How HoursTracker earns five figures a month on the App Store
J Thoendell stashed this in Apps
Because HoursTracker has been in the App Store since before In-App Purchases were introduced, there’s a pay-up-front version of it still available in the App Store. Let’s see how the revenue distribution has changed over time:
The direction is pretty clear. That 36% revenue from the paid version is actually still quite high. Likely some customers are not finding the upgrade option in the app and are instead returning to the App Store to upgrade. When that’s fixed, I expect the split will be more like >90% In-App Purchase.
As an individual developer, I read many blogs and listen to podcaststo keep engaged and in-tune with the happenings in the industry. Recently I’ve had a few conversations with Jeremy Olson from Tapity, an app marketing whiz who does a great job sharing with other developers. We were discussing freemium business models and community morale when he suggested I write about my experience.
It is easy to accidentally give too much away for free.
Why would a user purchase an app if it does everything they need for free? Some of them might, just to support the app, but most will assume you’re making money some other way (ads? data-mining? VC?), or just not even think about it at all. And that’s fine, our business needs are not our customer’s problem. But still, I’m doing this instead of something else. Namely, taking a full-time job. If I’m not doing as well or better as I could with a job at BigCo, then I’m being irresponsible with my time. So, how do we make a living when our product must be permanently free to use?
Sell premium features vs have ads:
One approach is to put ads in your app. The free edition of HoursTracker shows banners from iAd. But for HoursTracker, I know I’ve done a great job when the user spends the least amount of time in my app and yet still tracks their time accurately. That’s not good for an ad-supported product. So, if I’m trying to make more money from ads, then I’ll be working against my customer’s needs and thus my own best interests. And, ads don’t encourage people to upgrade (since most of the apps they use are filled with ads: Facebook, Twitter, YouTube, Google), but they do create a perception that this free app is ad-supported. When ad revenue is less than 10% of total, that perception is not helpful.
Another approach is to sell premium features. For some apps, this is a great choice. Maybe you’re selling a painting app. You could probably sell extra brush types just by giving users a sample canvas to try them on and putting a big Buy button in the corner of the screen. But, if your app is differentiated by superior execution of core features, you don’t want to put any of those behind a purchase.
Carlos Ribas on pricing:
Pricing is dynamic. App Store dynamics change (search, rankings, policies), shoppers change, competitors change. Everything is constantly changing. Having an app in the store for so long, I’ve witnessed pricing trends in my app’s category. Sometimes, it was better to have a low price. I got more downloads for my app, and that helps visibility and generates more word-of-mouth. Other times, visibility is reduced for apps like mine, and a higher price is better to keep the app viable.The price elasticity of your app is affected by the environment in which it is sold, and that is always changing. Test, re-test, and then test some more.
My advice: Try a price reduction promotion to see if a lower price yields more revenue. If you can stomach it, let the discounted price stand long enough to get a feel for network effects. Try the opposite — check if increasing the price works better. Re-test previous pricing tests from time to time. What failed before could work beautifully now. Don’t get hung up on what you think the price should be. Do what works, and experiment often.