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How to Make Money with an iPhone App

  xm forex
The mobile app business continues to show impressive growth, minting fresh millionaires churning out new titles at a rapid rate. Apple’s App Store generated more than $10 billion in revenue in 2014, significantly higher than the $1.3 billion earned by Google Play.
Just as there are a number of different ways to monetize a website, there are a handful of ways to monetize an iPhone app. The best strategy for your business depends on a number of factors, including your existing visibility in the niche, product mix, and the functionality included in the app.
Below we’ll explain the four primary ways to make money from an iPhone app, including examples and suggestions of when to use each. (By the way, if you’re enjoying this article, you may want to subscribe to our free newsletter; we’ll send monetization tips straight to your inbox each day.)

Strategy #1: Sell App Sponsorships

This approach treats an iPhone app like a traditional desktop site, monetizing it through the sale of advertisements. A sponsorship generally involves an exclusive or semi-exclusive partner who “owns” all the ad inventory on the app for a period of time. These sponsorships can take the form of normal mobile banner ads or be integrated more thoughtfully into the app.
For example, here’s an example of a Home Depot sponsorship on the mobile Weather Channel app:
Weather Home Depot
In this case, the entire background of the app is part of the ad placed by the sponsor. This is similar to a “skin” on a desktop site. (See our complete list of 14 Creative Ad Units to Include In Your Next Proposal.)
Below is another example of an app sponsorship in action; this one also integrates the sponsor logo into the app:
Dunkin Donuts Sponsorship
If you already have a traditional website with a base of advertisers, monetizing your app through a sponsorship may be the best approach. Many advertisers will jump on the opportunity to sponsor a mobile app; it gives them an opportunity to own a unique medium and deliver their messaging to a captive audience.
Though an app advertising package can take a number of different forms, the easiest is probably to sell to an exclusive sponsor (i.e., 100% share-of-voice) for a flat monthly or annual fee.
When App Sponsorships Work: If you work with an existing base of advertisers, an app sponsorship would probably be pretty easy to sell. Even if your app doesn’t get a huge number of downloads, you may still be able to command a premium fee given the exclusivity.

When App Sponsorships Won’t Work: If you don’t sell any ads directly now, these deals aren’t going to materialize once you launch an app. Finding a sponsor for your app takes quite a bit of work if you don’t already have the relationships in place.

Strategy #2: Use Ad Networks

This approach to monetizing an app is probably the least exciting–until you see some of the success stories.
A lot of apps are monetized the exact same way as most websites: through an ad network that matches up advertisers and publishers. Similar to the desktop experience, mobile ads can take a few different forms. Most common is a simple banner at the top or bottom of a screen:
Banner Ad Example
There are also higher impact ads, such as interstitials that take over the entire screen with creative:
Interstitial Example
CPMs for mobile ads aren’t going to blow you away; the general average is revenue of about $1.50 to $3.00 per 1,000 impressions. So if your app has a few thousand downloads and generates 20,000 pageviews daily, you’re only looking at about $1,000 a month in revenue.
Where this revenue stream gets exciting is when the ad impressions get massive.
One recent success story using this approach is Dong Nguyen, whose smash hit app Flappy Bird came out of nowhere to dominate the App Store and Google Play charts for several months. The app, which was created in a few coding sessions after Nguyen’s day job, was downloaded more than 50 million times and was reportedly generating $50,000 daily in ad revenue from basic banner ads like this one:
Flappy Bird
Kyle Chayka did a bit of math on that claim and concluded that the game would need to be serving up about 16 million ad impressions a day to hit that level of earnings, a reasonable level given its place on the charts. More interesting were a couple figures that make Flappy Bird’s revenues look meager: Candy Crush and Clash of the Clans are reportedly making about $995,000 and $785,000 each day, respectively.
When Ad Networks Work: If your app is getting a ton of pageviews, you could make a decent amount of money simply by showing network ads. These can be up and running very quickly (within a day) and earnings will start to accumulate just as fast.
Running ad networks through your app is the easiest of the options here; it requires minimal setup initially and then very little ongoing maintenance. If you have higher priorities to tackle and no ability to pursue potentially more lucrative strategies here, going with a network isn’t a bad idea.
When Ad Networks Won’t Work: If you’re using any of the other approaches listed here, it probably doesn’t make much sense to be running ad networks as well. The other opportunities listed will generally have a much higher RPM, through they’re also much more difficult to pull off.

Strategy #3: In-App Freemium Sales

An increasingly common strategy, especially within games, involves providing a free download with the goal of selling products within the app. This is the mobile version of a “freemium” strategy; the basic product is available to everyone, but certain advanced functionality is only available for those who pay.
The best example is the game Clash of the Clans, which is free to download (and has been downloaded millions of times). Players can earn certain rewards, such as gems, by completing tasks. If they get tired of doing things the hard way, there’s an option to pay for virtual items that unlock new characters, levels, and other features:
Clash Example
This might seem like a strange approach, but it works. Clash of the Clans has reportedly been generating more than $2 million a day from these purchases. The game’s top players have reported spending as much as $2,000 a month on the hobby:
Jorgeyaogems
If this statement is true, that means that the game is making $1 million a month from a core group of dedicated players.
This game is one of the most successful examples, but it’s not the only one. At the end of 2013, almost all revenue from the Google Play Store and App Store came from in-app purchases:
App Revenue

Google PlayApp Store
In-App Purchases (Free Apps)98%92%
Paid Purchases1%4%
In-App Purchases (Paid Apps)1%4%
Source: eMarketer
Making these in-app purchases is relatively easy for users. If there’s already a credit card on file with the app store, there’s no need to enter payment information each time. That makes it possible to rack up some significant digital purchases in just a few seconds.
Some apps will show a notice the first time you log on, letting you know that the money you spend in the game is in fact real money that will be showing up on your credit card statement:
In App Purchases
When In-App Sales Work: This strategy is really only effective for games, and it generally only works if the game is somewhat addictive. Creating a best seller that attracts loyal participants is much easier said than done; for every mega-hit like Clash of Clans, there are hundreds of busts that never really catch on.
When In-App Sales Don’t Work: For most apps, this strategy won’t work at all. Unless there is a desired output that is unlocked by making the purchase (e.g., new characters or new levels unlocked), users won’t make in-app purchases.

Strategy #4: Paid / Freemium App

The paid app approach has generally declined in recent years as developers have gravitated toward the in-app purchase strategy highlighted above. But it’s still possible to charge for a download if you have a good app idea.
If you want to get a better feel for paid apps that work, check out the top sellers in the App Store and on Google Play.
It’s worth noting that paid apps don’t necessarily need to sell for $0.99 in order to be successful. Though most paid apps cost less than $2, there are a fair number of higher priced options as well. Several of the top sellers cost $3.99 or more:
iPhone Paid
There are apps that sell for $1,000 or more and get large numbers of downloads. There’s definitely an inverse correlation between price and number of downloads, but “expensive” apps can be a successful business model if the functionality is good and there’s an audience for the product.
Many appmakers have started creating two versions of their apps: a free app and a paid app. In many cases, the free app will have only a portion of the features offered in the paid version. For example, the free version of Where’s My Water includes only puzzles; upgrading to the paid version unlocks another 500 or so levels. The free version, pictured below, regularly gives players the option to pay $1.99 to upgrade to the higher version:
Water App Example
The paid version offers a great deal more functionality for a price of $1.99. This strategy is basically a no-risk free trial; if the free app is able to deliver a great experience to users, there will be a decent conversion rate to paid memberships.
When Paid Apps Work: At the risk of being obvious, paid apps work when you have a good, useful product to offer. If the functionality is lacking, the reviews will reflect the deficiencies almost immediately and you’ll see sales halt.
Paid apps can also work well if you already have a large audience to whom you can promote the product (for example, through email messages and on-site ads). Though only a small percentage of your audience will ever download the app, that initial wave of traffic can make a big difference by showing some initial traction.
When Paid Apps Won’t Work: Even if you do have a good product, odds of success with the pay-per-download model are limited without a marketing budget and strategy to go along with it.

Bottom Line

Mobile apps are big business; as smartphones have become ubiquitous, the potential audience has grown, and the revenue has skyrocketed. Though most apps struggle to attract downloads and make money, there are more and more success stories from both big companies and smaller individual developers.
Coming up with the right monetization strategy for your app depends on a number of factors, including the size and nature of your audience and the manner in which they’re using your app. If you’ve had success (or challenges) with any of the approaches above, or if you have more questions about monetizing mobile apps, chime in over at our free forums.
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