It was 2008. Mobile apps had just become a thing with Apple’s App Store opening in July that year, followed by the Google Play Store (then known as the Android Market). Then, both the app stores combined had only around a few thousand apps.
Fast forward 12 years, and now “there is an app for everything”. The number of apps available in the Google Play Store and the Apple App Store has exponentially increased to 2.96 million and 1.85 million, respectively.
Many wonder how and how much do mobile apps make on average. So, in this article, we have gathered the best answers to how much do apps make in 2020, based on their category and nature of app monetization.
How Do Apps Make Money
Depending on the nature and intention of the app, app development companies can monetize their apps in at least 10 different ways.
Below is a quick summary of the monetization strategies you can adopt for your app. Check out our in-depth article on app monetization for a complete guide to making money from your mobile app.
1. Premium Model
The classic and earliest form of app monetization. The terms are simple here – you have to pay a one-time fee to download and use a premium app. The market share of premium apps is steadily falling as only 5 to 10% of users are willing to pay for an app. Currently, paid apps account for only 3.6% in the Google Play Store and 8.1% in the Apple App Store.
With plenty of freemium apps to try out, users are least likely to spend ahead for an app. As a result, paid apps have a smaller user base as compared to other apps. Also, most app developers are shifting to other monetization models as premium apps account for only 2% of revenue generated from apps.
The price range of premium apps are spread across a wide spectrum. For example, a game app like Rayman Fiesta Run costs only US$0.99, whereas an app like The Color Atlas of Internal Medicine will cost you US$99.90.
How Much Do App Developers Make per Download?
Both the Google Play Store and the Apple App Store takes 30% of the revenue generated from an app and gives the rest (70%) to developers. As the revenue generated varies greatly depending on the app categories and platforms, drawing an average figure may seem vague, especially for paid apps, whose download charges are decided by the developers.
2. Freemium Model
A freemium app is free to download and use. But there’s a catch. Users will be able to access limited features of an app. By following a freemium model, app creators can enable users to gain an overview of their app and see whether it’s worth their time and money.
Freemium model can be executed in three ways.
- By limiting certain features, other than the core functionalities, which can be accessed only by premium users.
- By allowing freemium users to use specific features only for a fixed number of times per day.
- By offering exclusive and fast support only to premium users.
Around 71% of game apps and 52% of non-game apps follow the freemium model of monetization. To access the limited features, users will have to upgrade to a premium version of the app.
The upgrades in a freemium app like Headspace can cost you anywhere between US$6.49 – US$119.99.
3. Subscription Model
With the subscription model, developers allow users to use an app for a trial period, after which they will have to pay for a paid subscription. Unlike the one-time payment offered by premium apps, subscription-based apps let users choose from a list of plans varying in pricing and duration.
Generally, the subscription model is executed in two ways. Developers can either make subscriptions mandatory to access an app’s content or can use a subscription to remove the in-app ads. In a survey conducted in 2019, 56% of developers stated that they used the subscription model as their monetization strategy.
According to App Annie, app subscription contributes to 96% of consumer spend in non-game apps. In a subscription model-based app like The New York Times, subscriptions can cost anywhere between US$0.99 – US$199.99.
4. In-App Advertising
Do free apps make money? Yes, with in-app advertising, developers can make their apps entirely free and generate a significant amount of revenue.
By following the in-app advertising monetization technique, both the developers and users are in a win-win situation. Users get to use an app for free, whereas developers get to display highly-targeted third-party ads.
Developers can choose from six different kinds of ad formats, depending on an app’s user interface (UI) and layout.
- Banner Ads – These ads take up minimal screen space and cause minimal intrusion to the user experience of an app.
- Interstitial Ads – These ads take up the entire app screen and are meaningfully placed between app content.
- Native Ads – These ads are well integrated with the look and feel of apps and align with their natural flow.
- Video Ads – These are ads that play when users open an app or while they interact with it.
- Rewarded Video Ads – These ads offer users a reward (mostly in-app goods) in return for watching an ad.
- Affiliate Ads – These are highly targeted ads that refer users to a specific product or services.
How Much Do Apps Make From Adverts?
The revenue generated from in-app advertising depends on the number of users an app has, the type of ads it displays and the type of business model it follows such as Cost Per Thousand Impressions (CPM), Cost Per Click (CPC) or Cost Per Action (CPA).
For example, the average revenue per impression of rewarded video ads in the States is US$0.02 and for interstitial ads is US$0.16. In 2020, the global in-app advertising revenue is projected to surpass US$117 billion.
5. In-App Purchases
In-app purchases refer to the purchases made by a user inside an app. Such purchases allow users to acquire exclusive app features, content, or services. For game apps, in-app purchases can be the buying of currencies or boosts that will enable users to progress through levels quickly.
And if you ask how much do apps make with in-app purchases? In 2020, apps are projected to generate US$380 billion in in-app purchases alone. There are primarily four different types of in-app purchases,
- Consumable purchases
- Non-consumable purchases
- Auto-renewable subscriptions
- Non-renewable subscriptions
For example, in a mobile game app like Subway Surfers, the cost for in-app purchases ranges between US$0.99 – US$104.99 per item.
6. Lead Capture Forms
Another way apps make money is by including lead capture forms. By doing so, app creators can collect information from users who are interested in specific goods or services. This information can be sold to companies who are looking for such leads. In most cases, users are rewarded with in-app goods for filling the lead capture forms.
Once an app has a substantial number of users, app creators can incorporate sponsorships to make the app even more profitable. By doing so, developers can utilise a section of the app to introduce a sponsor’s products or services creatively.
If a developer feels their app goes in alignment with the app of a peer, they can together form a partnership monetization strategy to increase app revenue. With a partnership of that kind, both the app creators will gain a significant increase in the number of users, and ultimately, app revenue.
Partners can introduce one another’s app with the help of a dedicated app section. A notable example of this is the Nike + Headspace partnership.
Licensing is another non-conventional solution to how to make money from mobile apps. By licensing an app, developers sell user-generated data to a third-party company. As a prerequisite for doing so, developers are required to inform users about the licensing during their onboarding process.
Examples of apps that perform licensing as part of their monetization strategies are Foursquare and Waze. To license the user-data from Waze, businesses will have to pay anywhere between US$2 to US$850 per day.
Ever wondered how free apps make money without ads? One way they do it is with the help of crowdfunding. There are several platforms like Apps Funder, Indiegogo, and Kickstarter that let developers maintain their apps entirely free to use. Lil BUB’s HELLO EARTH game, which was crowdfunded by 2,406 backers via kickstarter.com, garnered US$148,003.
Top Grossing Apps 2020
Accounting for 43% of all smartphone use, it is no surprise that mobile games constitute the most profitable app categories. The top-grossing game is PUBG mobile with more than US$226 million generated in 2020, followed by Honor of Kings and Roblox, which made US$204.5 million and US$102.9 million respectively.
Which Platform Makes the Most Money?
Although Google Play Store dominates in terms of the number of app downloads and market share, Apple App Store generates more revenue. This is primarily because of Apple’s strong presence in the US and Japan, which are the highest contributors to worldwide app revenue.
What Type of Apps Makes the Most Money?
On average, the top 200 apps make US$82,500 per day, and the top 8000 apps make US$3,500 per day. The disparity between each app category is enormous, and when considering millions of apps, taking the average is pointless.
What Is the Most Profitable App?
Not surprisingly, mobile game apps reign at the top of the highest earning app categories, followed by music apps and video streaming apps. The main reason behind the lofty earnings of these categories is because of their high engagement levels.
In a Nutshell
The answer to “how much do apps make” is complex to decode. As most apps utilise one or more methods of app monetization, pinpointing exact numbers can be hard, and let alone fair, as mobile game apps continually break the upper limit of app revenue generation.
But one thing is for sure – mobile apps are here to stay, and with the number of smartphone users projected to reach 4 billion by 2021, app creators will have a broader range of audience to market their apps.
As can be seen, apps that stay away from the premium monetization model, do a great job to engage and retain users, and ultimately add value to users’ lives will reap the highest revenue.