Guide to Pricing Mobile Apps
“We already paid out more money to Android developers this year than in the whole of 2012,” revealed CEO Larry Page during Google’s Q2 2013 earnings call on July 18. In April, Apple CFO Peter Oppenheimer painted a similarly rosy picture: $1 billion paid to iOS developers every quarter—$4.5 billion in the last year.
Clearly there’s potential to make money from mobile apps. But how to effectively monetize remains an open question for most dev teams.
5 factors to guide mobile app pricing
Slap a price tag on your app and early retirement here you come…or not. In fact, it might be best to avoid a price tag altogether. The key is to never think of pricing in isolation. It’s part of your overall strategy for getting your app noticed and into the hands of happy users. Five questions to determine what’s right for you:
- Am I the new kid? When you’re unknown, it’s a good idea to go free, at least for a while. A price tag, no matter how small, often deters users from taking chances. That cuts you off from getting a ton of great feedback and ratings you could use to gain traction and improve your app. The flip side is that a price gives you a place to go with discounts and offers. So, if that’s something you’re interested in, get ready to experiment to find your pricing sweet spot.
- Which devices are being used? Business Insider recently reported that Apple users earn and spend more than Android users. Typically, the iPad spend is higher than iPhone.
- What do users expect? Users typically pay more for apps that make a difference in their lives, particularly their working lives. That said, there are $0.99 apps and $999.99 apps. Where you set your pricing carries a message about how vital and useful your app is, how polished it is, and how much value it will provide. So, know what competitors are charging and if you charge a premium, explain what sets your app apart. You may also want to offer a free trial version to intrigue and delight users enough to pay for a full version.
- Where is the app launching? Monetization trends vary from country to country. Look at Japan and the United States, two countries where apps monetize best. The vast majority of apps actively in use in the U.S. are free (upwards of 90% by some reports). In Japan, users are accustomed to paying ongoing subscription fees for everything from mobile email to games
- What are the business objectives? Are you looking for a solid return on investment (ROI), just enough scratch to pay your team or to promote a larger company or service? Businesses like banks, for example, offer free mobile apps to supplement online and in-person banking. The value lies in long-time customer loyalty.
Capitalizing on the “free” app market
Users love free stuff, particularly in the United States, but that doesn’t mean developers aren’t making money. Take Candy Crush Saga, for example. The free game by UK publisher King.com has topped iOS and Android charts the last few months, taking in close to $633,000 daily in in-app purchases according to Think Gaming. The game is so simple and addictive, and well-integrated into Facebook, that 30% of its users don’t mind dropping a buck here and there on things like extra lives in order to best their friends.
The game isn’t alone. The top-grossing list on the App Stores features a large number of freemium apps offering a basic experienced that can be enhanced by in-app purchases (IAP). As of February 2013, analysis firm Distimo estimated that 71% of iPhone app revenue came from IAP, from content to functionality to subscriptions. The challenge is in ensuring the basic app is great so that you get positive feedback and enthusiasm from users, but not so great that users don’t want to move up.
Well-integrated ads, served to the right audience are another great way to drive revenue. Advertisers happily pay to reach the eyeballs on your app. The challenge is in figuring out who to work with and how to serve the ads to various countries.
The Kii Ads platform provides ad mediation to help you get started—code to one SDK and get ads from multiple ad networks. You can also serve direct ads and manage your own campaigns if vendors approach you (or switch between the two). When you develop on Kii Cloud, you can configure region-specific ad network preferences to target the right users as well as track metrics for ads across networks.
Your app could be different
That last part about tracking your metrics is worth repeating. Your pricing strategy, the ads you serve, the users you serve them to—evaluating what works helps you make smarter decisions to grow your business. Nothing’s set in stone.