- I started Vivino 13 years ago, and always got the same question. "The app is free, how the
heck do you make money?" That's what we're gonna talk about today, how to make money from apps, and there are many ways to make money, to monetize an app in 2023. This is Raw Startup.
(upbeat music) I'm the founder of Vivino,
the world's largest wine app, and wine community with
over 60 million users all over the world. The app has always been free,
and yet we're still here. How the heck is that possible? And yes, this is something
I know a thing or two about. We look at the biggest five
ways to make money off apps, and I will show you examples
in every single category. We look at how much money there is to be made in each category, as well as the good and the bad. This list of five
doesn't have all the ways you can make money off apps, but probably 90% of how
money is made in apps today. With that, let's get started. Number one, sell products or services. You basically facilitate the
sale of a product or a service, and this can be done in many ways with very different complexities. From a very low complexity affiliate deal to full-on e-commerce in many countries. Examples are Vivino, we have a full marketplace in the app where users can buy wine. Amazon is another great example here. This can also be done
with nonphysical products, like hotels, flights, or car rentals. In that space, we have apps
like booking.com and Skyscanner. Usually you get a cut, some kind of commission on
everything sold through the app, that's how you make money this way. Let's have a look at how a sale
can be made through an app, and this is important because
the complexity changes a lot. Affiliate, basically sending buyers to somebody else that does the
e-commerce, complexity, low. Marketplace, a marketplace
with many vendors, one good example here is Etsy, but Amazon also has a
marketplace, complexity, high. Drop shipping, you take orders, but somebody else does most
of the shipping, et cetera, complexity, medium. Full e-commerce, you run
a full e-commerce shop just like Amazon, complexity, high. Now, let's look of a look
at the good and the bad when it comes to selling
stuff in your app, and we're starting with the good. It's a feature, and doesn't really get in the way of your app. There's a big upside
if customers buy a lot, and you get a cut of that. The bad, can be low margin,
really depends on the category. Hard to scale, especially internationally. Adds considerable complexity
depending on the model. All in all, this is a very complicated way to make money off an app, and yes, this is something I have
extensive experience in. Number two, digital subscriptions,
and this is a big one, have a paid digital subscription where users pay monthly or annually. This model is very
popular for many reasons, we'll get to that. This model is especially good for apps that are used on a regular basis, monthly, weekly, or even daily. Apps that use this model that you probably have heard
about already are Netflix, Disney+, Max, used to be HBO Max, as well as most other streaming apps. And dating is a big category here. We even did a full video
on the dating app, Smitten, check that out later. There's also a lot of
health and wellbeing apps that use this model. Apps like Reflectly, the journaling apps, Strava, the biking app, MyFitness
Pal for calorie counting, Headspace, the meditation
app, and many, many more. When it comes to how is you
charge, and what you you charge, the strategies vary a little bit. A very common way of doing
it is having a free app, then adding a few features,
and you pay for that, that's known as freemium. Others are paid only, maybe you get a short trial, but then after that you
have to pay to use the app. Prices vary depending on the service, value, and the category. We see prices all the way
from a few dollars a month all the way up to 20,
$30 every single month. If you have a free app, the number of users
that are willing to pay can vary from say one to 10%. My impression is that most
apps are between three and 5%. Okay, let's have a look
at the good and the bad. The good, instantly global, high margin, recurring and predictable. The bad, not for occasional used products, some markets and people just
don't like subscriptions. All in all, this is a fantastic
way to monetize an app. This is a reason why
it's very, very popular. Number three, advertising
and sponsorships. Basically putting ads or
some kind of advertising into the app, it could look something like
this, or even interstitial ads, they take over the full screen
and the user has to wait. They're more intrusive,
but they will pay better. You will need some volume, you'll need a lot of
users to make money here, or it can be very, very targeted. Then you can make a little bit of money. Showing ads to a small group of people. Say 200 people is not
gonna get you very far. You will need a lot of
users, but the usage is wide, it's used in all kinds of different apps. The good, pretty easy to do. There are platforms like AdMob, and it's a pretty simple
way to make money. The bad, can be intrusive. Users often don't like banners, and advertising in general
takes a lot of volume to get a good revenue, usually millions of users
before it becomes meaningful. Number four, sell digital goods. This is sometimes referred
to as in app purchases. Basically you pay something
to unlock a feature or get something special inside the app. These days it's mostly used in games where you can buy things like skins, weapons, extra lives or turns, levels. These are split into two categories, consumables and non consumables. Consumables are things that
you buy, and then you use them, and then you need a new one. Non-consumables, you
buy once, and that's it, maybe it unlocks a feature
or something like that. The cool thing about consumables is that people keep buying them. It's almost like a subscription. This can be used outside games, but you have to be a little creative. If you know any good examples,
put them in the comments. The good, instantly global. There is a willingness to
pay in certain categories, especially games. The bad, not recurring, unless it's consumable, then
they sort of keep coming. This is a good way to monetize, especially in certain categories. Number five, sell data. When you have an app, the usage of the app usually generates some data, and there might be people
willing to pay for that. With the Vivino for example, we know a lot about what
people like to drink, what's trending upwards, and
what's falling out of favor. This data can have a
lot of value for people in the wine industry, and it is something we
make money from at Vivino. All that said, please be very careful. It's okay to sell some high level data, but you can never sell user data. We would never do that. The rules are very strict,
especially in Europe with GDPR, those rules are coming in the US too. I think California is leading the pack. The EU will give you a massive fine if you break those rules. Meta just got a $1.2 billion
fine for selling personal data, so be very careful, or just don't do it. On top of that, apple
really values privacy. They do not want you to
sell any sort of user data. You are making an app, and you should really
be friends with Apple. Anonymized data about users and behaviors, trends and so on is okay, but any sort of user data is a no-go. A lot of hustlers in this space, they'll try to put some SDK into your app, and sell the data, stay away from that. And the good, doesn't get
in the way of the product. There is money to be
made in some categories. The bad, so many things,
especially on what you sell, so be careful here. All in all, this is a bit of a minefield, so if in doubt, don't do it. Here's the list of the full
monetization strategies. Very often you can combine things, and then you have a really good revenue. This way you monetize
different kinds of users. Some users are willing to pay for the app, others are willing to see ads. If you know other creative
ways of making money on apps, please let me know in the comments. If you want more content just like this, please consider pressing
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