developers also have ways to get revenue from it: by placing ads in it, freemium-version, through affiliate advertising or through mobile commerce.

How to make money on the free version?

An application with built-in advertising is by far the most popular and the easiest way to monetize. Developers earn money by providing an ad slot in their application. Thus, it will be easier for authors to popularize their product. Using this method, it’s important not to overdo with the amount of advertising and monitor its quality, so as not to spoil the impression of using the application and not to lose users.

Freemium model is the most profitable model on both the App Store and Google Play platforms. It is a free basic version of an application or program that has built-in purchases. By purchasing them, users can get access to the full version, premium content or virtual goods, any digital services or subscriptions. The key advantage of this strategy is the ability to try the product for free and pay if it is liked.

Applications with built-in purchases can sell upgrades or accessories for game characters (for example, Angry Birds or Subway Surfers), additional levels or special user status (for example, Peak or MeetMe) or paid subscriptions (for example, Fitness or Cosmopolitan Magazine US).

Using this model, the App Store and Google Play also hold a 30% commission for content distribution and transaction fees.

Affiliate advertising is a mixture of freemium and advertising. The advertiser buys from the developer awards for users for performing any actions in the application, for example, for viewing advertising or downloading the application. Here, brands and agencies are a tool for monetization. The program developer receives a certain percentage of the reward given to the user. An example of such a model is Gardenscapes.

Mobile commerce is an application that sells real goods or services. In this case, the application acts as a sales channel, primary or additional, and the profit is obtained from the main activity – direct trading or placing virtual stores. When implementing real sales commission from the App Store and Google Play is not charged.

The statistics provided by various research agencies show that the most widely used model of monetization is a free application with demonstration of advertising in it, and the most profitable is freemium with a subscription. In any case, the decision which way best suits one or another application is highly individual, and it is influenced by many different factors. It’s important not to repeat the actions of others, try to combine different models of application monetization and adapt them to yourself.