Woman and creature look at a phone shaped graph going up and to the right Image credit: undraw.co

Image credit: undraw.co

Can I make Money from my App?

How do I get people to download my app? How do I get folks using my app to buy what I’m selling? What is my app is a flop?

These are questions that any entrepreneur, business owner or developer should be asking themselves before they start building their new app. In this fourth article in my series How to Build an App I’ll be giving you answers to these questions.

Black businessman with briefcase and suit jacket, walks through group of upward trending arrows. Image credit: blackillustrations.com
Before even starting development on your app, think about how you make it a success. In whichever way “success” makes sense for your app.
Image credit: blackillustrations.com

To get the context for this, including what kinds of apps there are, how apps work and how you build an app, refer the previous articles in the series.

Let’s jump right in.

They will. Oh Really?

Often when I’m coaching start-ups I hear people say: then our users will download our app and they will…. 

I just stop them right there. Hold up my hand and stop the mid-speech.

Our users will download our app then they will…

Every beginner app entrepreneur ever

At that point I just want to grab that start-up founder by the lapels, stop them, and ask them.  “‘they will…”. You just said they will.

This is the number one mistake that new app owners make about the app when they’re designing it.

Before you even start building, while you’re still working with your UX designer, and your product owner to hash out the basic shape of your app you need to answer this question: why will my users do anything?

Your story about how your app succeeds needs to start with “Joe, who is a X, wants to do Y” where Y is something unrelated to your business “and so he Z” where Z is a story about how Joe even connects with your app in the first place.

Its easy if you are building an app for your bricks & mortar store because Joe is in your shop, and you give him a voucher for 20% off if he downloads & uses your app today. Otherwise, why would customers even find your app, let alone use it?

Start with your customers. Ask what do they want to do?

The mistake often happens because owners of apps have a lot of functionality that they want to put in.

Often they have a website packed full of “valuable” stuff that they want the customers to engage with. When they start building an app the first thing they want to do is cram all of that stuff into the app as well.

Successful apps are the ones that work for what customers want to do. Often that has nothing – at least initially – to do with what you’re trying to force feed them via your app.

A good way to understand how to avoid this mistake is to see how successful apps manage to fit with what customers are trying to do, and thus wind up making money for their owners.

So before we work out how to fix this mistake let’s just look at some of the ways that Apps make money.

Money is not the only measure of success by far, but its a good place to start.

Monetisation in Apps

Let’s think of two broad categories for apps that succeed in making coin for the folks that own them:

  • Firstly those that provide value inside the apps themselves, and
  • Secondly those that are commerce enablers for businesses.

Examples of the first kind abound, and were part of the initial app gold rush in 2007 onward. They could be what we think of when we think of some of the most popular “apps”, like Instagram or Twitter.

These of course are well known as mobile apps, but are now massive web presences as well. Both were mobile apps first however: Twitter because SMS or “texting” got us interested in communicating by short messages. And Instagram because we all have a camera in our pocket now.

Those kinds of apps like Twitter have public users who will get together on the platform to share photos or personal messages, and while they’re there they see advertisements that the platform (Instagram or Twitter) shows to them.

We are also familiar with mobile games like Candy Crush, or apps such as Duolingo that teaches you languages. Here the value that lures the folks to the platform is some in-app offering – like learning a language, or playing a game.

Free to Play Apps

So if you’re the app owner, and you’re not using your app to enable some commerce outside the app then you have to make money right on the customers phone itself. And when customers don’t want to pay a cent, you have to do that some other way than getting them to pay up-front. Enter the “free to play” apps.

Ads on Twitter are shown inline with posts made by platform users.
Screenshot of Twitter (c) 2016 used under fair use.

What’s common to Twitter, and DuoLingo is these apps make money from the actual app having some value that it delivers to its users inside the app itself.

Free apps that generate revenue from the app directly survive by acquiring a wide funnel of incoming users, retaining some and then monetising them.

The critical strategy for this kind of free app is to have a wide funnel of incoming users, who go through the classic cycle of acquisition, retention and monetisation. This area is huge and there’s plenty of great books & resources around it. Some of the best ones have been written by game monetisation experts but they apply just as well to non-game apps. The Free-to-Play Toolbox is an excellent place to start.

“Free” is a marketing strategy, not a business model. In fact, it’s not even a marketing strategy.. [for your app]. You need to figure out how to get users (free can help), how to hold onto them and ultimately, how to make money from them.

The Free-to-play Toolbox, Rob Fahey & Nicholas Lovell

It’s very common to have the customers pay for that value by ingesting advertisements. Other possibilities are subscriptions with a free month, which have become hugely popular, and in-app economies, like Trello Gold.

Premium Apps

In yet other cases customers can upgrade from the free to the premium version by completing an in-app purchase also known as an “IAP” or by buying the “premium” app outright in the App Store.

I have bought a few premium apps on mobile, and I have no doubt you may have a few favourites too. Its possible to do OK with selling apps up front.

In fact Apple would really prefer that we went back to this way of doing things. Its much better for their customers, and they’d save a ton of pain, dealing with people who complain constantly that their child spent a ton on in-app-purchases when they weren’t looking.

The reality is that app pricing is a race to the bottom, with everyone searching for “free” solutions for almost every niche of value based direct revenue app. That giant free-to-play funnel of popular apps keeps gobbling up all the customers and making it very hard to break even with a premium app these days.

The way to do it, is to make something absolutely gorgeous, and truly excellent, then win via App Store listings, and positive reviews. This is possible but takes a long time, and lots of user-testing, UX genius, and endless polishing.

Monetisation outside of Apps

Apps also can make money indirectly, by speeding up, enabling and making more ubiquitous the every day actions involved in business.

Apps like Uber, AirBnb and Airtasker enable us to pay for services like transport or the home handyman.

The local government, the tax office, post office and big corporations like Facebook and Google often have apps to help folks engage with various parts of the business.

  • Workplace by Facebook iPhone app App Store listing screenshot. App is (c) Facebook. App Store is (c) Apple.
  • Australia Post App for iPhone app screenshot. App is (c) Aust Post
  • Google My Business App for Android Google Play store screenshot. App is (c) Google.
  • Facebook Pages Manager app for iPhone App Store listing. App Store is (c) Apple. Facebook Pages Manager is (c) Facebook
  • Apple Music app for Android screenshot. App is (c) Apple

Smaller businesses often use web apps to manage restaurant menus, online stores and appointment bookings.

What all these apps have in common, where the folks interact directly or indirectly with the business, is that tasks are at the core of success for these apps.

What this means is that for you to make money from your app, see your app to be a success, is to ensure the folks who are using your app can complete tasks that they already had in mind when they were downloading the app.

Commerce Based Apps Succeed when Tasks are Completed

What do I mean by a task? Tasks don’t sound very exciting or lucrative do they?

We use the word tasks, because it works with task based analytics. Will cover analytics in full in the next video, but what we mean is measuring whether or not a user can complete one end-to-end transaction within your app and successfully achieve what they were trying to do.

Let’s imagine your business has a special promotion for summer or winter or some new seasonal holiday, and you send out promo codes to your customers to take advantage of the offer. A task would be for a customer to take that code,  shop on your app, and apply the code to their account.

A task would be for a customer to take an emailed code,  shop on your app, & apply the code to their account in-store.

The task starts when the customer sees the code in the email, the first action might be to manually open the app from their phone after seeing the email on the desktop; or it might be that they already were reading the email on their phone went to the website, and then from the website were prompted to open the app which they then did. 

Task Completions are Key

From there the user opens their profile, And paste the code into a form, and press submit. At this point a wait spinner may be displayed, and then finally a message saying that the code has been applied and then a $10 discount will appear on the next purchase.

Don’t leave customers watching a wait spinner. Give them the value, and do it fast or they’ll leave & try somewhere else. Image credit: undraw.co

I’m sure you can imagine tasks that customers would do all the time when engaging with your business.

The most important thing with tasks is that even if a customer can get almost all the way through the task, if they can’t complete it then you don’t make that sale. It might not be a literal sale, but it’s some interaction where the customer receives value, and engages with your business.

Getting Tasks Right Starts with UX Design

As the owner of the app, you need to work with your user experience designer to come up with a workflow that can demonstrate to the customer how to complete the task they want to do, and how to understand that they have successfully completed it. You should also take into account the possibility that something goes wrong, and in that case your design should include messages that will allow the customer to try to recover from the problem.

The product owner is constantly checking that key tasks can be worked through to completion in the app. Image credit: undraw.co

During the app development process, each iteration, the product owner should be working to check that these tasks can be completed inside of the app. If a feature that has been implemented by the development team is claimed to help a user complete a task, then that should be able to be verified by trying it out in the app.

The product owner checks if a coding task hasn’t been completed, and will push it back to the developers; if an end user cannot complete the task.

It doesn’t matter how many fancy animations, or other whizz-bang things are happening on screen; the coding is not finished if the customer cannot complete their end-to-end task.

Rule Number One for App Monetisation

So here is the first rule for making money from your app: identify the top 3 tasks that you want customers to engage with through your app; then absolutely nail the user experience for those tasks and insure that throughout development of the app those tasks are tested end to end to make sure they work and the value was delivered both to the customer, and to your business.

With apps that feature customers engaging in a monetary transaction inside your app a critical step is ensuring trust. Customers will be looking for all the hallmarks that let them know the money is safe, and the goods that they are paying for will be received by them. This is part of the task. If the customer feels unsafe, and doesn’t trust the app then something about the user experience is wrong.

Can I trust that my transaction went OK? Image credit: undraw.co

To ensure that tasks are working, conduct acceptance testing prior to your release where each step of the end to end task is tested out on a device like a phone or an iPad – not on a computer. Your developer must demonstrate to you that the entirety of the task can be completed by the customer. 

You should do this acceptance testing with an actual customer figure, someone who hasn’t been part of the development of the app. Ask them to complete the task described in plain English and see if they can do it in the app. For example, ask them to apply the code that you’ve received in the email to your user account in the app. If they run into problems then the app may need to be fixed.

In-App Purchases

In the case of in-app purchases (IAP’S) the Apple App Store has its own Apis for these which can make these transactions very secure. Likewise Google has its own commerce APIs. Both of these require custom native programming in the app to work.

Store API programming is tricky and customers credit cards are at stake.
Image credit: undraw.co

Apple in particular is a stickler for getting these right. If a customer buys something in your app, which they get to keep – for example upgrading to a premium version in the app, then you must provide for restoring that purchase if the app is reinstalled.

Retention Rules

The second rule for making money with your app is stickiness. You need to keep your customers in your app. You need to have the making longer sessions, and you need to provide reasons for them to come back to your app after they’ve closed it.

The number one reason why customers uninstall apps is because they don’t see any reason to keep using them. Often when customers upgrade their phones they will manually install apps so they can get rid of ones they haven’t been using. Android and iOS can even clean up apps that are not being used.

Your job as an app owner is to ensure folks who have downloaded your app have a reason to come back to it

So your job as an app owner is to ensure stickiness, by ensuring that those who have downloaded your app have a reason to come back to it. You need to think from their point of view.

Folks who have downloaded your app should feel like they are special, and that they have special insight, or privileged access to your business. If your business has Street premises, then there should be prominent signage asking folks who have the app installed to use it to get special discounts, jump queues or gain other benefits.

On your app website you should have carefully crafted open in app linkage so that customers can continue their transactions from the website into the app.

Application Deep Linking

Marketing promotions that utilise email should open automatically in the app if possible and include special promotional incentives to get app owners users to click through.

Although it is extremely easy to annoy and uses the careful and judicious use of notifications is also a great way to have users return to the app.

You need to make sure that the notifications have been asked for specifically by the user, for example “notify me when an out of stock item comes back into stock”.

When a user gets a notification it should be seamless for them to click through into the app and continue their task as cued by the message.

Boots on the Ground

The final point that I’ll make in this article about using your app to generate revenue for your business, is that you need to have a really good understanding of how your business operates and how your customers gain value from it. This applies even if you believe that the app itself will generate revenue for you, like say Twitter or Airbnb.

There’s a lot to unpack here so I’ll take a few steps to get to my point. To do that let’s understand the concept of boots on the ground. 

Amazon Treasure Truck, Seattle, WA 2016 (c) Sarah Smith
Amazon really understands boots on the ground.
Amazon Treasure Truck, Seattle, WA 2016 (c) Sarah Smith

Think about a regular business like a car wash. Here you might own a car wash and employ eight people to wash cars, while you yourself talk directly to customers, take credit card payments to handle all of the business like advertising and signage. As the business grows you can probably manage for a while just by yourself but for each time the number of cars doubles you need to have double the number of people washing cars. 

Businesses that Grow may need more Service Staff located where Customers Are

Once the business grows to a certain point you’ll need to have additional car wash real estate and probably extra hands on deck to speak directly to customers who are coming to the premises. These people that are working in the business I call boots on the ground.

Boots on the ground is when people have to be in the same location as the customer to assist them in getting the value from the business.

Something that’s often not understood is that in apps like Airbnb and Uber boots on the ground is a really big part of the operation of the business as well as the app. In fact it’s often much bigger. We only see the app but behind-the-scenes there’s a huge support operation of boots on the ground.

Uber has to employ people to on-board new drivers, handle online complaints, and deal with logistical issues. Those people have to at least be in the same time zone and very often in the same geographical location. For AirBnb it’s the same. There is very often a need for support folks who speak the same language as the users involved in any complaint or issue.

Okay so now we understand boots on the ground, how does that affect your business?

A Real-life Story of App Entrepreneurs

One group of entrepreneurs I worked with during my start-up years were extremely resourceful and talented young app developers. They came up with an app that involved trades people taking photographs inside their app and communicating with the customers of those trades people.

Tradespeople that wanted to work with my friends app had to be walked through setting up. Image credit: undraw.co

The assumption of the app was that this would help the trades people communicate to their customers that the work had been completed in a trustworthy & high-quality way via the photographs. The app was successfully built, but my entrepreneur friends found that the trades people did not want to start working with the app by themselves. 

My entrepreneur friends found that the tradespeople would download the app but then did not know what to do next. They had several trades people download the app, and they had to go and visit them personally and work through with them as they took the photographs and engaged with their trades customers.

My entrepreneur friends underestimated how much cost in boots on the ground was required to get the app working.

This is part of the “they will” problem. People who have not experienced an app before, that are new to an app, will often need help to get started.

They may need to be tutorials online, support staff, or people working with them in person to get started with the app.

Typically when we come to know about a successful app it’s already been in the store for a good 18 months or more, all the kinks have been worked out and it has a large user base. At this point many people already know how to use the app because their friends use it, and it’s gone through several iterations of user experience updates.

Eighteen Months

However the folks who are new to building apps look at these mature App Store successes and think that their own app will just spring into being on the first launch, and new users will use the app just like the thousands of other users of say Instagram or Twitter. Unfortunately this could not be further from the truth.

Your app. It’s everything right now. But imagine it wasn’t there & think of all the customers you are doing business with. Image credit: undraw.co

You may require many boots on the ground for some time before your app really starts to get traction and stickiness with your users.

A big part of the business effort around the app which has nothing to do with the app itself is of course marketing.

Take your app out of the picture for a moment, and just imagine doing business directly with all of the customers you imagine will download your app.

How will you reach them?

How will they respond on, for example Twitter?

How will you handle your apps social media, or negative app reviews if they don’t like the app?

Imagine there’s no app. You’re just trying to do business directly with all those people.

This is the scale of what you’re trying to do. This is a business problem that you need to solve before you can think about how your app will succeed. 

Successfully promoting your app is hard legwork, and it’s a big part of the boots on the ground process which means more human hours of work that don’t get assisted by any magical digital process just because you’re working with an app.

Mark your calendar for eighteen months. That’s how long you’ll need active users before your app is mature enough for recommendations to be a factor.
Image credit: undraw.co

Count on eighteen months before your app is mature enough before you start getting an effect where people are recommending it to their friends, and relying on it.

The apps you are looking at and using as inspiration in the App Store? They’re probably these ones that are at least 18 months old.

The Gold Rush is Over

Back when the App Store and Google play store first launched, putting an app up, would certainly result in people downloading it because there are relatively few to choose from. These days there are thousands and thousands of apps being submitted every single day.

Your new app will quickly be submerged under the torrent of other app submissions. Marketing your app to your customers is part of marketing any other sector of your business and has to be treated the same.

App Store listings are no longer a place to get discovered just for showing up. Image credit: undraw.co

A key success strategy for your app is to limit the boots on the ground factor, reduce your marketing spend and the amount of work hours you have to do by doing a very small launch 1st to a manageable number of customers.

This can be what we call a soft launch where the app is placed into the App Store, and you manually approach your customers and place the app in their hands, just like my entrepreneur friends had to with their trades persons.

Consider a Soft-launch for your App

The soft launch process will allow your customers to experience your app, and you can witness that happen firsthand, recording any fixes that you immediately realise you need to make. Also I cannot recommend highly enough throwing away all the features that you planned to integrate into the app and just select two or three of the most critical features that you require for the app.

Simple apps with well chosen feature sets are the most successful money making apps.

What Do we Know Now?

Alright. To close out and sum up this article let’s go over what we’ve learned.

  • Think: why would the customer do anything? Especially, why would they download your app?
  • There are a couple of different kinds of apps:
    • ones that direct make money inside the app
      • through in-app purchases, adverts, subscriptions or
      • up-front “premium” in the App Store or Google play store;
    • and commerce apps that help customers engage with a business.
  • Apps that directly make money include free apps; which rely on a funnel and a conversion process. Premium apps are still a thing, but hard to make bank.
  • Apps that engage with an existing organisation or business at least have a pre-existing customer relationship to leverage.
Apps are a business, so if you already have a business leverage that customer relationship into your app. Image credit: undraw.co

But apps of both of these kinds need to be sure of one thing for success: that customers can complete tasks.

  • To make money from your app
    • ensure that customers can complete the tasks in the app
      • complete means all the way to the end.
    • When customers complete a task that gives them value
    • they can then be ready to give you value.
  • To achieve this you must use the skills of your user experience designer
    • Have your product owner and UX designer working
    • to absolutely nail these task based designs.

At all costs avoid the mistake of just simply exposing functionality from your website.

  • Do acceptance testing on your app before release with folks who have never use the app before, to check that your customers will be able to achieve those tasks.

Understand boots on the ground.

Think about the regular business related aspects of doing commerce with all of those customers – especially imagine marketing to all those customers, and how you will get those customers to come and use your app.

  • Solve this marketing problem the way you would any marketing problems for your business.
  • Imagine that there was no app and you had to deal directly with the customers.
    • What transactions would have to happen?
  • Know how many people you will require to support your app when you release it.
    • Release via a soft launch to a very small hand curated group of customers that you can directly work with.