In brief
An app with few downloads can potentially earn good money through what the article calls the Invisible Business Model for Apps. The article contrasts this proposed model with advertising, in-app purchases and paid apps, but does not explain how the model works.
Developers need to look beyond downloads to build their app businesses.
On the outside this sounds like a great idea. A lot of successful app developers have been saying this for a really long time.
So what do they really mean by this?
How do you build a business without worrying about downloads?
95% of the app developers currently make money using one of the following strategies:
Monetizing with Ads – this is the most preferred medium of monetizing an app for app entrepreneurs. An app developer integrates an Ad Network SDK in the app and then the app entrepreneur is paid based on the number of views the ads receive.
Monetizing with In-App Purchases – In-App purchases have very quickly turned into a preferred medium to monetize the apps. A lot of app developers release a free app and limit the functionality, slow down progress or show annoying ads in their free app. If a user wants to get rid of these constraints or annoyances, the user can make a payment inside the app. A well-implemented in-app purchase actually works pretty well and can generate a decent amount of revenue to the app entrepreneur.
Monetizing with Paid Apps – This strategy is losing its appeal as more and more apps move towards in-app purchases as their preferred strategy to monetize apps.
All the three strategies mentioned above work decently well and in fact many app developers have made millions based on the in-app purchase monetization strategy.
But the problem with all the above strategies is that each one of the above strategy has a very specific requirement to be successful.
Succeeding with Current App Monetization Models
Ads – For an app entrepreneur to make serious money with ads, the app needs to have been downloaded at least 100,000 times. Also just getting downloads is not good enough. Most apps lose a majority of their users very quickly. They have low retention and engagement metrics. Since your revenues from ads depend on the number of sessions, if your app loses users or has low engagement then you are not going to make any money from your app. For example, I was recently helping a game studio market their apps. Although we were able to increase the number of downloads through ASO, Facebook ads and other medium, the retention rate of the games was really poor. The app was getting close to 3,000 downloads per day but it was losing 95% of the users by day 2.
In-App Purchases – This type of monetization is the most profitable but at the same time also the most difficult to get right. Even large companies are known to spend huge amounts of money A/B testing their in-app purchase workflows to try to increase the number of people making in-app purchases. This strategy also relies on specific types of individuals to make money. The real money through in-app purchases is made when a game is able to acquire users who are referred to as “Whales”. These are the people who spend large amounts of money to purchase virtual currency to rapidly progress through an app or a game. The truth is that most app entrepreneurs are just not sophisticated enough to identify the “whales” and nurture them to make big money.
Paid Apps – There is not much point discussing this strategy, as it is widely known that the whole app store is moving towards the freemium model where app entrepreneurs are looking for alternate ways to make money, rather than making money by charging people for downloading the apps.
Enter the Invisible Way To Make Money From Apps
That’s why has some company decided that this had to change and as a result started working with a few other entrepreneurs to create a business model which allowed app entrepreneurs with even low number of downloads to make good money.
We call this model the Invisible Business Model for Apps.
This business model basically makes it possible for app entrepreneurs with even low download counts to make some good money. The app entrepreneurs also do not need to worry about the ad networks, user engagement, retention and a whole lot of other issues plaguing other apps.
This business model is truely a game changer.