The application market is huge, with billions of dollars worth. What's more, most of the apps are entirely free and therefore in higher demand among users.
The popularity of free services is confirmed by statistics. According to the latest research, only 25% of paid apps are downloaded more than 100 times. On the other hand, 25% of free software is likely to be downloaded over 15,000 times. Not bad, isn't it?
But how much money do apps make if they're free? Can such a digital product be a profitable venture at all? The answer is yes, it can. Free mobile services are quite capable of bringing money to their owners, you just need to approach your business properly.
That's what we want to talk to you about in our new article. You'll find out if there is any point in releasing a free application to the market and learn the key ways to benefit from it. We're going to analyze the issue from A to Z, and if you have any questions left, you're welcome to consult with our experts.
Now let’s see how to monetize free apps.
Apps Market Statistics
We wonder if anyone could have guessed in the early of mobile applications how popular they would be. Anyway, today these programs are in incredible demand. According to Statista, more than 1.8 million apps of any type can be found in App Store, and even more are in Google Play (namely, almost 2.6 million). And this is hardly the app market limit! On the contrary, the market is growing at 14% per year, and the trend is expected to continue. What's more, as Google Play claims, 97-99% of revenue comes from free applications.
What is the easiest audience to monetize? According to recent studies, the most productive users are men and women over 30 (but under 40). These people are financially solvent and used to taking advantage of applications in their daily life.
But how does a free app make money? It's free, isn't it? So it doesn’t require payment… right? Keep reading our article, and you'll find out the answer to these questions.
The Most Popular App Monetization Methods
There are only 3 application types, namely, shareware, free, and paid apps. Let’s take a closer look at each option.
Paid Apps
In the first case, everything is clear: the user pays money and gets the right to download the application. Thus, the owner of the service makes a profit without delay.
Pros:
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quick start of earnings. As we said, you don't have to wait to start making a profit. Of course, if you manage to convince someone to download your application at all;
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user loyalty. Once the person has agreed to part with the money, he's likely to use the purchased product (in your case, a mobile application).
Cons:
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the difficulty of attracting users. This is the biggest drawback of paid apps. Why pay money if there is always a chance to find a free analog (or a shareware one)?
When to choose this monetization business model for your app?
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the functionality of your service is truly unique or at least exceeds the offers of free analogs;
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the cost of the application isn’t too high;
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you thought out your marketing campaign from alpha to omega, so to speak.
Shareware apps
Shareware applications are the most popular these days. Such a mobile service seems to be free, but only in its basic version. To access the most valuable features, users have to fork out.
Pros:
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the ability to attract more users. Since there is a free version of the program, there shouldn't be a shortage of users;
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several monetization strategies. To increase your profits, you can monetize paid and free users in different ways.
Cons:
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a few functional sets. The main difficulty is to come up with a fairly good basic functionality and offer tempting features in its paid version. To be precise, on the one hand, you cannot offend free users, and on the other hand, you must find a way to lure paid ones.
Free Apps
We'll discuss popular monetization methods for free apps in due course. And right now we'd like to briefly describe the advantages and disadvantages of such programs.
To begin with, users don't expect any miracles from free services. And if your application isn't perfect in one way or another, they won't be unnecessarily critical.
Pros:
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attracting a larger audience. The user doesn't need to pay money, and if the program hasn't met his expectations, there is nothing easier than removing it. The user doesn't lose anything in the end. Therefore, he is more willing to download it in the first place;
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a greater number of positive reviews. Oddly enough, free apps have more chances to get positive user feedback (as various surveys claim).
Cons:
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no confidence in income. You have to think over a monetization strategy in advance in order to make money from free apps. Otherwise, your project will be unprofitable.
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low user loyalty. Paid users are much more loyal (we’ve already explained above why this is due).
If you've decided to release a free (or shareware) application to the market, you might find it useful to read the next section of our article.
How Do Free Apps Make Money?
When publishing free apps in the mobile application market, it is important to decide in advance on a monetization strategy. We offer you some easy ways to make the most of your digital product.
In-app advertising
Scientists from the University of Cambridge recently conducted a study and found that almost 75% of applications on Google Play are free and 80% of them are being monetized through ads. Well, advertising is one of the best app monetization methods. The basic rule is to stick to the golden mean, otherwise, the user may get tired of your intrusiveness.
Among the main types of advertising are the following:
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Banner advertising, the most traditional one. An advertising banner is usually located at the bottom or top of the screen and covers it only partially.
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Native approach, when advertising is like a continuation (or addition) of the application and therefore least annoys users;
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Interstitial advertising, which occupies the entire application screen. And for this reason, the user cannot but pay attention to it;
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Video advertising (explanations are needless, right?);
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Interactive advertising, commonly used to monetize games. "Watch the promotional video and get additional features in the game!" - this is how the call to the gamer sounds, and he follows it.
But if you really intend to make money from free apps via ads, do your utmost to choose the most effective advertising model. Take your time to find the best option.
Pros:
You can make the app completely free and monetize it only with ads. Thus, you’ll attract as many users as possible and you’ll be able to gain their trust.
Cons:
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it's far too easy to overdo it with ads and therefore tire the user;
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the income per user is quite low, so you have to convince a lot of people to download your program to start making decent money;
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there is also such a thing as banner blindness, and it cannot be ignored either.
In-app purchases
When thinking about how to make money from free apps, don't discount monetization with in-app purchases. If you have some offer virtual goods to sell, go ahead, it's a good chance to earn an extra penny!
The easiest way to implement such a monetization model is in gaming applications. Gamers like no one else are willing to pay if they get some improvements in return. There are a lot of ideas: access to new levels, more powerful weapons, etc. It all depends on the essence of the game.
BTW!
Did you know that Pokemon Go users made $ 1.5 million in in-app purchases every day? These are good numbers, aren't they?
Pros:
This is a good monetization business model for your app because it's familiar to users. It won’t annoy them, which is important.
Cons:
Alas, a very low percentage of users make purchases regularly. And it's not always possible to come up with a suitable virtual product to sell.
Freemium
Freemium model is one of the best app monetization methods and undoubtedly the most popular among them. It uses a shareware approach, which we've briefly described above. You've probably already grasped its general meaning but we'd like to repeat it anyway. We're dealing with subtleties here, and you had better know them.
When it comes to Freemium, you don’t ask the user for money right away and let him download the application without any payment. Moreover, you offer him quite decent basic functionality. And if the user wants more, he must pay. Then he'll get access to premium features.
Pros:
The Freemium model is very easy to implement. Still further, users like it. If they want, they can use the application for free, and no one will reproach them or force them to pay. They’re welcome to buy access to premium features at any time.
Cons:
You have to work hard to make the premium features really worth paying for.
Subscription
The Freemium model is really good, but it comes with a one-time fee. And how to make money from free apps on an ongoing basis? This is where subscription comes to the rescue.
You also provide the user with a certain free basis and offer him additional paid features. The difference with freemium is that the user has to subscribe and pay monthly.
A few great subscription examples:
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Tinder invites you to find your soulmate without paying. If you want access to more advanced features (such as the ability to hide your age), you need to buy a Tinder Gold subscription and renew your membership monthly ($ 24.99 per month at the time of writing).
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Netflix, too, uses the subscription method but takes a slightly different approach. The user may freely resort to the services of the resource only for 3 months, after which he must pay on a regular basis. The trial period will help him test all the features of Netflix properly.
To finally decide whether to choose such a monetization model for your free app, let's discuss its main pros and cons.
Pros:
You get paid monthly and give users the opportunity to test your platform's features before offering a subscription. So your users remain loyal to you.
Cons:
As in the case of the freemium model, you’ll have to use your imagination to convince the user of the benefits of your paid subscription. In addition, the paid subscription implies regular content updates. Are you ready to further develop your platform?
White-label apps
Let's assume you've managed to create a service with no analogs on the market yet. And you spent a lot of time and effort on its development... moreover, you're sure the idea of the service can be applied in other areas as well. In this case, you should mark the structure of the application as white-label (patent it) and sell its code to interested parties.
That’s how free apps make money if they're unique and universal (or multipurpose) and difficult to develop.
In its time, Uber succeeded in white-label monetization, and many companies still successfully use its on-demand model.
Pros:
The white-label model is a great addition to any other monetization method and will help you increase the profitability of your project effortlessly.
Cons:
The model has no shortcomings as such, but let's face it: you have little chance of coming up with an Uber-style service.
Commission or Percentage of the transaction
Among the popular monetization methods for free apps, it’s also worth mentioning the commission model. Usually, it's about different kinds of marketplaces, which serve as a virtual meeting place of sellers and buyers. As an intermediary, you receive a percentage of each transaction.
Pros:
The model is easy to implement, and it’s compatible with any other monetization method. And if you manage to attract a sufficient number of sellers and buyers, you can be sure of a source of constant profit.
Cons:
It’s quite difficult to promote your marketplace and make it in demand. Sometimes large investments are required in marketing campaigns.
Besides, if one of the sellers deceives the buyer, your company will lose its reputation too.
Affiliate programs
How do apps make money? Believe us, you’re not the only one asking such a question, it worries many other developers no less. Fortunately, big names like Google and Apple often offer cool affiliate programs to help application owners earn extra income.
There are many programs of the sort, and you must choose the one that best suits your needs. Typically, a program involves advertising a specific application with the intent to get a fee.
Sponsorship
How to monetize free apps without the hassle? The best way is to find a sponsor. You just need to convince him that your application is going to be a profitable business investment.
Your partnership can be based on different models, such as:
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free marketing of your sponsor's business;
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the share of the profit generated by monetizing the application;
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regular payments to the sponsor.
Pros:
Attracting investors is a great way to find the right amount of money to develop and subsequently evolve a digital product.
Cons:
In the case of the sponsorship model, you depend on your investors. You either have to constantly pay them money, or you’ll have to share a percentage of the profit.
Crowdfunding
Suppose you have a cool application idea but you don't have the funds to bring it to life. And you don't know how to attract investors. Then you should consider getting help from crowdfunding, which is one of the modern monetization methods for your free app.
You need to register with one of the fundraising platforms like Kickstart or GoFoundMe and describe your project. You must be as eloquent as possible so that potential investors understand why your product is so good… and what they get in return (effective marketing, a percentage of the profit, access to the customer contacts, the chance to use the application without payment, etc.).
Pros:
Crowdfunding is a perfect way to find money to start a new project or improve an existing one. It doesn’t require any investment and effort on your part.
Cons:
Relying on crowdfunding alone is unwise. It'd be helpful to figure out how to earn money from free apps using other methods too.
Email-marketing
Finally, we shouldn't forget about email marketing, which is an indirect way to get profit from your application.
The main point is to build a customer base and start sending out content that may be of interest to your users. Of course, you must carefully study user behavior so that your emails are really personalized. This will increase the chance of the consumer responding to your offer as you want him to.
To get customers' contacts, you can request an email address when registering a user or through third-party tools.
And keep in mind, even companies like The Washington Post and The New York Times (both have their own apps) don't shy away from email marketing.
We've figured out how free apps make money. Now let's see how much you can earn.
How Much Money Do Apps Make?
Surely, we won’t be able to give exact numbers, especially since the mobile application market is constantly changing and evolving. However, we're ready to provide you with some statistics to help you get a general idea of the case.
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The App Store collected statistics, analyzed the data obtained, and concluded that iOS developers earn at least $ 1200-4000 monthly. Perhaps these calculations don't impress you? Well, we want to note that some digital products bring millions of dollars to their creators. The main thing is to competently approach each stage of the development process.
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Do you want to find an idea for a free mobile application able to bring you maximum profit? Then your niche is mobile games. The thing is, gamers like no one else are ready to part with money in order to receive certain bonuses, open access to higher levels, and so on. All the best app monetization methods apply perfectly to games: ads, in-app purchases, premium paid features, and so on.
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Advertising is one of the leaders in monetization today. Do you know why it is in such high demand? The point is, advertising can be embedded in any monetization model for your free app. Wanna specific numbers? It couldn't be easier: according to statistics, 1 million ad views equals $ 500 in revenue.
Examples of successful monetization strategies
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Let's start with Balloon Island. The company releases simple and fascinating games, which users enjoy playing. The main way of monetization is advertising, which, as of 2016, had been bringing owners at least $ 2,000 a day (which was just the beginning).
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Another company, HeroCraft Ltd, has also succeeded in creating applications. In particular, it developed a game called Farm Frenzy, which quickly won the love of users. HeroCraft Ltd resorts to the most popular app monetization methods, namely:
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In-app purchases. The game itself is free, and at first, the company received profits only through in-app purchases. The profit was at least 20 thousand US dollars per month;
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in-app advertising. A few months later, the company added another method of monetization, which was advertising. And the company's revenue rose to nearly $ 59,000.
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One more great example of app monetization is the case of developer Rich Woods. He created the free Cherry Chaser Slot Machine app just for fun and didn't even count on making a profit. However, a month later, the game began to bring the developer up to $ 100 per month (thanks to in-app advertising). The results would seem modest, but let's repeat: his goal wasn’t money! Money has become a pleasant side effect
How to Choose the Perfect App Monetization Model?
We've figured out how to earn money from free apps, but knowledge alone isn't enough. You need to be able to reduce theory to practice.
Let's sort it out in order! Our task is to help you create the most powerful app monetization strategy.
What should you pay attention to?
Before moving on, answer the following questions:
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Will the app be valuable enough to be used on an ongoing basis? This is the only way to make your application generate sustainable profits.
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How have your competitors monetized their apps? Perhaps you should adopt their strategy… if these competitors are successful, of course.
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Are your users solvent? Much depends on their age and your geography of sales: say, US residents are more wealthy than users from less prosperous countries. In addition, it should be understood that a teenager is unlikely to be able to spend money like an adult.
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Are you considering your users' requirements when designing your monetization strategy? Think about which features are more logical to make paid, and which are better to provide in the free version. What is your consumer willing to pay for?
Basic monetization mistakes
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Wrong strategy. When choosing monetization methods for your free app, pay respect to its specifics. If a certain approach produces a profit to Twitch, it doesn't mean it'll work in Tinder's case either, and vice versa.
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Poor scalability. We often advise you to start small if you don't have the resources for more. However, starting small isn't the same as forgetting about the future evolution of your project. Among other things, you should make sure you will later be able to add new ways to monetize the app.
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Ineffective analytics. No matter how thorough the preliminary market analysis is, you cannot 100% guarantee that the app monetization strategy you choose will be successful. Therefore, you won’t do without analytical tools. Thus, you'll have a chance to correct your actions in a timely manner.
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Incorrect selection of advertisers. You've probably learned by now that advertising is the best way to monetize your apps. But it is important to choose the right advertiser. Let's say a fitness app would interest manufacturers of sportswear, and a dating application should advertise gift websites, cozy coffee shops, and so on (everything related to love and romance).
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Relying on a single solution. Finally, there is nothing wrong with combining several app monetization models at once. Why not, after all! If one method fails, then the other might prove effective, so you'll make a pretty penny out of your application anyway.
That's all very good, but the best way to build apps that make you money is to choose the theme properly. And we're happy to share our experience in this regard.
Choosing the right application theme
If you've already thought out your project well and know what topic it’ll be devoted to, then this section will be of no use to you, and you should move on to picking an app monetization model for your free app idea. Otherwise, let's talk about the perspectives of different application types.
We'd like to offer a few simple approaches to choosing your program theme:
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New original ideas. Perhaps you’ll be able to come up with something new, even unique, and thereby win more users. Of course, there is a risk of complete failure, because all the demanded niches seem to have already been taken. But what if you're lucky?
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Improved versions of existing products. There is no point in reinventing the wheel if you can improve it. Let's say Viber and Whatsapp work in a similar way, but both apps managed to find loyal users.
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Latest trends. Another option is to analyze the modern market and user requirements and choose a topic on everyone's lips. What is popular now, what services are in particular demand? Perhaps you’ll be able to meet users' needs.
