How Do Free Apps Make Money in 2024? (With Expert’s Insights and Examples)

I can imagine the title of this article has some people raising eyebrows.

Why would you choose to make a free app when you can get users to pay cold, hard cash for it? Isn’t an initial download or subscription fee a more efficient way to make money from a product?

Yes, paid apps offer instant revenue for web or mobile app developers.

But what if I tell you that the most effective way to profit from your product isn’t necessarily the most obvious?

In many cases, it’s even more challenging for app owners to earn money from paid mobile apps.

Consider this:

As of August 2024, there are a total of 4,345,848 apps available across Google Play and the Apple App Store.

Source: 42matters

Now, picture yourself in the shoes of app users.

With millions of options available, would you choose to pay for an app if there’s a free alternative?

Likely not.

Fortunately, charging an upfront download or subscription fee is only one of the many ways to make money from mobile apps.

There are other means to generate revenue while keeping your app free, and I’ll gladly share the most effective ones in this article.

But first, let’s look at the pros and cons of paid and free apps.

Paid vs free apps

To be clear, I’m not discouraging you from embracing the paid app monetization model.

Each business model has its strengths and weaknesses depending on various factors, including your target audience, app development and business goals, and other aspects specific to your industry.

Make sure you think about these as you draw out your app monetization strategy.

Now that that’s out of the way, let’s continue discussing the upsides and downsides of paid and free mobile apps.

Paid apps

The most obvious advantage of a paid app is that it brings instant revenue during app downloads. Users are also most likely to engage with the products frequently since they spend money on them.

Building a loyal user base that remains invested in your app is one of the best ways to generate a healthy profit using this model.

The problem is most people aren’t willing to pay upfront for an app without having experienced it. One Google study found that 50% of mobile users have never paid for an app. This has resulted in free apps outnumbering their paid counterparts in the app stores.

Free apps

Now, offering mobile apps free can be a double-edged sword. The most obvious downside of a free app is that they don’t generate instant revenue.

However, when an app is made free, a user’s choice gets much easier.

The cost barrier is removed, and there is one less reason not to download the app. The user can playtest with the product with no strings attached.

Since the initial access threshold is nonexistent, free applications acquire more users. At this point, different app monetization opportunities become possible.

The 5 most effective ways to make money from free apps

Now that you know the pros and cons of paid and free mobile apps, let’s discuss the different ways how free apps make money:

1. Freemium apps: Make them want and pay for more

One popular method to make money from free apps is through the freemium model. Freemium apps offer both free and premium features, and this monetization strategy is also known as the in-app subscription model.

How the freemium model works

The freemium model allows users to access a free app version with basic features. Freemium apps make money by locking full access to more desirable and advanced features behind a subscription fee. It is a common strategy employed by productivity and dating apps.

By using this approach, you can attract a large number of users with free features while generating revenue from those who choose to upgrade for additional benefits, balancing user acquisition with monetization effectively.

Source: Bumble

How you should do it

Ever heard of the idiom, “Why buy the cow when you can get the milk for free?”

To entice customers to upgrade or turn into paying users, you must know how to give them enough without giving everything away.

You must allow your target audience, particularly first-time users, enough access to experience your app and find compelling value. At the same time, you must put enough limitations so they’ll have reasons to make paid subscriptions.

But how do you decide which features should be kept free and which ones you should charge for?

Assess how crucial the feature is to the core experience

In a discussion with our senior product manager at Appetiser, I learned that the key is to assess how critical each feature is to the overall app experience.

“If a feature is crucial for user retention or engagement,” he said, “you might want to offer it for free to keep users coming back. On the other hand, if it’s not essential, consider making it a premium option.” — Brian Wong, Senior Product Manager, Appetiser Apps

Core features essential to the app’s main value and user satisfaction should remain free to retain users.

Keeping these features accessible ensures that users continue to find the app valuable and engaging, which helps in maintaining a strong user base.

On the other hand, less important features can be offered as premium options. Since these features are nice to have but not crucial, users who want extra benefits can choose to pay for them.

Measure profit potential against user retention

You can calculate the feature’s importance by comparing revenue to retention. Weigh the potential revenue against the risk of alienating free users.

If the feature could significantly drive revenue without negatively affecting retention, then it could be worth making it premium.

Make upgrades feel like a win

App gamification is another strategy you can try. You can reward users with in-app currencies, credits, or bonuses when they transition to a paid version. By framing the upgrade as a prize rather than just a purchase, you create a sense of accomplishment that encourages users to pay.

“If they see it as a reward rather than a purchase, it might make the switch easier for them.” – Brian Wong, Senior Product Manager, Appetiser Apps

Example
The fitness and ballet technique app Claudia Dean World is a great example of an app that nails the freemium model. They offer free workouts to reel users in and premium, specialized options that convert them.

Attracting 20,000 users monthly, it’s clear they’ve hit the mark. The app stands out for its ease of use, engaging content, and smart communication through notifications, emails, and updates.

By making their premium features feel exclusive, Claudia Dean mastered connecting with their audience. They didn’t just toss extra content behind a paywall—they created an experience that felt special, like being part of an insider group.

I’ve noticed that this approach taps into that desire we all have to access something a bit more elite. It’s not just about the premium content itself but the feeling of getting something others don’t. That’s what really drove people to pay.

And on top of that, their proactive listening to feedback and strong community ties just fueled even more growth. It’s a smart, layered strategy.

I encourage you to check out Claudia Dean World’s case study to learn more about their story.

Freemium model pros and cons

2. In-app advertising: Gain revenue with every ad view

Ads are the easiest and most common ways free apps make money. If you’ve downloaded any free application, chances are you’ve encountered all kinds of ads.

In this app monetization model, you get paid every time a user views the ad, clicks on it, or installs a program directly from the advertisement.

Types of in-app ads

In-app advertisements come in different formats. Some of the most popular are:

• Interstitial ads. These are full-screen pop-ups that often appear between app transitions, usually before or after accessing features within an app. These ads typically include videos, animated images, or texts encouraging app users to interact with the ad or visit an external website.

Source: Instapage

• Banner ads. Banner ads are image-based advertising placed at the edges of the mobile device screen to get the user to go to a different app or site. They can often contain an image, a video, text, or a combination of these.

Source: AppSamurai

• In-stream video ads. These are digital advertisements served between content while the user is streaming a video. They may appear before, during, or after the video depending on where it’s been strategically placed to optimize engagement and results.

Source: AdRoll

• Native ads. Native ads are designed tofit into the app’s regular content, matching the visual style, tone, and overall look. While they are clearly marked as sponsored content, they blend so well into the app’s design that users may not immediately notice they are looking at an ad. This makes them less disruptive and more engaging for users.

Source: Outbrain

• Rewarded video ads. Popular among gaming apps, rewarded video ads help app makers earn money without annoying pop-ups or banners. Instead, these ads let users watch a video in exchange for incentives like extra game currency, special items, or other perks, creating a win-win for both the app and the user.

Source: CleverTap

How in-app ad works

This monetization model works by integrating ads into your platform through ad networks, such as Google AdMob.

In most cases, the process is straightforward. You simply need to sign into the ad network platform, and it will take care of delivering relevant ads to your free app.

I wrote another article outlining tips and strategies on how to get ads for your app and monetize it effectively. Check it out.

How you should do it

If you’re using ads in your app, make sure you don’t disrupt the user experience. Ads can sometimes be intrusive and frustrate users, but there are ways to avoid that.

Take Facebook and TikTok, for example. I often find that Facebook interrupts videos with ads, which forces me to wait—and honestly, that gets pretty annoying.

But with TikTok, the ads often blend so well into the content that I hardly even notice them. The experience flows naturally, and I don’t feel like I’m being interrupted.

Here’s a video that showcases some of the best TikTok ads from brands:

Source: Filmora for Creators (YouTube page)

But even if you prefer to run ads on platforms other than TikTok, you can still deliver the seamless experience users expect. Here are some ways how:

• Strategic placement. Run your ads at natural breakpoints, like after a user finishes an action or level in a mobile game.
• Personalized content. Tailor your ads to your users by analyzing their behavior and preferences so the content feels relevant.
• Quality control. Ensure your ads are high-quality and glitch-free—nothing leads to bad reviews faster than a poorly functioning app.

In-app ad pros and cons

3. Affiliate marketing: Cash in on connections

Another way free apps make money is through affiliate marketing.

This app monetization model is similar to in-app advertising, but instead of random ads, you recommend specific companies, products, or apps that fit your audience’s interests.

It shares a similar dynamic with how influencers partner with brands. Influencers with a huge following often promote brands that resonate with their followers or fit their image.

Likewise, affiliate brands work with apps to promote products or services that match the interests of the app’s audience.

How affiliate marketing works

With affiliate marketing, you earn a commission when users make a purchase from a partner brand, download an advertised app, or click on an affiliate link in your free app. Essentially, you get paid based on how users interact with the promotions you feature.

To get started, you can either reach out to companies looking to advertise through affiliate marketing or use platforms like Google AdMob. These tools help you find the right affiliates and manage the process, so you can focus on engaging your users while still earning from their interactions with the ads.

Source: Google AdMob

How you should do it

For a successful affiliate marketing campaign, make sure your recommendations align with your app users’ interests. Partner with brands that match your audience’s demographics and preferences.

For example, if you have an app for fitness enthusiasts, teaming up with a brand that sells workout gear or healthy snacks is a great fit.

To make your campaign even more effective:

1. Know your users. Use data to understand what your audience likes and choose brands that fit those interests.
2. Build trust. Promote products and services you genuinely believe in, as this builds trust with your users and improves conversion rates.
3. Track performance. Monitor how well your affiliate links perform and adjust your strategy based on what works best. If certain types of ads generate more clicks or sales, focus more on those strategies.

Example

Amazon is an example of a company that offers an affiliate program.

Source: Amazon Associates

Amazon has a huge inventory of products they promote by integrating links into their affiliate’s app. Every time users click a link and make a purchase, the company pays the affiliate a percentage of the sale.

For more powerful tips for marketing your app, check out the Biggest Mobile Marketing Trends That Will Level Up Your Business.

Affiliate marketing pros and cons

4. In-app purchases: Sell add-ons and upgrades right inside your app

The in-app purchases model allows apps to generate revenue by selling various products and services directly within the app. This model offers flexibility, covering a wide range of items that cater to different user needs.

Premium additions, like extra game levels or advanced workout routines, are common ways apps make money. But it’s not just digital products—apps can also sell physical items like branded merchandise, clothing, or accessories related to their theme.

How the in-app purchase strategy work

To sell items through your platform, you need to set up your app with the payment systems of the Google Play Store (for Android apps) or the Apple App Store (for iOS apps).

Start by signing up as a developer on these platforms and configuring your app to handle payments. You’ll need to decide what you want to sell—like virtual items, subscriptions, or premium features—and set the prices and descriptions for these items.

I found some video tutorials that you might find helpful:

How to set up in-app purchases on App Store Connect

Source: CodeWithChris (YouTube page)

How to set up in-app purchases on Google Play Console

Source: Sharcourse (YouTube page)

Once everything is set up, users can buy these items directly in your app. The mobile app stores take care of the payment processing, and you get paid based on their revenue-sharing rules. This setup ensures a smooth buying experience for users and helps you earn money from your app.

How you should do it

The key to a sustainable in-app purchases model is to motivate customers to make repeat purchases. One way to achieve this is to keep your prices as low as possible.

A purchase of less than a dollar is insignificant by itself, and most users don’t mind spending a small amount every few days or weeks.

You can also introduce time-limited offers to persuade more users to buy. Leveraging consumers’ fear of missing out is a powerful app monetization strategy for free apps and even other types of digital products.

Example

Candy Crush Saga is a prime example of how to make in-app purchases work brilliantly. The game lets players buy extra lives, boosters, and level skips, which makes it easier to move through tough levels and keep enjoying the game.

This strategy helped Candy Crush earn $956.9 million in 2023, making it one of the top-grossing mobile games of all time.

Source: Candy Crush

What I think makes this approach so effective is how it taps into our desire to keep progressing and avoid frustration. When you’re stuck on a level and just need a little extra help, the option to buy a booster or an extra life is tempting. It feels like a quick fix that helps you move forward without getting frustrated.

In my view, the success of Candy Crush Saga’s in-app purchase strategy is all about timing.

They offer these purchases when players are most likely to want them—like when they’re close to finishing a challenging level. This clever timing keeps players engaged and willing to spend money. It turns what could be a frustrating moment into an opportunity for both enjoyment and spending, driving their impressive revenue.

In-app purchase pros and cons

5. Sponsorship: Turn smart partnerships into profit

Once your app becomes popular and you have a high number of loyal daily active users, you can potentially attract brand sponsors.

In this app monetization strategy, mobile app developers partner with businesses looking to promote products or services through app content.

This type of app monetization can help app providers earn additional revenue without resorting to traditional advertising platforms like banner ads.

How sponsorship works

Companies that enter into sponsorship deals often pay a monthly sponsorship fee for product placement in prominent sections of an app, like the loading screen or the main menu.

The sponsorship model allows app publishers to create mutually beneficial partnerships with other companies, reinforcing both their brand and the sponsor’s brand.

How you should do it

Before looking for sponsors or charging an ad placement fee, I suggest you arm yourself with compelling user data using mobile analytics tools, such as demographics, app usage metrics, and buying behavior.

Brands are more likely to invest in your app if they see detailed insights into who your users are, how often they use the app, and what they’re interested in buying.

The more specific and compelling your data, the better you can show potential sponsors that your app is a valuable platform for reaching their target customers.

Example

One app that managed to pull off a memorable sponsorship monetization strategy is Snapchat.

Source: Twitter

In 2016, the popular fast-food chain Taco Bell sponsored a Snapchat filter that turn users’ head into a giant taco to celebrate Cinco de Mayo.

The filter broke Snapchat records with a total of 224 million interactions and 12.5 years’ worth of unique user engagements in just one day.

Needless to say, Snapchat users ate it up.

Sponsorship pros and cons

How to choose the ideal app monetization model for your brand

Free apps can indeed be profitable, but choosing the right monetization strategy requires a strategic approach. Here’s a step-by-step guide to help you make an informed decision:

1. Conduct market and competitor research

“Conduct market research to understand your users, their thresholds, and what your competitors are charging,” advises Brian Wong, one of our product managers.

Understanding how your competitors approach pricing can reveal effective strategies and potential pitfalls. Examine their app store descriptions, user reviews, and revenue rankings. Identify what strategies they use and what pitfalls they encounter to reveal effective approaches and help you differentiate your app.

Take into account your users’ demographics, behavior, preferences, and spending patterns. This information will help tailor your monetization strategy to meet their needs and expectations.

2. Define your app’s value proposition

Identify what makes your app valuable and unique. Determine the core features, functionalities, or content that users find compelling and are willing to pay for. Apps that communicate their value are more likely to attract paying users.

For instance, as we’ve seen in Claudia Dean World’s success, positioning certain features as exclusive or essential can make them more attractive to users who are willing to pay for premium access. Apps make money when users are engaged with what they bring to the table.

4. Consider user experience

Balance monetization with providing a positive user experience. Avoid intrusive ads or excessive monetization methods that could frustrate users. Implement strategies that enhance the user experience rather than detract from it.

5. Evaluate revenue potential

Assess the revenue potential of each monetization model based on your app’s target audience and market trends. Consider factors such as user acquisition costs, engagement levels, and conversion rates. A model that aligns with your app’s value proposition and user base while providing a sustainable revenue stream should be prioritized.

6. Experiment and iterate

After selecting a monetization model, implement it and monitor key performance indicators (KPIs) such as user retention, engagement, conversion rates, and revenue. Collect feedback from users and analyze data to refine your strategy. Don’t hesitate to experiment with different app pricing models and adjust based on user responses and market trends.

7. Stay updated

Keep an eye on industry news and successful apps to identify opportunities for innovation or adjustments in your monetization strategy. The app industry evolves rapidly, so staying informed about emerging app development trends, technologies, and user preferences is crucial.

Speaking of trends…

📈4 Biggest app monetization trends to watch out for

The first-party data advantage

First-party data refers to the information you collect directly from your users—such as their behaviors, preferences, and interactions within your app.

With privacy rules getting stricter and third-party data becoming tougher to get, first-party data is your new best friend. This is the info you gather directly from your users—like what they do in your app and what they’re into. It’s incredibly valuable because it gives you a clear picture of who your users are and what they want.

User experience is still (and will always be) king

Free mobile app monetization will primarily revolve around providing a great user experience. More app developers recognize the significance of ensuring a positive and seamless user experience and will refrain from compromising it when implementing methods to increase downloads and generate revenue.

Money in the mix

App publishers need to find new ways to earn money, especially with inflation and a crowded market of both free and paid apps. This might mean trying different app monetization strategies or using several methods together, like combining affiliate marketing with the freemium model where users can access basic free features but pay extra perks.

Increased attention to catching users’ attention

As consumers’ attention span continues to decline, monetization strategies have shifted towards capturing and retaining users’ attention as a means to drive revenue. From personalized content recommendations to strategic push notifications and immersive gamification, app monetization is now centered around engaging users on a deeper level.

Frequently Asked Questions About the Free App Monetization Strategy

How do apps make money without a download or subscription fee?

Free apps make money by implementing any or a combination of the following app monetization models:

• In-app advertisements
• In-app purchases
• Affiliate marketing
• Freemium
• Subscription

Why should I monetize my free app?

Surprisingly, not all app publishers are looking to monetize mobile apps.

But even if your goal for creating an app is not purely to earn money, you should still ensure that your unique app idea has a path for generating income.

Developing and maintaining an app that users would love to use comes with costs. Generating income from your work can help you offset your expenses while maximizing your reach.

What is the most popular app monetization strategy for free apps?

As of 2024, In-app ads continue to be the most popular app monetization strategy in the U.S. and the rest of the world.

Are there many free apps in the app stores?

Yes. Free mobile applications make up a dominant share of the total apps in the app stores. As of March 2024, 97% of Android apps in the Google Play Store and 95.1 % of iOS apps in the Apple App Store were free.

How much money do free apps make?

There is no figure reflecting exactly how much free apps make. The top-grossing apps include both free and mobile apps. Considering how free mobile apps dominate the app stores in terms of downloads, it can be inferred that it is a lucrative market.

Go from free to profitable

It’s amazing to see how these apps, which seem to offer everything at no cost, are actually revenue machines in disguise. For app publishers, this knowledge is a game-changer.

Whether it’s through a freemium model that offers enticing premium features or ad-supported content that seamlessly fits into user experience, free apps have cracked the code on monetization. They prove that when you focus on value, any concept can evolve into a successful business.

Ready to turn your app idea into a revenue powerhouse? Discover how Appetiser can help you go from concept to traction in just 30 days. With our expert team and streamlined app development process, we’ll turn your idea into a polished, high-performing product that stands out and drives real growth.

Contact us to get started!