As an app developer, people ask me all the time, “how do you make money?” Seemingly every day an innovative new app finds its way to app stores as the answer to countless problems has become “there’s an app for that.”

In fact, according to a 2016 Statista report, Android users were able to choose between 2.2 mil-lion apps on Google Play while Apple’s App Store remained the second-largest app store with 2 million apps available. With so many applications at your disposal on a daily basis, is it any wonder that finding an audience to install your app — let alone make money — is difficult?

The majority of last year’s top-grossing apps didn’t cost anything to download. But, in a market where users increasingly expect their apps to be free to download, how do app creators actually create revenue?

When talking about profiting from an application that is free to download, it is all about leveraging the number of downloads. Mobile app creators are finding that even when they offer an app at a low price — less than a cup of coffee — they make less money than if they would have decided to offer a free mobile application with the option to make premium, in-app purchases (IAPs). As a matter of fact, an app’s download count can prove to be much higher when it is free and it allows consumers to decide whether they want to buy specific features.

It is becoming more apparent that consumers enjoy being able to choose whether they want access to more premium features or not instead of being forced into up-front investment. A us-er’s ability to test out an application and its features before investing any of their hard-earned money in it is becoming more important, and app creators need to pay attention if they want to survive in this nearly $90 billion industry.

Obviously, a free app serves as a way to attract customers and build up your audience, but just having a sizable audience does not make your app likely to drive a profit — you still need to convince users to become paying customers.

Many of the most profitable applications offer premium in-app purchases, which are ideal for either one-time or ongoing purchases — and I quickly learned that my app, Lumyer, an aug-mented reality app that allows users to put video and sound effects into their videos, selfies and live streaming, is no exception. Obviously, ongoing purchases are going to drive more serious profit than their one-time purchase counterparts, but with either option it is essential to develop premium features that entice users to come back and continue to spend their money.

For example, over the holiday season, Lumyer, Google Play’s #2 top-trending app of 2016, de-cided to test out a number of premium effects for 99 cents and the results were stunning for both Apple and Android users. Among Lumyer’s predominately millennial user base, made up of more than 10 million downloads globally, the premium holiday- and winter-themed effects were a huge hit. We found that more than seven percent of monthly active users purchased one or more premium services and that 20 percent of Android users completed more than one premium purchase, exhibiting their affinity for the premium effects.

Despite the short timeframe used for reference, we found that if a premium effect works once and we consistently bring fresh, new content that continues to add value, users will come back and spend more money in our app. In fact, during December 2016, our revenues were higher than our acquisition costs.

In the end, smart app monetization strategies demonstrate which monetization options are not only available but viable for your app. Developers need to be aware of the marketplace, trends, their competition and leverage knowledge of their audience and business to be able to cater premium IAPs to the right user experience. As we learned at Lumyer, offering a free app allows app creators to formulate a large, active user base and premium IAPs are a great way to gener-ate user engagement, loyalty and most importantly, revenue.


Diego Mortillaro is a three-time successful entrepreneur in the mobile industry. He is the CEO of Lumyer, an augmented reality app that was #2 on Google Play’s Top Trending App list in 2016 and is available on iOS and Android. With more than 10 million downloads in its first year, Lumyer has quickly become one of the most popular photo and video enhancement tools avail-able and is grabbing the attention of brand marketers thanks to its interactive capabilities.