How do Free Apps Make Money?
Have you ever thought, how free apps make money on app markets? It’s a common question for users as well as for developers, as free apps are far more outnumbered the paid ones, and it’s not clear how one can make money with a free app on the marketplace.
First of all, let’s fix once and for all the common truth for 2020 – the app boom is not over and won’t in a near future according to Techcrunch.
Today people charge fees for app downloads only because they don’t get the idea: free apps can generate money. And that’s how.
A few statistics
Today an average smartphone user installs about 40 apps. In the case of millennials, this number hits 67. We interact with about 30 apps per month, opening an app over 11 times during the day.
It’s predicted to have a 25% increase in the global mobile app market by 2022! According to Statista, global mobile app revenue will hit 581.9 billion in 2020 and grow to 935, 2 billion by 2023.
Free or paid, that is the question
When a free app is released on app markets, it’s automatically got the chance to be noticed by users. It’s because 96.4% of all app downloads on Google Play are free apps. However, 25% of iOS developers and 16% of Android developers earn over $5,000 monthly with their free apps. About 24% of apps generate up to $500,000 in revenue monthly, and 1.5% of apps get over $500,000 per month.
In the case of paid apps, it’s clear that users mainly pay for mobile games: top-10 apps on Google Play with the highest revenue are downloadable free games.
So how to monetize free apps?
Top 8 free app monetization strategies you should know
There are 8 proven monetization strategies for free apps, three of which were leading in 2019 according to Statista. These are:
- subscription model
- freemium model
- advertising model
ADVERTISING
In-app ads are the most popular way to gather millions of dollars. There are 5 main types of free app advertising strategies.
- Banners - With not so high Click Through Rate (0.06%), Banners are the least disturbing add type, as they don’t interfere with user experience, interacting with an app without limitation.
- Videos – With a duration of about 10-30 seconds, such in-app adds are highly inclusive. So why that is placed between levels in the case of games. Videos can be used to get rewards or additional benefits from the app.
- Native Ad – such types of ads are made with the same design and overall concept with the app and don’t disturb the user experience.
- Interstitial advertising – these are full-screen pop-ups that interfere with app usage. Usually placed when the user opens or closes the app.
- Incentivized Ad – users' favorite (84%) this type of ads offer the users to share content, leave a review, fill out a survey, etc.
REFERRAL MARKETING
Placing some other content inside the free application is a part of the referral marketing strategy.
Number of clicks, app installations and etc. brings commition. Referral marketing acts as CPA (cost-per-action model) and includes the following types CPM (cost-per-mille, cost-per-impression), CPC (cost-per-click), CPV (cost-per-view), CPI (cost-per-install).
IN-APP PURCHASE IN THE FREEMIUM MODEL
Besides the in-app ads strategy, there are also four monetization strategies for free apps that can earn a pretty penny:
In-app purchases and a freemium model – giving access to the basic features of an app for free and charge for some additional functionality or bonuses.
Subscription model – This model necessitates payment for a weekly, monthly, quarterly, or annual app subscription. To use this strategy you must provide your users with regularly updated content, new features, and release updates to make them stay with the app.
Sponsorship model - Find a sponsor to invest in your app in exchange for the promotion of their solution or product, and you’re done! This best works, when you have a huge user base or unique app idea.
Crowdfunding model – Crowdfunding platforms like Kickstarter, IndieGogo, GoFundMe, Patreon, etc. can be another effective channel for monetizing a free app.
Email marketing – Being the oldest among strategies, email marketing uses a user base email addresses to send emails. About 75% of Millennials communicate with businesses using email, so why it’s an effective marketing tool today for making money from apps.
App merchandise & eCommerce - Sell your own branded items within your free application make money from free apps.
Top free apps of 2020 with the highest revenue
Sensortower states that the most prosperous free apps on the market by July 2020, were
- TikTok
- YouTube
- Zoom Cloud Meetings
Facebook Messenger
- Snapchat
- Gmail
- Disney+
- Amazon Shopping
HOW TO CHOOSE THE BEST APP MONETIZATION STRATEGY
There are 4 steps for the best free app monetization:
Step 1 – Research the market and find competitors
Step 2 – Determine your target audience and identify
Step 3 – Create a unique app idea
Step 4 – Decide on the app monetization strategy
BEST TOOLS TO MAKE MONEY FROM FREE APPS
There are plenty of technical tools that can help you to make money with free apps from a technical point of view. The best ones are:
Google AdMob – integrated with Google Analytics, it helps to research the target audience, improve ad strategies, increase the click-through rate.
Facebook Audience Network - Ad placements inside applications with more exact targeting for better revenue.
Amazon Mobile Ad Network - In-app display advertising solution to monetize mobile apps across platforms.
Success stories
Having over 2 billion users today, WhatsApps holds unlimited opportunities for in-app ads, gathering millions from advertising.
Another example of successful in-ads strategy implementation is Facebook that gets millions of dollars from its apps by utilizing in-app ads. Ads generate 98,5% of revenue for Facebook.
Whether choosing one model or combine several for the best monetization of your free application, first focus on providing value for your users and help to solve their problems.
