Can You Make Passive Income With a Mobile App?

If you’re thinking about developing a mobile app, one of your biggest goals could be generating passive income; in other words, creating a stream of revenue that allows you to keep making money, while requiring little to no time or money from you in the meantime.

Is this a viable strategy for entrepreneurs hoping to accumulate wealth? And if so, what’s the best way to approach it?

The Myth of Passive Income

First, you should understand that “passive income” in its truest sense is something of a myth—or at the very least, the name is misleading.

Passive income strategies tend to fall into one of three categories, all of which violate the core principle in some way:

·         Strategies that require ongoing effort. These strategies claim to be passive, but they require ongoing effort to maintain. For example, you can invest in rental properties to generate cash flow, but you’ll still need to repair, maintain, clean, and manage the property (unless you hire a property management company).

·         Strategies that require initial effort. Most passive income strategies at least require a massive amount of initial effort. For example, you can write an eBook that you sell for $2 per copy, generating monthly revenue from new purchases—but you still have to invest the time necessary to write the book.

·         Strategies that require initial capital. Other strategies require significant upfront capital before you can take advantage of them. For example, you can invest in dividend stocks to generate recurring cash flow, but you’ll need to work to earn the initial capital for your purchase first.

Passive income via mobile apps is a strategy that falls into all three categories. You’ll need to invest time in maintaining and updating the app if you want it to keep making money. You’ll need to invest a lot of upfront time designing, developing, and marketing the app. And of course, you’ll need some upfront capital to get things done in the first place.

App Monetization Strategies

Assuming you’re willing to fulfill these requirements, mobile apps can be a useful tool for generating income. In fact, there are many different strategies you can use to monetize your app, and in some cases, you can use multiple strategies simultaneously:

·         Initial purchase price. You could generate income by selling your app; for example, you can charge users $1.99 to download your app. This may seem like the most straightforward and reliable way to make money. However, more than 90 percent of mobile apps in Apple’s App Store are free, and as much as 98 percent of all global app revenue comes from free apps. If you’re interested in tapping into the biggest chunk of the market, a free app might be a better choice.

·         Advertisements. One of the most common ways to generate income with a free app is with paid advertisements. You’ll make money based on how many people see and/or click the ads you host—just make sure the ads aren’t so obnoxious that they compromise the user’s experience.

·         Affiliate links. You may also use your app to endorse the work of others in some way. With the use of affiliate links, you’ll make money based on how many people you persuade to complete a purchase on an external site or platform.

·         Microtransactions. Many mobile games make use of microtransactions—a business model where users can use small amounts of money to purchase virtual goods. For example, they may be able to unlock a new level or a special “skin” for a character by paying a dollar. Individual payments are typically small, but in high volumes, they can be responsible for a massive stream of income.

·         Other products and services. You can also use your app as a platform to sell other products and services you offer. For example, you might use it to promote a book you’ve recently written, or you can sell merchandise related to the app.

Making Your App Valuable

Of course, all of these strategies rely on the popularity and perceived value of your app. If users aren’t interested in your mobile app, it’s not going to make money, no matter how good your monetization strategy is.

These are some of the most important hallmarks of effective mobile apps:

·         Utility. Your app should provide information or entertainment to a specific demographic.

·         Uniqueness. It also needs to be different (and preferably better) than other apps on the market.

·         Design and usability. Your app should be well-designed and easy to use, even for a first-timer.

There’s no surefire recipe for a revenue-generating mobile app, and purely passive income is downright mythical. However, with the right business model and a solid monetization strategy, you should be able to create a semi-passive income stream for yourself.

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