App store purchases totalled some $133 billion in 2021, and have grown at least 15% year-on-year. Revenues even grew 19.2% between 2020 and 2021, and that’s despite the fact that many well-known names (including Netflix, Spotify and Epic Games) removed in-app subscription options from their apps. So what is the best way to get a slice of this? And is it really possible to make money on the app stores?
Clearly, it’s an enormous industry, and it’s an interesting one to get into. Google Play, the default app store for Android phones, has particular potential for newcomers because it allows you to compete on a level with the really big players. Google’s ranking algorithm is sophisticated and effective at delivering the best apps for a given search term. So, if you produce a word-processing app which people engage with better than Microsoft Word, then – eventually – you’ll be beating one of the largest companies on earth.
The other big player is, of course, Apple. Their App Store ranking algorithms are more simplistic than Google, being biased towards apps with large amounts of good ratings. Therefore it can be hard to beat the established big players, and those apps which are good at inciting their users to leave reviews will beat better apps which don’t. But, with the right outside marketing, the rewards can be greater than Google’s: last year Apple’s App Store delivered about 77% more revenues to developers than Google’s. This is largely due to the fact that Apple’s devices are more popular in wealthier countries.
There’s always ads
Traditionally, Apple users prefer to pay for their apps whilst Android users prefer free, but ad-supported, apps. Ads can be a very effective way to earn money from apps, but their earnings are directly proportional to the number of users you have, and the amount of time those users spend in your app. If your app is niche, then it will work better as a paid-for app.
If you build an ad-supported app, you should always provide an in-app payment for removal of ads. Set the price at more than you would expect to gain from a single user via ads in a lifetime, and it’s win-win. The end user gets a choice.
Outside the app stores
But a good app strategy doesn’t even necessarily have to involve ads, in-app purchases or subscriptions which are delivered via the app stores. As mentioned earlier, companies like Netflix and Spotify have stopped offering app store payments, instead requiring people to set up accounts outside of the app. This means that they avoid the 30% “tax” which Apple and Google charge on their purchases. (Note that this is reduced to 15% for smaller businesses).
Netflix, for example, has a big enough presence that their business can be done outside of app stores. People don’t find out about Netflix through an app store search for “TV on demand” – they find out about Netflix because Netflix is everywhere. So people sign up via their website, enter their payment details, and only then are directed to download the app.
This puts Netflix in control of the customer journey. They aren’t reliant on the app stores, so there’s no need to use the app stores as an expensive payment mechanism.
The downside, of course, is that they have only got this far by investing literally billions of pounds in advertising yearly. It’s expensive for people to get to know you outside of the app store. That’s why, ultimately, many still rely on the app stores to deliver their users. Whether the stores represent good value for money depends on how you use them.
there are three main ways of making money through apps. Via the app stores you have the options of in-app purchases or subscriptions. Alternatively, ads are an effective way for earning money if your app has wide appeal. Outside the app stores, there is a great opportunity via traditional marketing to deliver users to your app, allowing you to avoid the high cost of app store payments. With the right approach and an app which is genuinely good, there is always a route to earning money.