As our technology became mobile, smart companies helped create a range of products for use on mobile devices. When Apple launched their iphone, they had the app store ready to support it.
The app store was one of the best possible things they could have ever had. It gave people young and old access to all kinds of entertainment and utility directly on their phone. While many other developers have caught up with Apple in terms of apps, the initial advantage has meant that Apple gained early loyalty in the mobile wars.
Because of the success of mobile apps in an otherwise brand new market it’s done what any new sector does. It’s created a new economy called the app economy. The app economy functions much like any other economy. There are primary sources (Users) of income and there are secondary sources (Advertisers) of income.
Primary sources of the app economy are the people who use applications themselves. There are now many thousands of developers working very hard to try and come up with useful or catchy apps to get your attention. Primary sources have two different ways to get your income.
- Initial Purchase Price: The most obvious (though not necessarily best source of income) is the initial purchase price of the application. You pay a set fee and are able to download the app from that point forward. The price points can vary depending on the type of app and their goals. Serious work heavy applications that use this as their only source of income will cost a lot more. The costs usually aren’t the same as traditional software, but can get up to maybe half of traditional software.
- In App Purchases: Here’s the big one! In app purchases have turned companies into app empires. Generally these are micro transactions where a free to play gaming application offers you in game currency to make the game more enjoyable or easier. These games can sometimes be referred to as “pay to win” games. The secret is that these small transactions add up quickly. While a traditional game might get $70 from the initial purchase, in app games can collect hundreds or thousands of dollars if the users are willing to pay the price. South Park famously had an episode with a fake game that kept hooking young Stan in and having him purchase more and more “Cana-dough” thanks to his addiction.
Secondary sources come from advertising and marketing. This is one of the biggest ways that companies make money through their apps.
- Marketing - Marketing is more of an internal thing. Companies create applications for their own companies and it gets people looking into them without having to visit their website. It’s a convenient alternate method. Many will allow purchases from their companies. Apps also allow a sneaky denial of other companies. Take a look at some of the fast food apps available now. You can pre-order your food, show up, pick it up and leave. By taking your order as soon as you get a craving, they ensure that you are not going to pass by another restaurant on your way there.
- Advertising - This is one of the biggest moneymakers of anything that exists in the app economy. Advertisers have realized that there is less reason to advertise on traditional websites when mobile advertising is being seen by so many people! It allows for very targeted advertising as well as you can specialize the apps you advertise on to maximize your potential returns.