How Do Mobile Developers Make Money?

Introduction

There are multiple ways mobile developers can make money. In this article, I will briefly describe what these methods are and give some examples of them.

Developers Earn Money from Ads

If you have downloaded a free game or application for Android or an iPhone, you most likely have encountered this method of earning money. Many developers earn money from showing ads to their users. How does showing ads equal income for the developer?

The developers receive payment from an ad network. One of the most common ad networks is Google AdMob, but there are other ad networks developers can earn from as well. Every ad shown to a user earns the developer a tiny portion of the money. There are many ad types including banners full-screen ads and videos. The amount of money earned from each ad view depends on market factors, the ad type, and the ad network.

The important thing to keep in mind is that developers would need to show many ads to earn any significant amount of money. This is also a double-edged sword though because if you show too many ads to users, they will become frustrated and annoyed. Have you ever stopped using an application because of too many ads? I have done this myself.

The developer needs to find a “sweet spot” of not too many ads shown but enough to make some money. One thing some game developers have done is reward users in-game currency or rewards for watching video ads. It seems this method causes less annoyance among users because they get something in return.

There is also another option developers can give users that are frustrated by ads, and this leads to the next way developers can make money.

In-app purchases

Often a free application with ads will offer a one time purchase to remove ads. Some developers also sell an ad-free version of the application as well, but I will cover selling applications after this section. Doing this gives the user two options. Either put up with seeing ads often or give the developer money and see none at all. I have personally paid money in applications to remove ads myself. There are other ways for developers to earn money from in-app purchases.

If you ever played a mobile game you probably all too familiar with ways developers can charge for things with In-app purchases. Here are some examples I can think of.

• Premium currency that is used in the application.
• Pay to replenish lives to keep playing the game
• Pay to speed processes that the user would have to wait a long time for.
• Random rewards like loot boxes or Gashapon like spins.
• Boosters like extra experience or other rewards like object earned faster.
• Purchasing characters or upgrades

If the developer can think of it, they can try it. Some of the developers that earn the most money get it from in-app purchases alone. Examples include Candy Crush Saga, Toy Blast, and other similar games.

One downside to in-app purchases is if players perceive the developer to be too greedy they may refuse to spend any money. Most people want to play a game that feels fair and like they don't need to spend lots of money to win or be good at it. Perhaps you have played a game that felt unfair or too hard without spending money? Either way, developers have to consider this in mind when designing in-app purchases. Or maybe they don't as I am surprised often to see what people will spend money on?!

Developers Can Earn Money from Selling Applications

Of course, developers can sell applications directly to users. In most cases, these sales take place on the platform marketplace. So Google Play or the App Store. There are other app marketplaces, but these two are used the most. In the case of Google Play and the App Store developers pay a fee for each sale in that some of the earnings go back to the store. As of 2018 in both cases, developers earn 70% profit from each sale of an application. Developers also have to pay a one time fee to sell apps on Google Play and a recurring charge on the App Store.

Developers can also sell applications outside of a marketplace entirely on Android, but these require more effort on the user to install the application.

Keep in mind selling an application is just one revenue stream so in theory, a developer can sell an application and still show ads and have in-app purchases. However, a developer that tries this would probably get lots of hate as traditionally paying for an application implies there will be no ads and minimum or no in-app purchases. There are three downsides I can think of to selling applications.

One people do not like to pay up front for an application no matter how good it is. On one had people find ads to be annoying but they also want everything to be free. This puts developers in an odd spot where only the best and most popular games and applications can get away with charging money. There is also the fact that so many applications in many categories are free, so a developer really needs to stand out to offer something that demands an upfront cost.

The second issue is people don't like paying a lot for applications. Rare it is to see an application selling for $10 or more. I am not saying it can't happen, but I just don't see most developers getting away with that. Most applications are between $1 - $5 or the equivalent of your local currency. Even then though it is sometimes harder to get value from selling application at that price range versus using other revenue methods.

Lastly on Android pirating applications is fairly easy. So developers will lose some sales to pirates and some cases lose many sales. Now I know the argument that somebody pirating an app is not a lost sale is a thing, but I am not trying to get too deep into that. I am not going to comment on the ethics of pirating either as you can decide that for yourself. I personally pay app developers for good applications.

There are ways developers and marketplaces can counter pirating. They can use stronger DRM that is stricter methods of forcing users to verify they purchased the game. They can also force the game to be online only as then the DRM is pretty much impossible to beat. However, in both cases, this at the cost of annoying the user and some people will refuse to buy games with online DRM. Some people argue they shouldn't have to be always online to play a game.

Another thing to keep in mind too is the people that discover and develop the cracks and tools to break DRM are very resourceful and determined. It is an endless cat and mouse game with developers constantly trying to find ways to stop the pirates.

Developers Can Earn Money from Subscriptions

One of the last common ways developers can earn money is by selling subscriptions. While in theory a developer can charge a subscription for just about anything without offering a good deal of value or a desired service people will refuse to pay for it. For example, people probably will refuse to pay $10 a month to use a simple calculator or other basic tools. Adobe Photoshop is a great example of an application people will pay monthly to use, but this is because professionals need access to this software.

In most cases, developers charge a subscription for services. For example a premium membership in Spotify or a subscription to a video streaming website like Netflix. In both cases, there is a strong value being offered to users to keep on paying to use the service.

The downsides I can think are pretty much the same as the ones for purchasing apps. People may not value a service enough to pay for it monthly, or they may seek out free alternatives legal or not.

Another thing to keep in mind is that with digital multimedia some people may still prefer to just outright buy music, videos, and books versus paying a subscription to access that content. Some people may even still prefer to use physical media.

Other Ways Developers Can Make Money

There are still other ways developers can earn money. Some developers may not include any payment option at all and then opt for optional donations. Open source developers tend to do this. There are some ways developers can make money I can't think of. Maybe you know some other options?

Conclusion

Hopefully, by now, I have answered the question of how do mobile developers make money. If you have any comments, questions, or feedback feel free to post! If you have some other ideas of basic questions you want to be answered, feel free to let me know as well.

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