How Do Free Apps Make Money
There are over 3.8 million apps on the Play Store and over 2 million apps on the Apple Store. Over 80% of those apps are free, and yet somehow the app stores are worth billions of dollars. Just imagine that 98% of the revenue comes from these free apps. It is worth noting that the primary source of the revenue comes from the product or service that you sell with your app. For instance, for an e-commerce app selling products and making a commission would be the primary source of revenue of this app. How does it work though, if an app does not sell products or services?
There are monetisation strategies that can further increase the revenue for an app.
Let us have a look at what helps free apps make money.
Integrating a third-party ad network is probably the most common and the easiest way to make money. This can be done with help of one of the ad networks like AdMob, StartApp or InMobi. An app owner is paid based on the number of impressions or the number of clicks he receives on the ad and the type of an ad that he runs. The type of ads typically includes banner ads, video ads, interstitial ads and native ads.
This is one of the most powerful strategies to make money from an app. The in-app purchase is a concept where a user purchases a set of virtual items from the app. These virtual items may be some special content, a premium feature or a restricted level in a game. The in-app purchases generate the highest revenue for an app owner and this strategy is very likely to dominate in the years to come.
Businesses sponsor various initiatives from TV shows to events to get closer to their target audience. If you build a niche product or service, you can find a business to sponsor your app, to launch it and run it on behalf of sponsors. Reaching out to the brands to showcase your app can be a great starting point to find the right sponsors. Same way if you have not launched your app yet, finding sponsors can kick-start your app.
Subscription is one of the best ways to get a predictable recurring revenue. There is a requirement though – your app should have some value to share to its users so they can keep coming back and paying you month after month. A popular approach is to start with a free trial for a limited period of time (14/30 days) and then charge a subscription fee to those users who wish to stay and continue with a paid plan.
Freemium apps are made available free of charge but include paid or premium features. The term implies a mix of free and premium access, hence is the name. The users download free version of an app and if the content is worth paying for, then they upgrade to a premium version. It is a great way to get your foot in the door and upsell your users with quality and premium content. You can also have two different types of app, one would be free and a paid version. Usually 15% of the free apps have a sister version which is a paid app to unlock all the premium features.
Affiliate marketing is a huge industry. It allows promoting and selling someone else’s services or products and make money on commission. You can use various techniques within your app in order to promote the affiliate products or services based on the numbers of clicks or installs. There are number of websites that are available to help you find the right affiliate based on your app vertical. There are several techniques to use this app monetisation strategy like CPM (cost per impression), CPI (cost for install) or CPC (cost per click).
Crowdfunding is a known method for raising money for different initiatives through crowdfunding platforms, for instance Kickstarter. These days crowdfunding can be incorporated into an app to run a campaign and encourage people to participate in the good cause that you app works towards.
Amazon Underground is an autonomous app store that has a mobile app of its own. This Android mobile app comprises large number of services (apps, games etc.) with premium features that are free for users. Amazon Underground pays app developers directly for two minutes of app use per single user. The app is ads and in-app purchase free. You can use an in-app purchase in your app should you wish to join, but you will have to sacrifice the fees to Amazon Underground. This strategy is great for making money, but unlikely to benefit apps with relatively short session duration.
Email marketing has been around for a while now, but surprisingly is a good monetisation technique for an app. The app collects users’ email at sign-in stage and then uses them to send marketing notifications. It is a quite convenient way to be able to reach out to your users to inform them about special deals and promotions. The flipside of this method though is that is has been vastly overused in the recent years.
On top of collecting and selling personal data, some apps generate volumes of information, which they can then sell to various research companies.
This may not be the most effective, not to mention ethical technique, nevertheless some use this tool for app monetisation.
Mobile app development can be a very lucrative activity if you choose the right approach for yourself. Top 15% of the iOS and Android app developers make roughly $5,000 per month with their free apps. This also means that only about 10%-15% of the apps on the App Store or Play Store combined are good quality apps.
If you apply these app monetisation strategies on top of quality coded app, then you will certainly be able to increase your revenue.