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 fee a more efficient way to make money from a product?
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.
As of the third quarter of 2022, there were more than 5 million apps combined in the Apple App Store and Google Play Store.
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?
Fortunately, asking for an upfront download 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. So, read on.
But first, let’s have a closer look at the pros and cons of paid and 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.
Consider all those 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.
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.
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.
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:
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.
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.
- 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.
- 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.
- Native ads. Native ads appear as part of the app’s natural content. They are customized to fit the app’s visual style. This makes native ads indistinguishable from traditional content aside from the fact that they are sponsored content.
- Rewarded video ads. Commonly used by gaming apps, a rewarded ad video enables app publishers to make money from their free app without intrusive pop-ups or banners. Rather, rewarded video ads offer an opportune moment for users to engage with app content in exchange for incentives, like app currency boosts, unlockable app merchandise, and more.
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.
|✔️Wide range of potential advertisers, providing a variety of revenue sources||❌Can interrupt the user experience and lead to reduced engagement|
|✔️Can be implemented in both free and paid apps||❌Users may find ads intrusive and distracting, affecting their overall satisfaction|
|✔️Can generate revenue without directly charging users||❌Ad blockers may prevent ads from being displayed, reducing potential earnings|
|✔️Offers the potential for high earnings if the app has a large user base||❌Ad revenue may fluctuate based on ad performance and user behavior|
The best way to execute ad campaigns is to ensure it’s done in the least disruptive way possible.
One of the downsides of the in-app ad strategy is that it can be intrusive and, therefore, affects user experience.
So, how do you seamlessly run your ads?
There is no one-size-fits-all approach, but some of the strategies that have worked for many of our app development partners are:
- Running the ad, particularly full-page ones, after the user finishes an action or a level, in the case of mobile games.
- Analyzing how your app users interact within the platform so you can tailor ad content based on their personal preferences.
- Ensuring the ads, regardless of the format, are high quality and free of technical glitches.
Remember, nothing drives bad reviews faster than an app that fails to deliver the seamless experience that users expect.
This is why at Appetiser, we make sure every client experiences our design excellence and tech perfection — a practice that not only earned us UpLabs’ recognition as the #1 designer in Australia and #7 in the world but also empowered numerous partners to make an incredible impact.
One of them is Grill’d.
Before having Appetiser on board, Grill’d was a crash-prone app with a 1-star rating and a high customer churn rate.
In 6 months, we turned the food ordering platform into a 99.9% crash-free app that saw a 10 times increase in orders and 51% growth in monthly active users.
Want to know how we did it? Check out Grill’d’s case study.
Another way free apps make money is through affiliate marketing.
This app monetization model is closely related to in-app advertising, except that the companies, products, or apps that you recommend on your platform are specifically curated for your audience.
It shares a similar dynamic with how influencers partner with brands. Influencers with a huge following often refer brands that resonate with their followers or fit their image.
With affiliate marketing, you typically get paid a commission when a user purchases your partner brand’s products, downloads an app advertised on your free app, or clicks a link.
You can either find a partner company looking to promote its products and services or use tools like AdMob that can find suitable affiliates for you.
|✔️Can provide a passive income stream without the need for direct sales or product development||❌Requires careful selection of affiliate partners to maintain app integrity and user trust|
|✔️Offers the potential for high earnings if the app has a dedicated and engaged user base||❌Users may perceive affiliate promotions as biased or manipulative|
|✔️Allows for partnerships with relevant brands and products that align with the app’s niche||❌Overreliance on affiliate marketing may dilute the app’s original purpose and content|
|✔️Performance-based commissions incentivize the promotion of products and services||❌Affiliate program changes or closures can disrupt revenue streams|
The key to an effective affiliate marketing campaign is to ensure that your recommendations resonate with your app users. As such, you must partner with brands with a market that shares your audiences’ demographics and other profiles.
One good example of companies that has popular affiliate programs is Amazon.
Source: Tech Crunch
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, Amazon pays the affiliate a percentage of the sale.
For more powerful tips for marketing your app, check out our article about the Biggest Mobile Marketing Trends in 2023.
Another way to make money from free apps is by adopting the freemium model. Freemium apps are applications that offer both free and premium features. This monetization strategy is also known as the in-app subscription model.
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.
|✔️Wide user adoption potential due to the free availability of the app||❌Requires additional development efforts to create and maintain both free and premium versions|
|✔️Provides a trial period or basic features for users to experience the app before committing to a paid version||❌Users may expect substantial features and content for free, diminishing the perceived value of the paid version|
|✔️Enables a larger user base, increasing the potential for in-app purchases or premium subscriptions||❌Competing free alternatives may impact the conversion rate to the premium version|
|✔️Users can choose to upgrade if they find value in the app, leading to a higher conversion rate||❌Balancing the free and premium features can be challenging to avoid user frustration|
Ever heard of the idiom, “Why buy the cow when you can get the milk for free?”
The freemium model requires a keen sense of balance. 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 exactly do you know which features are compelling enough for your potential users?
As with any app, paid ones or otherwise, the only way to know is to bring your product into the hands of your users.
This is why we always stress the importance of a minimum viable product (MVP).
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Having an MVP plays an essential role in custom app development. It helps you ensure that you’re creating something your customers want.
By creating the leanest version of your app, you can launch your app faster. This will allow you to gain user feedback and refine it accordingly to increase your chances of success.
To learn more, check out our comprehensive guide on how to start lean with an MVP.
One great example of an app that impressively utilizes the in-app subscription model is Vello, a social network platform that connects fans and celebrities and among many of our successful app development partners.
The brainchild of Hawthorn FC’s Ben Dixon, Vello allows users to join the app without a fee to send and receive personal video messages from their favorite personalities.
To leave users wanting more, Vello offers premium features. It gives users the option to subscribe to a VIP feed for access to exclusive video content.
Want proof that it works?
Vello now has a database of over 1,000 high-profile celebrities and a fan base of over 150 million!
In Vello’s unique startup journey, you will see that we put a premium on making freemium work for our clients.
The in-app purchases model sells merchandise or services within the app.
These can range from anything, such as premium content and digital products to actual tangible goods or branded items.
Free apps make money from this model by receiving a percentage of the revenue generated through in-app purchases.
To sell items through your platform, you need to sign up and configure your app to the commerce and payment systems of either the Google Play Store (for Android apps) or the Apple App Store (for iOS apps).
|✔️Users have the option to enhance their app experience through additional features, virtual goods, or content||❌Users may perceive in-app purchases as expensive or unfair, leading to negative reviews and decreased retention|
|✔️Offers flexibility in pricing and different tiers of in-app purchases to cater to various user preferences||❌Balancing the in-app purchases’ value with the free app experience can be challenging|
|✔️Can generate significant revenue if the app has strong user engagement and a compelling in-app purchase ecosystem||❌Users who are unwilling to make purchases may feel limited or excluded from certain features or content|
|✔️Supports ongoing monetization beyond the initial app download||❌Can create a perception of pay-to-win scenarios in mobile games, affecting users’ view of fairness|
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 little 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 apps.
One example of an app that succeeded with the in-app purchase model is Roamni — a world-first multisided marketplace for audio tour content and one of Appetiser’s app development partners.
Roamni allows users to download the app for free to discover, listen, share, and monetize audio stories. At the same time, it provide users the option to purchase paid stories and guided audio tours shared by individual and business users.
In other words, Roamni has a brilliant, win-win strategy that benefits itself and its users.
This strategy, along with the app’s unique and user-centric interface, stimulates the interests of prominent investors — including the Australian Grand Prix and Formula 1!
To learn more about their journey and the roles our app development company played in their success, read Roamni’s case study.
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, 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.
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.
|✔️Provides a direct partnership with brands, leading to dedicated and targeted monetization opportunities||❌Requires careful selection of sponsors to maintain app integrity and align with user interests|
|✔️Allows for the integration of sponsored content seamlessly into the app experience||❌Users may perceive sponsored content as biased or intrusive, affecting their trust in the app|
|✔️Can make money substantially if the app has a specific and engaged user base sought after by sponsors||❌App content may need to be tailored to accommodate sponsor requirements, potentially altering the original app vision|
|✔️Offers the potential for long-term collaborations and brand loyalty||❌Sponsorship opportunities may be limited or competitive, particularly for niche or smaller apps|
Before looking for sponsors or charging an ad placement fee, I suggest that you arm yourself with compelling user data, such as demographics, app usage metrics, and buying behavior.
This will give brands a stronger reason to explore your app as a way to build their audience reach.
One app that managed to pull off a memorable sponsorship monetization strategy is Snapchat.
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.
Free app bring profits. But with numerous app monetization strategies available, determining the best direction for your brand requires careful consideration of various factors. Here’s a step-by-step guide to help you make an informed decision:
Begin by gaining a deep understanding of your app’s target users. Consider factors such as demographics, user behavior, preferences, and spending patterns. This information will help you tailor your monetization strategy to suit your users’ needs and expectations.
Apps make money when users are engaged with what they bring to the table, so clearly 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. These insights will influence your monetization approach.
Study your competitors, particularly successful apps, to gain insights into their monetization strategies. Analyze their app store descriptions, user reviews, and revenue rankings. Identify what is working for them as well as their common mistakes, and then consider how you can adapt or differentiate your approach to stand out.
Strive to strike a balance between monetization and providing a positive user experience. Intrusive or excessive advertising or monetization methods can frustrate users and lead to decreased retention rates. Focus on implementing monetization strategies that add value to your users’ experience rather than detract from it.
Assess the revenue potential of each monetization model based on your app’s target audience, market trends, and user behavior. Consider factors such as user acquisition costs, engagement levels, and potential conversion rates.
A model that aligns with your app’s value proposition and user base while providing a sustainable revenue stream should be prioritized.
Once you’ve selected a monetization model, implement it in your app. Monitor key performance indicators (KPIs) such as user engagement, retention, conversion rate, and revenue. Collect feedback from old and new users and analyze data to refine and optimize your strategy over time. Don’t be afraid to experiment with different free app monetization models or make adjustments based on user response and market trends.
Keep an eye on successful apps and industry news to identify opportunities for innovation or adjustment in your monetization strategy. The app industry constantly evolves, so stay informed about emerging trends, technologies, and user preferences.
Now, speaking of trends…
Allow me to arm you with some data and insights reflecting the latest in free app monetization.
📈What’s Trending in the App Monetization Landscape?
In-app ads rule the fads
In-app video advertising is increasingly popular — spending in the United States is projected to reach $11.3 billion by 2024. With the right approach, in-app advertisements can turn a free app into a money-making app.
User experience is still king
Free mobile app monetization will primarily revolve around providing a great user experience. More app publishers and 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.
Diversification is protection
App publishers must harness new revenue streams and ways to make money in a climate of inflation and a crowded free and paid apps market. This may involve exploring alternative monetization strategies or employing multiple approaches, such as combining affiliate marketing and the freemium app model.
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.
More players on the field
Non-game apps are forecasted to take over 57% of revenue share on the app marketplace by 2026. As non-gaming mobile apps develop so quickly, new monetization trends may emerge and evolve too.
Frequently Asked Questions About the Free App Monetization Strategy
Free apps make money by implementing any or a combination of the following app monetization models:
- In-app advertisements
- In-app purchases
- Affiliate marketing
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.
As of November 2022, in-app ads are the most popular app monetization strategy in the U.S. and the rest of the world.
Yes. Free mobile applications make up a dominant share of the total apps in the app stores. As of November 2022, 97% of Android apps in the Google Play Store and 94% of iOS apps in the Apple App Store were free.
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.
In the dynamic landscape of free mobile app development, it is crucial to adapt and innovate not only to make money but more so to stay ahead of the game. The strategies employed by free apps to generate revenue have evolved significantly. From in-app advertising to in-app purchases to sponsorships, app publishers are constantly seeking new avenues to maximize their earnings.
It becomes evident that the success of free apps lies in striking a delicate balance between user satisfaction and revenue generation. It requires continuous adaptation, data-driven insights, and a keen eye for emerging trends in the app industry. By embracing innovation and exploring new horizons, app publishers can unlock the potential to thrive in this ever-evolving landscape.
The line between an effective strategy and a weak one is thin, but with enough preparation and research, you will be ready to make money with your vision.
All the best!
Got an app idea? Appetiser offers world-class web, iOS, and Android app development services.
Schedule a free consultation with us today.
Jane Eslabra is a Content Marketing Specialist at Appetiser Apps. She has 14+ years of experience producing traditional and digital content. When she’s not busy being a wordsmith, she’s out swimming, taking a long walk, or trying new activities that will keep her eyes away from the screen and her body moving.
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