Do you recall the banners that show up when you visit an online business or the advertisements that show up when you view videos on YouTube? These are instances of how companies make money off of their websites; the same is true for both free and paid mobile apps. With 90.3% of apps on the App Store and 96% on Google Play, free apps are currently controlling the app market and generating $71.3 billion in revenue. However, because those apps are free, how can they generate revenue?

This article is perfect for you if you have a free mobile app or want to create one and would like to learn more about app monetization techniques. We go over how to find one that will work for your app and how to monetize it below.

Let’s get started.

How Much Money Do Free Apps Make?

Currently, the typical mobile device owner utilizes seven to eight apps per day. However, 98% of mobile app downloads and revenue come from free apps, while just 5–10% of customers are willing to purchase a paid app. Free apps are preferred by the vast majority of mobile app users, and this percentage keeps growing. Google Play saw a 16.4% rise in free app downloads in the first half of 2019 and generated $41.9 billion in revenue.

Due to their greater user popularity, free apps have the potential to make a substantial profit. But how can you pick the best monetization model for your specific app? To find out, let’s examine some tips.

How to choose the best free app monetization strategy

You must take into account the following factors while choosing the most lucrative and successful mobile app monetization strategy:

Business Objectives. Each mobile application has a commercial objective, which is to answer a user’s problem. Because users engage with apps for a variety of reasons, their business objectives have an impact on the revenue strategy. For example, a subscription mobile is not the greatest choice for educational apps with a lot of custom material, and in-app purchases would not do as well as a subscription for a mobile music app. Therefore, using the in-app purchase model in conjunction with advertisements will yield the highest return.

Target Market. A clear picture of the optimal monetization approach may be obtained by knowing and comprehending your target audience, particularly paying users, sometimes referred to as the money spending core. To do this, draw a portrait of your app’s users, consider the features they might require, and estimate how much time they will spend using it.

Rivals. As previously stated, every software helps the user with a certain issue. Therefore, examine competitors and other apps in your market more closely to choose an appropriate method of earning money from free apps. It’s possible that your company will benefit from the same monetization technique that other apps in your sector are using.

Are you curious how free apps generate revenue? Let’s examine several tactics you might use to monetize your free app.

How do free apps make money: The most popular monetization strategies 

Depending on your business industry and app type, you can apply one monetization model or several at once. The list of app monetization models includes:

• Advertising and affiliate marketing
• In-app purchases
• Paid subscriptions
• Freemium
• Sponsorship
• Crowdfunding
• Transaction revenue

Now, let’s look at them in more detail. 

Advertising and affiliate marketing

Ads and business promotion are how seven out of ten free apps make money. The most popular method of making money off of a free app is charging:

Cost per impression or cost per mile (CPM). Payment is made to you for each 1,000 ad views.
CPC stands for cost per click. When app users click on display adverts, you get paid.
CPV, or cost per view. You bill advertisers based on the quantity of interactions or ad views.
CPI stands for cost per install. Every time customers install the program you recommend, you get compensated.

HOW TO MONETIZE AN APP

As you can see, there are several kinds of in-app ad prices and ways to display advertisements to app users. Users of your app can see advertisements in five different ways:

Display ads or banner ads. In order to allow consumers to freely utilize your app, the banner ad shows at the top or bottom of the mobile device screen. These advertisements do, however, have a very low engagement rate (0.1%).
video advertisements. These advertisements linger 10–30 seconds and show up during normal app usage pauses. When an app user receives a reward for watching a whole advertisement video, this ad category also contains rewarded video commercials.

Native advertisements, such as sponsored movies or content, blend in with the app’s design and don’t divert users. As a result, people find native ads less annoying than other kinds of advertisements.
Interstitial Ads. When a user enters or exits an application, this kind of advertisement appears as full-screen pop-ups. To find out more about the campaign, the user can click on the advertisement or close it.

Sponsorship and influencer marketing

Deeper integration with the app distinguishes this form of app monetization from advertisements. Let’s clarify. In addition to running advertisements, you can incorporate sponsored content with exclusive deals directly into your app or display a sponsor’s badge or icon in the splash screen or footer. Look for sponsors who share the same target demographic to increase the profitability of this kind of monetization approach. For example, if you have a fitness app, you can look for sponsors among gyms, personal trainers, or websites that promote healthy eating.

Influencer marketing is a somewhat different approach to sponsorship because you will be working with a well-known individual opinion leader within your target demographic rather than the company. Such an opinion leader will spread the word about your app to admirers and draw in new users in this way. Another option is to contact an influencer to promote your app; this is a common tactic used by well-known companies.

In-App Purchases

You can sell a variety of goods using this app monetization approach, such as:

Consumables, such digital money or health points, that the user may use within the app.
Blocking, maps, and new games are examples of non-consumable things that can be used indefinitely.
In-app purchases keep consumers riveted to the screen and boost user engagement rates. Given that app stores take 3% of every in-app purchase, this monetization strategy involves integrating native app store payment methods.

Subscriptions

You can try using premium subscriptions to earn money on free apps. Only 5% of applications with significant user engagement—like productivity or music, video, or instructional apps—fit this criteria, though. Third-party payment gateways like PayPal or Stripe must be integrated for this kind of payment. App retailers don’t charge a commission as a result. The way the app subscription operates is as follows:

The consumer is given a trial period, often one month, to test your program after installing it for free.
If the user keeps using the app after the trial period is over, they will have to purchase a subscription.

Subscriptions come in two varieties:

Subscriptions that don’t renew when a customer purchases an app subscription for a specific time frame, such as one, three, or six months. To avoid unforeseen charges, the user must manually purchase a new membership at the conclusion of the current one. Seasonal apps like gardening, sports, or hunting are good candidates for this kind of app monetization.
The software will automatically collect user money once a year, every six months, or every month if subscriptions are automatically renewed. Users can only access the app after entering their credit card information in order to guarantee that they will purchase a subscription following the trial time.

Freemium

The freemium model, which is comparable to the subscription model, is a way to monetize a free app. The primary distinction is that users can utilize the basic functions of the free app version without any time limits. Users must pay monthly or yearly fees to obtain an enhanced edition of the program that is packed with features. Only 0.5–2% of app users purchase a premium version, according to statistics. However, releasing a free version of your program will spread its reach and increase its virality.

Crowdfunding

Startups especially use crowdfunding, which has been shown to be a successful method of generating capital. Crowdfunding brought in about $17.2 billion in 2018 in North America alone. Any platform user can contribute money to one of the more than 400 crowdfunding platforms if you need to raise extra money for marketing or app development. The following are the most often used crowdfunding sites for mobile app projects:

Kickstarter
Indiegogo
CrowdFunder
AppsFunder
To launch your crowdfunding campaign, you need to complete the following steps:

Set campaign fundraising objectives. Think of the SMART acronym: specific, measurable, achievable, relevant, and time-based.
Write a narrative that explains the purpose of your app, the decision you made to create it, and the issue it addresses. You will demonstrate the possibilities of your software in this way.
Since video material is the most captivating narrative medium, make a captivating video.
Create a campaign page that gives investors a thorough rundown of your project.
Promote your campaign on social media to attract possible investors.

In a nutshell

In summary, the market share of free mobile apps is larger than that of paid apps. There are numerous approaches of monetizing free mobile apps, and each one will yield a different amount of revenue and have a varied user engagement rate. We advise choosing the monetization model based on the target demographic, the app’s function, and its niche.

You can combine many revenue techniques to increase the profitability of your free app:

Ads can be displayed alongside a paid ad-free app version, which benefits both you and your users.
Additionally, you can blend advertising with subscriptions or in-app purchases and subscriptions.
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