How do free apps make money?

Free apps do make money but there is something that we should bear in mind. The right question to ask ourselves is; how do they make money?

How exactly do they profit? If one wants to join the app industry, what strategies does one need to profit out of his/her efforts? It is undeniable that the app economy is exponentially growing year after year. To better understand how developers are optimizing their revenue opportunities with their free apps, check out some interesting monetization tactics and choose the one that better fits your needs! A couple of questions have to run in one's minds. And you got to the right place, all the necessary info you need is right here.

 

Recent estimations project that global gross app revenue will double to reach $102 billion by 2020. As the mobile app ecosystem undergoes rapid expansion, app publishers will find it more and more challenging to stand out in a crowded marketplace. To capture a slice of the market, you’ll need to implement monetization tactics that evolve as quickly as the ever changing preferences and demands of your users.

1. Subscriptions

Subscriptions can be a very useful monetization strategy. Publishers may choose to offer free content on their apps for a limited amount of time and then charge users for a subscription fee that will allow them to access full content without restrictions. A commonly used tactic to convince users to subscribe to an app is to offer them a free trial period and then charge the subscription fee to those who wish to continue to access the app content.

Apple is paying extra attention to this monetization strategy and is about to make significant modifications in how app subscriptions work. In the new model, Apple will maintain the usual 70/30 revenue split for the first year of subscription. After one year, a new 85 percent/15 percent revenue share per subscriber will be implemented. The new format was made to encourage developers to sell their apps for a recurring fee instead of a one-time cost. Another significant change is that the method currently only available for apps classified as news, cloud services, dating apps, or audio/video streaming, will soon be applicable to all app categories. Let’s stay tuned to how this rolls out.

2. Affiliate Marketing

Affiliate marketing involves promoting a third party product or service as a way to optimize revenue opportunities. In mobile apps, this network marketing strategy mostly works by advertising other apps for a considerable share of revenue based on number of clicks or installs. Affiliate Marketing can be easily integrated depending on the publisher’s chosen ad network.

3. Advertising

Last but definitely not least there is advertising. Known as one of the most popular monetization methods, advertisements can be easily integrated to the app source code as a way to generate income.

Whether developers are being paid per click (each time a user clicks on the ad), per visit (each time a user visits the ad) or per install (every time a user installs the app shown in advertisement), ads provide a wide range of monetization opportunities. These are some of the techniques used by ad networks to aid in this process:

(i) Interstitial Ads: These are pop-up ads in full screen that appear on mobile apps. Interstitials are programmed to show up after a specific time frame or after user has lost a game, for instance. They can either close the ad or can click to browse the app and download it later.

(ii) Banner Ads: Banner ads are found mostly on the top and bottom of the screen of devices. These stay for a longer period on the screen and are less invasive.

(iii) Video Ads: Video ads are commonly displayed either while the app is running or during or after some intervals. An interesting approach to using video ads is via video rewards. With this method, the user can choose to watch a video ad in exchange of some sort of prize. After watching, users can receive coins or app currency, extra lives to continue playing, etc. This format sets itself apart from others since it is optional and can provide benefits to the app user.

(iv) Native Ads: This type of ads is specially built according to the destination site or app page. To avoid user aversion, native ads are made to be a more natural and less aggressive than other methods.

4. Selling Merchandise

Another innovative approach is selling branded merchandise as a monetization method. Items such as t-shirts, toys, cell phone cases, etc. can be a successful alternative to boost revenue. The physical products can be sold directly from within the app or via email marketing. To assist developers interested in this strategy, Amazon has launched a service called Merch by Amazon, which allows developers to create their artwork, upload it to their platform and promote products. To make things even easier, the company also handles payment and delivery of items.

5. Email Marketing

Although relatively under-used, email marketing can be quite powerful when it comes to publicizing and monetizing apps. This strategy works by requesting user email during login and consequently reaching them with email notifications. Collecting all user email addresses in a database may be very helpful in certain situations. For customers who haven’t used the app in a while, for instance, reaching them via email may be an interesting  tool to approach and retain them.

6. Freemium

As its name suggests, the freemium model offers both free and premium access: users gain access to a select few features, while exclusive content or additional features are available with a one-off or subscription fee. An example of an app that has perfected the freemium model is Clash of Clans. While users may advance through the game without spending, the app taps on the impatience of gamers by offering small purchases that enable players to progress through the game at a faster pace. These small purchases can add up rapidly – the app reportedly generated a revenue amounting to US$ 1.5 million per day at the peak of its popularity.

In conclusion

What should you do now? Browse the app stores, do a market research, check what other successful developers are doing and try to figure out the right monetization strategy for your app.

I’ll round up the article with a final tip: it’s never too early to think about monetisation. It starts from the concept stage; the type of app that’s developed, the potential target market and its features and aesthetics can impact the final monetisation strategy, so you need to think about how to monetise your app in a way that doesn’t affect your users’ experience right when you’re deciding on these factors.

Have you had any experience with one of these methods? Feel free to share your thoughts with our community in the comment section below.

Comments

1

Hey yoasaine, thanks for sharing this information. i can now clearly have an idea on how apps like VLC and Whatsapp make money.

I am honoured. And thanks alot.