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App business model strategy: Charge premium users OR give the app away and charge partners?

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schmidi

New Contributor
Apr 6, 2021
5
4
Deutschland
I quit my job a few weeks ago, thanks to the books. Since reading them I value my time more than money. Good job MJ!

Currently I am building an app, and there are already paying users. Its not enough to make a living, but at least proves, that users value the concept.
If possible at all, I would like to go without venture capital.

Now I am pondering between two different strategies. For both, I have got approx. a year of runway in savings from now on.
A) Continue charging my premium users (there is also a freemium plan) and bootstrap the app to grow bigger.
B) Start giving away the app for free and earn money in the long run by collecting fees / revenue share from partners for forwarding retail customers / leads to them and/or get sponsoring.

As far as I can see, pros and cons are:
A) Will be less risky in the short and is more predictable. Also, I won't be dependent on any partner. However, user base will grow much slower and probably also be limited.
B) On the one hand will be much riskier because I won't earn any money for the next few months. On the other hand the app will deliver much more perceived value and the user base will explode compared to A). There are even already competitors that give away a similar app for free.

Up to now, mentally I was sticking to A). One partner however gave me the following advice:
If any competitor executes well on variant B), I will definitely loose my user base to him. This is why I take B) into consideration for myself.

What would you do?
I am happy for any advice!
 
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Wojnaradam

New Contributor
Nov 11, 2021
21
15
Czech Republic
I quit my job a few weeks ago, thanks to the books. Since reading them I value my time more than money. Good job MJ!

Currently I am building an app, and there are already paying users. Its not enough to make a living, but at least proves, that users value the concept.
If possible at all, I would like to go without venture capital.

Now I am pondering between two different strategies. For both, I have got approx. a year of runway in savings from now on.
A) Continue charging my premium users (there is also a freemium plan) and bootstrap the app to grow bigger.
B) Start giving away the app for free and earn money in the long run by collecting fees / revenue share from partners for forwarding retail customers / leads to them and/or get sponsoring.

As far as I can see, pros and cons are:
A) Will be less risky in the short and is more predictable. Also, I won't be dependent on any partner. However, user base will grow much slower and probably also be limited.
B) On the one hand will be much riskier because I won't earn any money for the next few months. On the other hand the app will deliver much more perceived value and the user base will explode compared to A). There are even already competitors that give away a similar app for free.

Up to now, mentally I was sticking to A). One partner however gave me the following advice:
If any competitor executes well on variant B), I will definitely loose my user base to him. This is why I take B) into consideration for myself.

What would you do?
I am happy for any advice!
Option A) looks like that you don't have to be financially strong as with option B). Looks to me it is all about your situation and skills. There is no best answer.
I'm constantly trying to solve similar question.
 

schmidi

New Contributor
Apr 6, 2021
5
4
Deutschland
why not both?
Like that suggestion!
I just need to find a way to "give the app away" while also charging for it.
I am thinking about some premium feature most users don't need - but is giving so much value, that a few users are willing to pay a high price.
 
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schmidi

New Contributor
Apr 6, 2021
5
4
Deutschland
Option A) looks like that you don't have to be financially strong as with option B). Looks to me it is all about your situation and skills. There is no best answer.
I'm constantly trying to solve similar question.
Interesting, do you want to tell me more about your situation?

Regarding my skills, I am computer scientist and do the programming mostly on my own.
Hiring remote freelancers did not really work out in the past because of low quality / a lot of misunderstandings.
For marketing, I am working with an agency that helps out if I miss anything.
 

Eudaimonium

Bronze Contributor
Speedway Pass
Jun 8, 2017
135
138
Germany
How much is the premium subscription? What % or freemium users opt for premium? Do you know how much it costs to acquire new downloads?

If the $ per premium user is very low and/or the % of users that choose premium is low, I'd go for the free model.
 

Wojnaradam

New Contributor
Nov 11, 2021
21
15
Czech Republic
Interesting, do you want to tell me more about your situation?

Regarding my skills, I am computer scientist and do the programming mostly on my own.
Hiring remote freelancers did not really work out in the past because of low quality / a lot of misunderstandings.
For marketing, I am working with an agency that helps out if I miss anything.
Here is my situation... as you will see, I have to figure out monetisation too.
 
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schmidi

New Contributor
Apr 6, 2021
5
4
Deutschland
How much is the premium subscription? What % or freemium users opt for premium? Do you know how much it costs to acquire new downloads?

If the $ per premium user is very low and/or the % of users that choose premium is low, I'd go for the free model.
Premium is approx $35/year. 3.8% of active users chose premium.
In the current situation CAC per premium user is just about as high as CLV.
I know that is not a good ratio yet, I am working on this by increasing value for all users.
 

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