Article updated on September 6, 2024
The profitability of a mobile application depends on many factors, but it can reach significant levels, with profit margins ranging from 20% to over 70%, depending on development costs, marketing spend and user-generated revenue.
Mobile application profitability - How do they generate revenue?
Mobile applications generally generate revenue through a variety of monetization strategies.
A commonly used method is the integration of advertisements within theapplication, where users see ads. Developers receive revenue from advertisers based on the number of impressions, clicks or user interaction with these ads.
Another approach is integrated purchasing, where users can acquire virtual goods, advanced features or subscriptions directly within theapplication.
Freemium applications offer a free basic version and encourage users to upgrade to a paid version offering additional features or an ad-free experience.
Some apps generate revenue by selling user data to advertisers, although this practice raises privacy concerns.
Others apply affiliate marketing by promoting products or services and earning a commission on sales made through theapplication.
Finally, some applications require a one-off payment to be downloaded and used.
These different monetization strategies enable developers to generate revenue while offering a diverse range of applications and services to users.
What is the pricing model?
Pricing model refers to the method or structure used by a company orapplication developer to determine how much and how well users pay to use their products or services. In the context of mobile applications, several pricing models are commonly used:
Freemium models
The freemium model offers a free version of theapplication with paid options for additional functionality. This attracts a large number of users while offering incentives to pay for enhanced services.
Users can access basic functionality free of charge, but must pay for advanced features, additional content, or exclusive benefits. This model is effective in converting free users into paying customers.
In-App advertising templates
Free apps with in-app advertising generate revenue by displaying ads to users. Developers earn money from impressions, clicks, or user actions on ads.
Advertising formats include banners, interstitials, rewarded videos and native ads. In-app advertising is a particularly useful source of revenue for applications with a high volume of users.
Subscription models
Subscription-based applications charge recurring fees for access to content or services. This model is common in streaming applications, news, and productivity tools. Subscriptions can be weekly, monthly or yearly, offering a stable and predictable revenue stream.
Users are more likely to stay engaged and continue paying if theapplication regularly offers new content or updates.
Pay-Per-Download models
In this model, users pay a one-off fee to download and use theapplication. Although less common, this model can be profitable for specialized or high-value-added applications. Pay-per-download applications need to justify their initial cost through unique features, exclusive content, or an exceptional user experience.
This model eliminates the need for recurring revenues or in-app advertising, focusing instead on a premium user experience.
Monetization strategies
In-App Advertising
Apps can generate significant revenue by displaying ads. Formats include banners, interstitials, rewarded videos and native ads.
To maximize revenue, it's essential to strike a balance between ad frequency and user experience. Well-integrated, non-intrusive ads can keep users engaged while generating revenue.
Collaboration with quality advertising networks can also optimize earnings.
In-App Purchasing
In-app purchases allow users to buy virtual objects, premium features or subscriptions. This model is particularly popular in mobile games. Users can purchase virtual currencies, extra levels, cosmetic items or performance boosts.
In-app purchases are a flexible and scalable source of revenue, allowing users to spend according to their preferences and needs. Special offers and promotions can stimulate purchases.
Subscriptions
Subscriptions offer a stable, recurring revenue stream. They are used by applications offering ongoing content or services, such as streaming platforms and productivity tools. Subscriptions can include free trials to attract new users and convert them into paying subscribers.
The key to successful subscriptions is to maintain a steady stream of high-quality content or features to justify recurring fees.
User data sales
Some applications sell anonymized user data to third parties. This practice is controversial, but can be an important source of revenue. The data can be used for market analysis, targeted advertising or consumer research.
It's crucial to comply with privacy regulations and guarantee transparency with users regarding the collection and use of their data.
Affiliate marketing
Apps can promote third-party products or services and earn commissions on sales generated via theapplication. Affiliate marketing can be seamlessly integrated, recommending relevant products or services to users.
Affiliate links and strategic partnerships with brands can create monetization opportunities without detracting from the user experience. This strategy is effective for apps with a strong influence and engaged audience.
Profitability indicators for a mobile application
Mobile application development costs
Developing and operating a mobile application involves expenses such asapplication development, maintenance, hosting, marketing and customer support.
| Expense category | Description | Estimated cost (in EUR) |
| Initial development | ||
| iOS/Android development | Development costs for each platform | 20,000 - 50,000 per platform |
| UX design | User interface design and user experience | 5,000 - 20,000 |
| Infrastructure | ||
| Hosting and servers | Cost of leasing servers and cloud services | 1,000 - 10,000 per year |
| Databases | Database configuration and maintenance | 500 - 5,000 per year |
| Testing and quality assurance | ||
| Functional testing | Manual and automated tests to ensure correct operation | 5,000 - 15,000 |
| Compatibility tests | Tests on different devices and OS versions | 3,000 - 10,000 |
| Maintenance and updates | ||
| Bug fixes | 2,000 - 10,000 per year | |
| Functional updates | New features and regular updates | 5,000 - 20,000 per year |
| Marketing and acquisition | ||
| Online advertising | Marketing campaigns on social networks, search engines, etc. | 10,000 - 50,000 per year |
| App Store Optimization (ASO) | Optimizeapplication visibility on download platforms | 1,000 - 5,000 |
| User support | ||
| Technical support | Cost of customer support and technical assistance | 5,000 - 15,000 per year |
| Legal and administrative | ||
| Licenses and fees | Registration fees for App Store, Google Play, etc. | 100 - 500 per year |
| Compliance and regulations | Costs related to compliance with regulations and laws (e.g. RGPD) | 1,000 - 5,000 per year |
| Total | 58,600 - 245,500+ |
Initial development
Initial development includesapplication design, programming and testing. Costs vary according to the complexity and functionality required. Well-planned and executed development ensures a solid foundation for theapplication, with intuitive functionality and a pleasant user interface.
Development teams can include designers, developers, testers and project managers to ensure a high-quality product.
ExampleThe initial development of an application like Uber can cost several hundred thousand euros, including design, development, testing and launch.
Ongoing maintenance, feature updates and bug fixes add to recurring costs.
Maintenance and updates
Once theapplication has been launched, regular updates and maintenance are required to correct bugs and improve functionality. Ongoing maintenance ensures that theapplication remains compatible with new versions of operating systems and meets user expectations. Updates can also introduce new features, improve security, and optimizeapplication performance.
Hosting and cloud services
Applications require hosting services to store data and provide rapid access to users. Costs depend on usage and storage requirements. Cloud services offer scalability and flexibility to handle fluctuations in user traffic.
Cloud service providers such as AWS, Google Cloud and Microsoft Azure offer a variety of solutions to meet the specific needs of mobile applications.
ExampleA video application like YouTube requires robust servers to manage video storage and streaming, resulting in high infrastructure and bandwidth costs.
Marketing and user acquisition
Marketing and user acquisition are essential to attract new users and make theapplication known.
Strategies include online advertising, search engine optimization (SEO), social networking campaigns and influencer partnerships.
To ensure sustainable growth and profitability of a mobile application , investment in marketing must be balanced with the revenues generated.
Example: A travel application like "Airbnb" invests heavily in online advertising, influencer marketing campaigns and partnerships to attract new users. These costs can represent a significant proportion of the overall budget.
Customer support
Good customer support is crucial to solving user problems, gathering feedback and maintaining high satisfaction levels. Costs can include support teams, ticket management tools and live chat systems.
Effective customer support helps build user loyalty and reduce churn, improving the profitability of a mobile application .
ExampleAmazon" must offer 24/7 customer support for its shopping application , including support staff, ticket management tools, and return and refund systems.
When does a mobile application become profitable?
Dead center
A mobile application becomes profitable when its total revenues exceed its total fixed and variable costs.
In simpler terms, it begins to generate profits when the money it earns from integrated purchases, advertising, subscriptions, or even the one-off purchase price becomes greater than the expenses incurred for development, hosting, staff salaries, marketing and other operating costs.
This means that the mobileapplication has reached a point where it covers all its expenses and begins to generate revenue. neutral.
Let's take the example of a mobile application , where fixed monthly costs typically amount to approximately €10,000.
A rough estimate of a mobile application 's break-even point would then be around 10 000 € (as this is the total fixed cost to be covered). If theapplication, for example, uses a subscription model charging 2.99/monthit would need about 3,345 active subscribers per month to break even.
It should be noted that this indicator can vary widely depending on factors such as platform, marketing strategy, monetization model, operational costs and competition.
An application with many features and high development costs would obviously have a higher break-even point than a simpler application requiring less capital.
What is the average revenue of a mobile application ?
The average monthly revenue of a mobile application can vary significantly, typically between €1,000 and €300,000, depending on a number of factors such asapplication type, features, user base and monetization strategy.
Profitability indicators for a mobile application
1. Average Revenue Per User (ARPU)
- ExampleA mobile game application like "Candy Crush Saga" generates revenue by selling extra lives and bonuses. If 10 users generate €100 in revenue in a month, the ARPU would be €10.
2. Cost per acquisition (CPA)
- ExampleFor a fitness application like "MyFitnessPal", the CPA includes the cost of advertising on social networks, Google Ads promotions and so on. If theapplication spends €1,000 on marketing to acquire 100 new users, the CPA would be €10.
3. Retention rate
- ExampleA streaming application like Spotify tracks how many new users continue to use the service after 30 days. If out of 100 new users, 40 continue to use theapplication after one month, the retention rate is 40%.
4. User Lifetime Value (LTV)
- ExampleFor an application like "Tinder", if an average user spends €30 on subscriptions and additional purchases for the duration of their use, then the LTV is €30.
A mobile application becomes profitable when its revenues exceed its total expenses. This is measured by comparing the LTV of users with the CPA.
- ExampleIf "Netflix" spends €10 to acquire a user (CPA) and that user generates an average of €50 in revenue over the course of his or her subscription (LTV), theapplication is profitable.
Margins and profits
Gross margins
Gross margins indicate the profitability of a mobile application before indirect expenses, such as marketing and customer support. They are calculated by subtracting direct costs from revenues. High gross margins reflect effective management of production costs and substantial revenues.
Mobile applications generally have an average gross margin ranging from 70% à 80%.
This means that if your mobile application generates 20,000 per monthyour gross profit would be around 75% x 20 000 € = 15 000 €.
Let's explain with an example.
Let's assume a mobile application with 1,000 userseach spending 20 € in integrated purchases, generating total revenue of 20 000 €.
However, theapplication incurs costs such as development, maintenance and mobile app store fees.
Assuming these expenses amount to 5 000 €gross profit for the mobileapplication would be 20 000 € - 5 000 € = 15 000 €.
In this case, the gross margin for the mobileapplication would be 15 000 € / 20 000 € = 75%.
Net margins
Net margins take all expenses into account, giving a clear picture of the net benefits generated by theapplication.
They are calculated by subtracting all expenses (direct and indirect) from total revenues. A positive net margin is a strong indicator of the profitability of a mobile application .
Mobile applications generally have an average net margin ranging from 30% à 55%.
In other words, if your mobile application generates 20,000 per monthyour net profit could be around 6 000 €or 30% of total income.
Let's continue with the same example for consistency.
If our mobile application has 1,000 userseach spending 20 € in integrated purchases, total revenue would be 20 000 €.
Direct costs, as indicated above, would be of approximately €5,000.
In addition, the mobileapplication faces various indirect costs such as marketing, administrative expenses, research and development, and possibly office space. Let's assume that these additional expenses total 4 000 €.
After deducting direct and indirect costs, the mobileapplication 's net profit would be 20 000 € - 5 000 € - 4 000 € = 11 000 €.
In this scenario, the mobileapplication 's net margin would be 11,000 divided by €20,000or 55%.
Threats to profitability
Competition
Intense competition in the mobile applications market can reduce market share and profit margins.
Developers must constantly innovate, offer unique value and maintain an exceptional user experience to remain competitive and ensure the profitability of a mobile application .
Evolving user preferences
User preferences are changing fast, and applications need to adapt to stay relevant and profitable.
Developers need to monitor market trends, gather user feedback and regularly update their applications to meet changing expectations.
User acquisition costs
Increasing user acquisition costs can be detrimental to the profitability of a mobile application . Developers need to find efficient, cost-effective ways of attracting new users, such as viral marketing, strategic partnerships and optimized advertising campaigns.
Case studies
Utility applications
Utility applications, such as task managers, productivity tools and financial management applications, show how practical functionality can attract a wide audience and generate stable revenues.
For example, a budget management application can offer basic functionality free of charge and advanced analysis via a premium subscription, thus increasing the profitability of a mobile application .
Productivity applications
Productivity applications, such as project managers and note-taking applications, demonstrate the viability of subscription models for long-term profitability.
By offering collaborative features and integrations with other business tools, these applications can build user loyalty and ensure recurring revenues.
Gaming applications
Game applications exploit in-app purchases and advertising to maximize revenue. Mobile games can offer virtual objects, extra levels and exclusive benefits for a fee, while displaying ads for non-paying users.
This combination of monetization strategies optimizes the profitability of a mobile gaming application .
How profitable is a mobile application ?
Here are some more precise estimates of the potential income you could generate as a mobile application owner, based on different monetization models:
- Advertising :
- Cost per thousand (CPM) Revenue per thousand ad impressions can vary from 1 to 10 USD. If your application generates 100,000 ad impressions per day, you could earn between 100 and 1,000 USD per day.
- Monthly income For an application with 100,000 ad impressions per day, this would represent between 3,000 and 30,000 USD per month.
- In-App Purchases :
- Conversion rates About 1-5% of users make integrated purchases. If you have 100,000 monthly active users and 2% of them spend an average of USD 10 per month, you could earn USD 20,000 per month.
- Paid downloads :
- application price If your application sells for USD 2 and is downloaded 10,000 times a month, you could generate USD 20,000 a month, minus platform commissions (generally 30%).
- Subscriptions :
- If you offer a monthly subscription of USD 5 and have 5,000 subscribers, you could generate USD 25,000 per month.
- Freemium :
- Around 1-10% of free users upgrade to the premium version. If you have 100,000 free users and 5% upgrade to a $5 premium version, you could earn $25,000 per month.
Practical example combining several models
Let's imagine an application with :
- 100,000 monthly active users.
- 10,000 paid downloads at USD 2 per month (USD 20,000).
- 5,000 subscribers at USD 5 per month (USD 25,000).
- 50,000 ad impressions per day at a CPM of USD 5 (USD 7,500 per month).
- 2% of users make integrated purchases for an average of USD 10 per month (USD 20,000).
Total monthly income :
- Paid downloads: USD 20,000
- Subscriptions: USD 25,000
- Advertising: USD 7,500
- Integrated purchasing: USD 20,000
Total: USD 72,500 per month.
These figures are estimates and may vary considerably depending on many factors specific to your application and market.
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