There are typically 4 to 5 million apps available for download from the Apple App Store and Google Play Store and Of those 4 to 5 million, the majority are free to download.
As free apps have always outnumbered the paid ones (in terms of profits and download numbers), most of the people often ask a common question that – how much money do apps make. How do free apps make money? Ever thought how to make money from mobile apps?
Believe it or not, free apps can actually generate A LOT of money for your business.
Free apps essentially make money in the following two ways:
In-app advertisements
In-app add-ons, purchases and upgrades
There’s a lot of different ways to make money with mobile apps, but which are the top options here? How do people make money from free apps with these ways?
To find out, let’s analyze the top and most popular revenue models of free apps.
1. Advertising
Advertising is probably the most common and easiest to implement, and it is done via a third-party ad network.
7 out of 10 free apps providers used advertising as their revenue model in 2016.
Using ads to monetize apps and make money is quite simple. An app owner just needs to display commercials inside their mobile app and get paid from the third-party ad networks.
You can get paid every time an ad is displayed (per impression), per click on the ad, and when a user installs the advertised app.
2. Subscriptions
Subscriptions can be a quite useful monetization strategy. App publishers can choose to offer free content in 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 any restrictions.
The popular and common technique used by the majority of free app publishers is to offer a free trial period and then charge the subscription fee to those who wish to continue to access the app content.
This type of monetization strategy is often used for cloud services, audio and video streaming, and online news services.
To ease the integration of this revenue model, Apple is paying extra attention and making significant changes in how app subscription models work. In the present model, Apple will maintain its current 70/30 revenue split for the first year of subscription. After one year, the new 85/15 revenue share will automatically be implemented.
This new format was made to encourage the app publishers to sell their apps for a recurring fee instead of a one-time cost.
3. Selling Merchandise
Another innovative approach is to sell merchandise in your free app.
Many e-commerce businesses build free apps to sell physical goods such as toys, shirts, shoes, etc. these physical products can be sold directly to the app or via email marketing.
To encourage app publishers to use this monetization strategy, Amazon has started a service called Merch by Amazon that allows publishers to create their artwork, upload it to their platform and promote their products.
4. In-App Purchases
In-app purchases are directly made from within the app and are usually quite a simple process. They’re typically used to access special contents or features such as powerups, restrictive levels, or additional features.
In simple words, in-app purchases provide an ability to sell a variety of virtual items directly from the app.
To make things easier, Amazon even takes care of the payments and delivery of items.
5. Sponsorship
Sponsorship is one of the less commonly used monetization methods, but it can be still an interesting strategy.
In simple words, Sponsorship in your application can be a powerful app monetization strategy if the app publisher builds the right niche app for a targeted audience and launch it on behalf of another company.
Similar to websites, app publishers need to consider sponsors whose target audience is the same as the one being addressed by the app. Before building the app, creating a list of organizations and brands who could benefit from the partnership is a good starting point.
A good example of this strategy is Home Depot sponsorship on the Weather Channel App. the animated app background behind the temperature measurement is the advertisement placed by the sponsor to target homeowners interested in weatherproofing their houses.
6. Referral Marketing
Referral marketing involves promoting a third-party product or service as a way to optimize revenue opportunities.
App publishers can promote or sell affiliates’ products or services based on the number of clicks or installs. For this, you can use pop-up ads to promote someone else’s app or advertise products.
7. Collecting and Selling Data
As you know, apps collect a lot of users’ data, in terms of user behavior or other app usages. All these user behavioral data are desired by many researchers in different fields.
This means the app publishers can sell their users’ behavior data to these researchers and make a handsome amount of money. The data generally contains users’ email addresses, social media accounts, and their personal preferences.
There are two ways to benefit from this model. You can either track what users do and sell data to outside companies and researchers, or you can use the raw data for your own purposes.
From a marketing point of view, companies want to pay for displaying ads to the most relevant audience. So if you can gather enough relevant data, then you can have a way to make a profit out of it.
8. Freemium Upsell
When it comes to talking about freemium upsell, freemium apps are available free of cost to download but contain paid or premium features. These paid and premium features can be accessed through in-app purchases.
In this type of apps, users download the app without paying any charge, and if they like the content of it, they can get full access to functionality by committing a purchase. Using this tactic, gaining lots of new users is easily possible because premium features are optional.
Moreover, this strategy is extremely common for education and health and sports application, allowing users to get premium features with a particular cost.
9. Physical Purchases
There are many eCommerce businesses and startups that have started using free applications for selling their products or physical goods like mobile cases, t-shirts, toys, etc. via developed apps. Let’s take an example of one such free application, Angry Birds, that increased the profit from branded products.
Through this free gaming app, Rovio company sells approximately 1 million branded t-shirts, backpacks, and stickers every month. In fact, Amazon is offering a way to get revenue from merchandise by creating a Merch self-service program to sell custom branded t-shirts from their apps.
10. Transaction Fees
The ninth best way to monetize your apps is transaction fees. It is the best way to make money from your free apps. It is especially possible with those apps that provide a platform, where digital transactions occur on a regular basis.
Let’s take an example if your mobile app has an option for third parties to sell their products and those purchases can be carried out online, then you can charge transaction fees. You can charge a small fee for every single transaction that occurs on your app and makes a lot of money. This way, you can make your mobile apps to earn money without investing much money.
11. Crowdfunding
Another monetization of app way to make money from free apps is crowdfunding, which is new in the industry. In this method, startups and companies share their idea on platforms like Kickstarter, Patreon, Crowd Supply, Fundable, Indiegogo and Chuffed in search of donations to fund the development and promotion of the application.
