What’s the lifetime value of an app user?

Uncategorized  |  January 31, 2012  |  8 responses  

Free adsWhile working on some updates on my flashcard apps, I’ve been giving a lot of thought on how to better monetize the relatively good moment my flashcard app is having. More specifically, I’ve been wondering if you can reach a point in downloads after which having only a free (ad supported) full version makes more cents (pun intented).

Free vs. Paid

The never-ending debate between free vs. paid!

Since the beginning I had planned on publishing two versions, a limited free version with ads and a full paid version with no ads. I tested this for a while and made just a few cents a day from ads. I decided that using an ad network wasn’t really worth it, so I replaced the ad network for my own “in-house” ads which try to get people to buy the full version. After all, if my own ads could convince just one person per day to buy the app, I would be making a lot more than from the ad network.

However many things have changed since that first version, the biggest of which is the fact that this app has exceeded 100k downloads, with a little less than 1k new downloads per day.

This has made me totally rethink maintaining both a paid and a free version with ads. For example, if I were to give away the full version for free, with ads, I could potentially make money from that user for an indefinite amount of time, albeit a very small amount per person per use. The question I’m asking myself at this point is if the amount per user over their usage lifetime is more or less than the amount I make when he or she decides to buy the full version (which currently costs $2, of which I get $1.4). Just because this is such a small amount I tend to believe that a single user does make a developer more than $1.4 during their usage lifetime, although I have no data to support this.

 

Are there other benefits?

After giving this some thought, I’ve come up with some other benefits of only having a free version.

Cross promotion

If you have a large customer base for an ad-supported app, all of these customers suddenly become potential users of your next app via in-house ads (in-house ads are ads you create and show to your own users, via the ad network. Most ad networks will allow you to do this).

This means that if I were to make a full ad-supported version, the next app I make can be promoted to thousands of users for free. This potentially could make your user base grow even more, bringing in more money from ads.

Other markets

The amount of money I’m making from people whose devices are not supported by Google (do not have the Android Market app installed) is zero. Since these people cannot make purchases, I’m getting nothing from them (these people can’t make in-app purchases, either). This would not be the case if I had ads.

Also there are many different Android app stores with a decent following. Most don’t support paid apps, or if they do their payment process is complex and expensive. Uploading free apps is a lot easier.

Diversify to reduce risk

Every cent I’m currently making is paid to me by Google. If one of my apps were ever banned, or if my account were hijacked, or if I ever lost my good standing as an app developer I would lose 100% of my income. A single app can display ads from several ad networks, so this, along with publishing to several different app stores, is a good way to reduce this type of risk.

 

The veredict

I tend to be risk averse, so at the moment I’ve decided to go one step at a time. I’ll start by including ads into the limited free version to make sure the payments from the ad network work out smoothly. I can also use this to measure the income and see how it compares to the paid version. With a few month’s data I will be ready to make a final decision!