How Do Free Apps Make Money? – Top 7 Strategies to Monetize your Free Apps

9 Jun 2022

Remember those adverts that pop up while you’re viewing videos on YouTube or banners that display when you go to a website? These are instances of how businesses monetize their websites; the same principle applies to mobile apps, both paid and free. Free apps have a 96 percent market share on Google Play and a 90.3 percent market share on the App Store, generating $71.3 billion in sales. But because those apps are free, how do they make money?

This post is for you if you have or plan to develop a free mobile app and want to learn more about app monetization tactics. We’ll show you how to make money with an app and how to pick one that’ll work for you.

Let’s get started.

How Much Do Free Apps Earn?

On a daily basis, the average mobile device owner uses 7-8 apps. Simultaneously, just 5-10% of mobile app users are willing to pay for a paid app, with free mobile apps accounting for 98 percent of revenues and downloads. Free apps are preferred by the vast majority of mobile app users, and this number is growing.

So the Question is Do consumers spend money while using Free Apps?

According to earlier data, the average iPhone user spent $79 on in-app purchases in 2018, an increase of 36% over the previous year. When compared to other forms of mobile apps, games receive the majority of the funds.

In 2018, Apple’s App Store made $46.6 billion in revenue, while Google’s Play Store generated $24.4 billion. Given that more than 90% of the apps on both marketplaces are free to download, it’s reasonable to assume that free apps provide the majority of money.

In-app purchases produce $1.8 billion in revenue for Fortnite, the popular first-person shooting game. What does this mean in terms of a non-game app?

Slack, a popular communication app, has a financial year-end revenue of $400.6 million on January 31, 2019.

And the Journey that started with unbelievable figures, is continuously growing with surprising numbers till the time we are talking about it in 2022.

Free apps have the potential to produce a big profit because they are more popular among users than premium apps. Are you curious about how free apps make money?

Let’s have a look at some strategies that you can apply to make money from Free Apps.

How Do Free Apps Make Money?

You can use one monetization model or multiple at once, depending on your business industry and app kind. The following are examples of app monetization models:

  1. Affiliate Marketing and Advertising

Seven out of ten free apps make money by displaying advertisements and promoting other businesses. You can charge: if you want to use this most frequent method of free app monetization.

  • CPM (cost per mile) or CPM (cost per impression) are two terms for the same thing. For every 1,000 views of the ad, you will be paid.
  • CPC (Cost Per Click) (CPC). When users of the app click on display adverts, you get paid.
  • Cost-per-view (CPV). Advertisers are charged based on the number of ad views or interactions.
  • Cost-per-Installation (CPI). You are compensated each time a user of your app install the app you are promoting.

As you can see, there are various types of in-app ad prices and techniques for displaying advertisements to app users. You can show adverts to your app users in four different ways:

Banners or Display ads

So that app users can freely use your app, the banner ad shows at the top or bottom of the mobile device screen. However, such advertisements have a low engagement rate (0.1 percent ).

Video Ads

These ads show during app usage pauses and last 10-30 seconds. This ad type also contains rewarded video advertising, which rewards the app user for watching the entire ad video.

Native Ads

Native advertisements, such as sponsored content or videos, are seamlessly integrated into the app’s design and do not distract users. As a result, people find native ads to be less bothersome than other types of advertisements.

Interstitial Ads

This form of advertisement resembles full-screen pop-ups that appear when a user opens or exits an app. As a result, the consumer has the option of closing the ad or clicking on it to learn more about the deal.

2. Sponsorship and Influencer Marketing

This sort of app monetization is comparable to advertisements, but it is more deeply integrated within the app. Allow me to explain. You can put a sponsor’s logo or icon on the splash screen, footer, or integrate sponsored content with special offers right within your app, in addition to running advertising. Find sponsors who share the same target demographic to make this type of monetization model more profitable. If you have a fitness app, for example, you may look for sponsors among fitness clubs, personal trainers, or healthy diet websites.

Influencer marketing differs from traditional sponsorship in that you will work with an individual opinion leader who is well-known among your target audience rather than a company. As a result, such an influencer will promote your app to their followers and attract new users. You can also invite an influencer to become an app ambassador, which is a common tactic used by well-known firms.

3. In-app Purchase

You can sell a variety of things using this app monetization approach, including:

Consumable objects, such as health points or digital currencies, that the user can utilise within the app.

Items that are not consumable but can be utilised indefinitely, such as fresh games, maps, or as blocking.

In-app purchases boost user engagement and keep them addicted to their devices. Because app stores charge 3% on each in-app purchase, this monetization approach entails integrating native app store payment methods.

4. Subscriptions

Paid subscriptions can be used to make money on free apps. However, just 5% of apps with strong user involvement, such as productivity, instructional, music, or video streaming apps, work with this paradigm. This type of transaction necessitates the use of third-party payment gateways like Stripe or PayPal. As a result, there is no commission charged by app shops. The following is how the app subscription works:

After downloading a free programme, the user is given a 30-day trial period to try it out.

If the user wants to keep using the app after the trial period finishes, they must purchase a subscription.

Subscriptions are divided into two categories:

  1. Non-Renewing Subscriptions:

When a user purchases an app membership for a specific amount of time, such as one, three, or six months, the subscription does not automatically renew. After the membership time expires, the customer must manually purchase a new subscription to avoid any surprise expenditures. Seasonal apps like gardening, sports, and hunting benefit from this form of app monetization.

2. Automatically Renewing Subscriptions

Subscriptions that are automatically renewed mean that the programme will charge the user every month, six months, or once a year. Users can only access the app after filling in their credit card information in order to assure that they will purchase a subscription after the trial time has ended.

5. Freemium

The freemium approach, which is comparable to the subscription model, can be used to monetize a free app. The key distinction is that the app user has unlimited access to the free app version with rudimentary functionality. Users must pay monthly or annual fees to access an advanced feature-rich app version. According to statistics, just 0.5-2 percent of app users purchase a premium app version. A free version of your app, on the other hand, will reach a larger audience and help your app go viral.

6. Crowdfunding

Crowdfunding has shown to be a successful method of raising funds, especially among entrepreneurs. Crowdfunding generated about $17.2 billion in North America alone in 2018. If you need more funds for app development or promotion, you can turn to one of the more than 400 crowdfunding platforms, where anyone can donate money.

The following are the most popular crowdfunding platforms for mobile app projects:

  • Kickstarter
  • Indiegogo
  • CrowdFunder
  • AppsFunder

You must to complete the following steps before launching your crowdfunding campaign:

  • Make a list of fundraising targets for your campaign. Consider making your objectives SMART: specific, measurable, achievable, relevant, and time-bound.
  • Create a story that explains what your app is about, how you came up with the idea, and what problem it answers. You will be able to demonstrate the possibilities of your app in this manner.
  • Because video material is the most engaging form of storytelling, make a compelling video.
  • Create a campaign page with a clear explanation of your project for investors.
    To attract possible funders to your campaign, use social media.

7. Transaction Fees

If your mobile app belongs to the marketplace segment where users transact money, you can charge transaction fees to make money with free apps. This category includes not only e-commerce apps, but also the following:

  • Apps for booking flights and hotels
  • Apps for walking dogs
  • Apps for ordering meals

And there are others where buyers and sellers are present. You’ll need to incorporate a third-party payment gateway API into your app to charge transaction fees. Because this activity necessitates coding expertise, we propose employing mobile app developers.

In a Nutshell

When compared to paid apps, free mobile apps have a larger market share. There are a variety of free mobile app monetization tactics available, each of which has a distinct user engagement rate and generates a different amount of revenue. We propose choosing a monetization plan based on the app’s niche, purpose, and target audience.

You can combine various monetization tactics to make your free software even more profitable:

You can run advertising and charge users for an ad-free version of the app, which is a win-win situation for both you and your users.

In-app purchases and subscriptions, as well as advertising and subscriptions, can all be combined.

Pratik Gothaliya

Pratik Gothaliya is the Founder and CTO of Quest Infosense, A web & Mobile app development company. Pratik has accomplished over 9 years of experience in the software industry. Being an integral part of the company he assures uncluttered functionality for service or products development to clients. he promptly stands with unparalleled accomplishment for his clients and people.

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