The app marketplace provides tremendous potential for Appreneurs. However, most apps will not make back half of their development cost. Why? They were not built to make money. Before any line of code is written for your mobile application, the first question you need to answer is, "How can you monetize your app?"
In-App Store Purchases is a Dying Model
If your revenue model is based on people purchasing your app in the app store you need to go back to the drawing board. With the level of competition and quality of free applications, if you are counting on people purchasing your app it better be amazing.
Let’s think about this strategy…
You are competing against publishers with millions of dollars at their disposal to develop paid and free apps. In addition, the quality of free apps in the marketplace has caused paid apps to dramatically lower their prices from $19.99 to $8.99 to $4.00 to $.99 to free.
Relying on app stores purchases to make back your cost to develop is a huge mistake.
What about Freemium?
Lets say your revenue model is based on in-app purchases. This can be a stronger revenue model, but it is still not ideal. With in-app purchases many users lose interest in an application if they have to constantly make purchases, which may lead them to look for free alternatives. There is a high probability there IS a free app to suit their needs and now your revenue model is dead.
As an Appreneur, the key to creating a successful app is by developing a Stand-Alone Revenue Model. If the Apple and Google play stores disappeared tomorrow, your application can still be profitable. The Stand-Alone Revenue Model What exactly is a stand-alone revenue model? A SARM for short - is a revenue model that is dependent on user participation to generate revenue.
“Isn’t that the same as freemium content?”
No, it’s a revenue model of its own.
An example of a SARM would be a membership fee per month connected to the app which provides the user VIP memberships, Magazines, Exclusive Content etc. The membership is outside of the application, but the benefits are accessed through the app. You can’t have access to the membership/content until you have downloaded the free applications.
Benefits of a SARM
Control pricing and merchant fees without taking a 30% hit from the Apple store
Build a database of users to re-market new products or services
Works for any price point (considering quality of content)
Is a scalable revenue model
I encourage every client that work with to spend the most time brainstorming their revenue model before any development work has begun. If your plan is to develop an app to make you money, then you must have a Stand Alone Revenue Model outside of the app-store and in-app purchases.