Are you one of those who always wonder how do free apps like WhatsApp, Facebook, Amazon, and many more make money? If yes, do not worry, you are not alone. There are many people like you. And today, this is what we are going to discuss in this article. So, if you are interested in having a detailed insight into it, stick with us and read the blog further.
When launching any app into the market, the first thing which you need to decide is the monetization strategy. This is important for the success of your app as the number of users who download your app depends on the monetization model. For example, if your app is free to download, it may attract more users when compared to the paid apps.
Talking about the statistics, as of September 2020, 92.3 percent of the total mobile apps on the Apple app store were available for free. On the other hand, the share for free apps in the Google Play store was 96.5 percent. Also, over the last few years, the total number of mobile app downloads has risen, reaching 204 billion downloads annually, by 2019.
Before we move on to tell you about how free apps earn money, let us discuss in short about mobile app monetization strategy and what all models are available in the market via which you can earn money from your mobile app.
How Can I Monetize My Mobile App?
As we all know, that not all apps on the app stores are for free. Each app has a different way of earning money. Business owners, who are planning to launch their app in the market, are always in search of the best mobile app monetization strategy. So, here a few ways of how you can monetize your mobile apps:
1. Free Apps
Well, these are the apps that are available for free on the Google Play Store and Apple App Store i.e., users need not pay any money while downloading them. How these free mobile apps make money, we will learn further in this article.
2. Paid Apps
Unlike free apps, users need to pay some basic amount to download and then use these apps. If you are sure that your app has the features for which users will happily pay, you can easily go for this app monetization model. This way, app owners can instantly earn from each download and recover their app development cost sooner than the first model.
As the name suggests, this is the premium version of the free apps. Here users can download the apps for free, however, to use all the features or some premium features, users need to pay a nominal fee. Grammarly is an example of this monetization model. According to statistics, 56% of the developers used the subscription model for their apps, and 36% of them stated that it generated the most money. However, Freemium apps were on the second spot with the support of 54%, and 33% said this model to be generating the most revenue.
Now just like freemium, this model is an upgraded version for the paid monetization model. Here users need to pay some money while downloading the app and can use basic features of it. However, if they wish to use the premium features, they need to pay more. Not many people prefer this model as it may lead to lesser downloads.
Now that you know about the different monetization models available in the market, it is vital that you choose the right model for your mobile app. Mobile app monetization strategy plays a very crucial role in determining the success of your app. It helps you determine how quickly you can recover the app development cost and start earning profits.
If you are not sure about how to choose the right pricing strategy for your mobile app, you might want to take help from a proficient mobile app development company. These app development companies have experts who can do the market research on your behalf and suggest the right strategy based on your business goals.
How do Free Mobile Apps Make Money?
Now this a very common question that most of us have in our minds. If the app is free for everyone, how do the owners recover the cost and make profits? What is the benefit of launching an app for free if you cannot earn anything from it? However, this is not the case. Unlike paid apps, free apps do not make many when users download them, rather, they make money when more and more users use them.
So, here are a few ways via which you can easily earn money from these free apps:
- Affiliate Marketing
- In-app Purchases
- Data Selling
According to the statistics shared by Statista, the worldwide mobile advertising spending amounted to $189 billion, and this amount is expected to cross $240 billion by 2022. Mobile advertising has been rapidly growing in the past couple of years and is one of the easiest and most preferred ways of earning money from free apps. All you have to do is insert display ads in the middle of your app, and every time a user clicks on it, you get paid.
There are mainly five types of advertisement strategy that one can follow:
i) Banner Ads
While using any app you might have seen a banner either on the top or at the bottom of an app. These are the banner ads where the owners of an app get the money if someone clicks on them. However, these apps tend to have a low success rate as users can easily ignore these banners and not click them at all.
ii) Native Ads
This is one of the most common types as ads in this strategy ads are naturally integrated into the apps so that users do not feel irritated. However, mobile app developers may find this strategy the best, but this is one of the most hated ways of seeing ads by users. And also, the revenue earned by native ads can be much lower when compared with others.
iii) Interstitial Ads
Have you seen those full-screen ads that do not let you use the app unless the ad is over? These ads are known as Interstitial Ads. Once the ad is over, or half played, users, can easily cancel it, and keep using the app. Many gaming apps use this kind of advertisement model.
iv) In-app Video
Just like still ads, app owners can also integrate videos for users to watch, and based on the number of clicks and impressions, they can earn money.
v) Reward Videos
Mostly used by gaming apps, these videos offer some sort of rewards to the users watching them. It may be an extra life, hint, or anything so that users are compelled to watch these videos, and owners in return can get money. People hire mobile app developers and ask them to create a model like this.
Though this is one of the ways of earning money from the free apps, this method is not as effective as it may sound, but researches say that less than 20% of users click on these ads, and this can be a disadvantage for people who are looking to earn money via this method.
2. Affiliate Marketing
Affiliate Marketing is a term that you all must have already heard. Here in this model, app owners promote third-party products or services via their apps and in return take money from them. App owners, tie-up with other business owners and promote their products and services. This model is best for apps that are already popular and are attracting enough users. Amazon is one of the greatest examples of how affiliate marketing works.
There are various ways of how you can get money:
i) Cost per Acquisition: In this model, you can earn money on the number of affiliates acquired. The more the affiliates the more money you get to earn.
ii) Cost per Clicks: In this model, you get money based on the number of users who have clicked on your ad. This is a great way to earn money as all you need to do is compel your users to click on the ad shown.
iii) Cost per Install: There are some apps that show ads of another app and compel their users to download them. Here as soon as a user install the app shown in the ad, the app owner earns the money.
Affiliate Marketing is one of the most trusted monetization models for free apps, and customers earned via this method are quite profitable.
3. In-app Purchases
As per a report shared by emarketer.com, global app revenues from purchases rose by 23.4% in the first quarter of 2020. Of the $50.1 billion generated by in-app purchases, $36.6 billion came from within games, a 21.2% increase from the previous year.
In-app purchase is one of the most preferred models to earn a handsome amount of money via these free apps. Most gaming apps do so. You need to buy extra lives, gold coins, treasures, and lots more to stay in the game. Even app development companies offering mobile app development services prefer this model to earn money via free apps.
There are generally three types of products that users buy via this model:
- Consumable: These are the items that are used once, especially in gaming apps like extra lives, currencies, coins, etc.
- Non-consumable: These are extra or say the premium features that will upgrade your app and will enhance your user experience. For example, ad blocking extensions or some additional plugins to increase in-app functionality
Gaming apps like Clash of Clans, PubG, and even PokemonGo are the live examples of apps making money via this model.
Subscription is another yet quite a powerful monetization strategy to go for. Many business owners first launch their app as a free app for a few days, and once a user gets a hang of it, they need to pay a fee either for a monthly or yearly subscription.
This model is usually preferred by music service providers like Spotify and video-streaming apps like Netflix and Amazon Prime. This model is known to bring more user engagement and genuine users to the apps, and thereby increasing the revenue. Also, the Apple store is now rewarding the apps that are using this monetization model. However, one of the major drawbacks of this model is, if the user does not like your free trial, they are more likely to not subscribe to the paid version.
This is relatively a new method of earning money. But within a really short span, this model has gained huge popularity. In this monetization model, entrepreneurs can share their app idea on various fundraising platforms like Kickstarter, Patreon, CroudFunder, Crowd Supply, Fundable, AppsFunder, Indiegogo, and Chuffed. There are many people who are willing to invest in unique ideas, and these platforms help an app owner to meet these investors. This way, they can earn or rather raise money for their apps.
Both gaming and non-gaming apps can raise money via this model. As per the reports, in the year 2017, nearly 138 app ideas were crowdfunded on these platforms, and these apps raised approx. $10k-$100k. However, to raise money, app owners need to invest in their marketing strategy and campaign so that they can attract more investors to their apps. Companies offering Android app development solutions and iOS app development solutions can also help you in creating an impressive and powerful marketing strategy.
Although not a very common way of earning money, this model can also help you raise funds for your free app. This model works best for the apps that are already working successfully in the market and has a good number of users. Here you can reach out to the sponsors in the same niche as your app and promote their brand on your app. You can either share ads, any information, or even adapt the design of your app to their brand.
This model can work in two ways. You can either share the revenue of your app with the sponsors or can charge them a sponsorship fee. However, to earn money via this model is not easy as you will have to first create an app in a specific niche, and then find a suitable sponsor for it.
7. Data Selling
Now, this is a very common technique of earning money via free apps. Most classified apps like Craigslist or even job portals like Naukri are known to sell their data and earn money. You can hire iOS developers and Android developers to get these kinds of apps developed for each platform and earn a significant amount from them.
You can create an app that collects the data and studies the user behavior, and then sell this data to the researchers and other companies looking for it. There are mainly two ways via which you can be benefitted from this model. As mentioned above, you can easily sell this data to other companies or can even use this raw data for your research and make more money out of it.
Common Mistakes While Choosing the App Monetization Model
The process of choosing the right app monetization strategy is complicated. People generally look for tips and tricks to choose the right pricing strategy for their apps and if not prudent in their choices, can make mistakes.
Here are some of the common mistakes that most people make, and instead of earning money they tend to lose their users. So, let us see a few of them:
- Charging too much money is one of the most common mistakes that app owners do. Before finalizing any payment plan, you need to do comprehensive market research, and also see what your competitors are quoting. Based on that you must keep your prices.
- You must have heard “too many cooks spoil the broth.” The same goes with monetization models. Using too many monetization models in a single app can also ruin the purpose. Hence, based on your business goals and target audience, you must choose the mobile app pricing strategy.
- Always sticking to one model and not making changes as per the analytics can be fatal. Never ignore what your analytics is showing, and based on that try to modify your approach.
- Hiring the right set of people to get your app developed is very important. If you are planning to get an Android app developed then hire Android developers as they are the ones who have the expertise for that platform, and the same goes for iOS app development. It is better to hire iOS app developers to get a native app developed for the iOS platform rather than going for a generic mobile app developer.
To summarize everything all we can say is there are a plethora of ways to attract users and earn money via free apps. As of now, the most common ways people know are in-app purchases and subscription models but there are many more that you can follow.
However, each monetization strategy comes with its own set of pros and cons, and hence, one has to be very prudent in choosing the right one for their business. And to choose any model all you need to understand is your target audience and then act accordingly. Comprehensive market research, keeping an eye on your competitor, and hiring a good mobile app development company is all you need to launch a successful app and earn handsome money out of it.
FAQs on How to Earn Money via Free Apps
Now that you know how to earn money via free apps let’s have a look and answer some of the top questions asked by people on this topic.
1. How can I earn money from a free app?
Earning money via free apps is very simple, and there are too many monetization models available like Advertisement, in-app purchases, sponsorship, subscription, data selling, and many more. Based on your business goals and what kind of users you have on your app, you can choose the monetization model for your app.
2. How much money do free apps make?
The amount of money a free app makes depends on the kind of monetization model the app owner has chosen for their app. Also, the more popular an app is the more money it will make. To give you an estimate a popular app may earn somewhere near $50,000, while the lesser popular apps may get somewhere around $3,500.
3. What are the best in-app advertising monetization tools available in the market?
Tools like AdMob, InMobi, Facebook’s Audience Network, Apple’s Ad Apple, Amazon’s Ad, and Tapjoy are a few most popular in-app advertising monetization tools, available in the market. Also, tools like Inneractive, YuMe, Adcolony, and Vungle are a few popular in-app video advertising tools that one can use.
4. How much revenue does a free app make from advertisements?
Most apps follow the cost per click (CPC) model i.e., whenever a user clicks on an ad, a little amount is added to the app owner’s pocket. On average, the revenue per click is approx. $0.10 for banner ads and optimum CTR for an app is approx. 1.5-2%. Also based on the user engagement this money increases.
5. How much does it cost to develop a mobile app?
Mobile app development is a complicated process and hence to calculate the exact mobile app development cost is not possible. This is because the cost to develop a mobile app depends on various factors like app complexity, features, mobile app development team size, the hourly rate of developers, and many more. However, we have compiled a complete guide on mobile app development cost, which you may refer to find the exact cost of your mobile app.