Everything I Know About Making Money with Apps

With approximately 15 years of experience since creating the first application and earning from it, the feeling of seeing money appear from an app is incredibly rewarding. However, it is crucial to maintain control and understand the strategies behind it. For those looking to deepen their knowledge of the investment market, the UVP, Brazil's largest investment school, is highly recommended. You can find a link in the description below.

While the common advice is to build an Android app, the reality is that the App Store is where the significant money is made. Initially, the speaker believed that apps no longer generate substantial income and that passive income from them was nonexistent. However, after re-evaluating, the perspective has shifted, and it is now believed that earning money with applications is still very much possible.

Lifetime Value (LTV) is a critical metric for anyone aiming to make money with an application. It represents the total value a customer will bring to the business. For example, the Persua app currently has a subscriber LTV of 36€, meaning each acquired customer generates approximately 36€ on average. Given its 12€ monthly subscription and three-month existence, this suggests most subscribers continue for at least three months. LTV informs strategic decisions, such as opting for a paid upfront model versus a subscription based on profitability and user retention.

The Freemium model offers a product with basic functionalities for free, with an option to upgrade to a paid 'expert' version. In contrast, the Premium model requires payment from the outset, granting access to all features without limitations. This distinction is fundamental to how users interact with and pay for app services.

A hybrid approach involves offering a limited number of free credits, like Persua's 20 daily credits granting access to most core features, with paid options for unlimited use. Freemium's advantage lies in attracting more users by breaking down entry barriers, which is excellent for data collection. However, premium models often generate revenue faster due to a stronger initial conversion focus. The challenge with Freemium is depending on a potentially lower conversion rate.

Customer Acquisition Cost (CAC) measures the expense to acquire a new customer. Investors prioritize a low CAC, often achieved through viralization. Even organic growth, like 'building public,' incurs costs such as content creation time, which must be factored into CAC. For instance, paying 10 cents to acquire a customer is highly desirable.

Understanding CAC and LTV is essential for calculating Return on Investment (ROI). If acquiring a customer costs 10 cents (CAC) and they bring in 40€ (LTV) with a 1% conversion rate, the ROI is 30€. This calculation must account for taxes and other expenses. A 1% conversion rate is considered low; 4% is ideal for digital products. Realistic CAC varies by market, with advertising in the US potentially costing around 1.50$ to reach 1000 people, leading to a CAC of approximately 0.15 if conversion occurs.

The app market generates substantial revenue. For 2024, the Google Play Store estimated consumer spending at $55 billion, projected to reach $65 billion. Apple's App Store revenue has more than doubled in the last 4-5 years, reaching $33 billion in 2024. This demonstrates significant and growing financial opportunities within the app ecosystem.

It is crucial to understand your app's specific numbers by monitoring actions that lead to conversion, not just general user activity. Identifying high-converting features is key to deciding what remains in a basic free version versus what becomes a paid feature. For example, while Persua's 'stealth mode' is a powerful conversion feature, it might remain free, while others like session summaries or custom assistant creation with file attachments are clearly premium offerings.

Advertising (ads) is a common monetization method, especially for freemium apps. A past app successfully generated revenue through subscriptions, AdMob, and Apple Club. Historical methods also included Apple Club, which was acquired by Opera, and parallel app stores where users paid with phone credits to access applications, sometimes for premium versions.

The White Label model involves rebranding an existing application, essentially selling the same codebase with a new look and feel. This is useful when an app can be adapted with specific customizations to serve new markets or clients. It can involve an initial fee, a revenue share, or simply selling the product for the client to use in their own business. Opportunities arise when a core product can be tailored for different industries, each with its own CAC, LTV, and monetization strategy.

Reflecting on 15 years of app creation, valuable insights have been gained. Past media mentions include a reaction video on M1 Podcast to an interview given to SBT about an app, and content published on the Startup Life channel. These experiences highlight the journey and evolution of app development and monetization.

For deeper understanding of app monetization, Neto Marinho's video is highly recommended. Neto possesses extensive experience, including years as an Android Developer Advocate at Google, offering profound insights into the subject matter. Checking his content can fill any gaps left in this overview.

Remember to stay hydrated, like the video if you found it useful, and subscribe to the channel for more content that extends beyond just applications.