How Do Free Mobile Apps Make Money? 6 Free App Monetization Strategies

Have you wondered how free apps make money? or What is the free apps monetization strategies used by developers/app owners to generate revenue and keep the app up and running?

That word, free, alone is enough to grab the attention of millions all over the globe. We love free stuff, don’t we? And more than anything, we love free mobile apps and use them daily, be it games, social media, music apps. The majority of the mobile apps available in the Google Play Store or Apple’s app store are free of cost. 

Allow us to showcase some key app statistics-

  • There are 2.8 and 2.2 Billion apps available for download in Google’s Play Store and Apple’s App Store, respectively.
  • 96.4 percent of apps in the Google Play app store were freely available and 91.9 percent of iOS apps were free, as of June 2020.
  • A study revealed that the average American checks their phone every 12 minutes. And on average 10% of people check their phones once every four minutes.
  •  90% of the time spent on mobile is solely on apps.

The viability of a free app is tremendous, and the world-wide reach is mind-boggling. And this is the reason that people are developing and launching apps vigorously in the app store. In the month of May 2020, 113 thousand apps were released in Google Play Store worldwide.

If these statistics motivate you to develop an app, you are working in the right direction, since investing in an app can give great ROI. Before that let’s refer to the table below to understand the basic difference in paid and free apps.

 If you are planning to launch a free app, this blog will helps startups and entrepreneurs alike to earn from the same. Since we are a mobile app development company, we have developed a successful free app for our clients and exactly know the right ingredients to monetize the app.

Let’s dive straight into the list.

#1 Advertisement Revenue for Free App Monetization

Free App Monetization Strategies

One of the most used and easy to implement app monetization models is advertising. The app owner simply will display commercials in mobile apps or tie-up with third-party ad networks to get paid. 

This entails three types of ad revenue:

  • Cost per Thousand Impression (CPM)- It is the most preferred since it doesn’t require the users to click on the advertisements. Although the pay is less, on the positive side it causes less disruption in the user interface 
  • Cost per Click (CPC)
  • Cost per Action (CPA)

Moving further, there are 4 types of ad display used in the apps for monetization. You have to monitor whether or not the targeted users find the ads entertaining or are bocking them.

1. Interstitial ads

  • Full-screen pop-up, displayed at timed frames
  • Has a close button at the upper left corner

For example, if you are navigating from one news article to another in the app or entering a new level in a game, you will encounter an interstitial ad.

2. Banner ads

  • Displayed in different sizes and either at the top or bottom parts of the app screen
  • Given their screen share, they are often small and thus are user friendly

3. In-app video ads

  • Displays automatically
  • Used as reward video in exchange for other in-app awards

4. Native ads

  • Appear as a regular element in the app.
  • The aim is to promote a product or mobile app
  • User friendly, since it feels more like a suggestion than an ad.
  • On average, the pay is better than mobile banner ads 

5. Rewarded Videos

  • The most successful advertising model 
  • These appear in between games to reward the users with app currency to get to the next level
  • An effective way to communicate a brand message.

#2 In-App Purchases

Free App Monetization Strategies

It sounds as simple as its name. The users spend money to access the premium features or to buy survival bundles in a free gaming app. This app monetization method is great to sell the virtual items from the app itself. The best examples are Clash of Titans or Angry Birds that provide boosters and packs to progress further in the game.

In 2019, 79% and 94% of the top 250 apps monetized via in-app subscriptions on Google Play and iOS store, respectively. Another interesting reveal is that users are spending $380 billion worldwide on in-app purchases. 

This is why the in-app purchase is the most popular source of revenue amongst app owners and is the best option for startup and entrepreneurs.

#3 Freemium for Free App Monetization

You can include a freemium business model that allows users to use basic features of an app free and later charges for “upgrades” to the basic package. Companies that are just starting out can use this model to attract customers to use their app, for example, Spotify uses this strategy and over time has become a billion-dollar company.

Freemium allows app owners to increase the length of the user’s interaction with the app. If users have a positive experience while using the app the chances of them using the paid feature increase. 

#4 Subscriptions

The subscription model is the sub-category of in-app purchases. Unlike in-app purchases that are based on a per-user basis, subscription brings recurring profits. The developer/owners of the app can offer monthly or yearly and once you acquire customers a steady amount flown in periodically. 

According to data, in 2019, based on the top 100 subscription apps, a total of $1.1 billion was spent by users in the Google Play Store and around $3.6 billion in Apple’s App Store.

The preeminent aspect of how the subscription model is right for you depends on how you understand your customer base and how much they value your app. Maintain a balance between charging the right amount and delivering an app that adds value to the user.

#5 Affiliate Program for Free App Monetization

Free App Monetization Strategies

A strategy where the developer/owner of the app gets a commission on advertising and promoting third-party products/services.

Below is the list of different types of affiliate marketing models that publishers use.

1. CPA- Cost per acquisition or cost per action

  • Advertise other products through an in-app store

2. CPC- Cost per click 

  • Based on the number of times ad gets clicked on

3. CPV- Cost per view 

  • This includes video interaction.
  • The video ad’s duration can be up to 30 seconds.

4. CPI-Cost per install 

  • The publisher of the app is paid one the user installs the advertised app

Major players like Apple, Google, and Microsoft offer affiliate programs that are accessible to developers of mobile apps. Furthermore, the fee offered by advertisers for referral programs is usually between $0.80 to $3.00 making it a profitable opportunity to explore.

#6 Sponsorships

Free App Monetization Strategies

Sponsorship yet again is an effective strategy free app monetization to earn money. The app developer can build an app in the niche and for the target audience and launch it on behalf of other companies. 

The app developers need to approach sponsors who have an audience with similar interests as your app’s niche. Make sure you do homework and work on a list of businesses that could prosper from the partnerships.

This app monetization strategy offers advertising space within your app to the brands with exclusive content or discounts. These brands can impose great discounts and exclusive offers tactics to stand out to attract users. Additionally, this strategy does not disrupt user experience while they are using the app.

All in all,

We cannot stress more on the fact that an app, be it free or paid, created with keeping the fine details in mind and the one that adds value to users can do wonders for your business.

Choosing the above app monetization strategies is subjective. 
Try them all and do in-depth research to know what suits you as the app owner the best. Many reputed mobile app development companies can also guide you through ways to monetize your free app.