How do free apps make money?

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How App Make Money

That’s the question that both app developers and users often ask.

What happens after a user downloads a free app from an app store? How much money do app developers make? If you are asking the same questions and want to know the answers, this article will explain each point in detail.

This guide covers the following factors on how free apps make money:

the difference between free and paid apps
the best monetization strategies to make money with mobile apps
how much money do free apps make?
approaches to choosing the best monetization strategies
technical tools, APIs, integrations to make money from an app
how world-famous companies make money from apps

Let’s jump right into an overview of all details.

FREE APPS VS PAID APPS BUSINESS MODEL

An average user in 2020 has 40 apps installed on their smartphone. For Millennials, the number rises to 67 apps. Around 49% of users open an app over 11 times each day. Overall, we interact with 30 apps each month.

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Between 2018 and 2022, global app downloads will face a 25% increase.

When it comes to free vs. paid app downloads, users are hesitant about paying for an app. In fact, free apps take a whopping 96.4% of all app downloads on Google Play. If you release a free application, it automatically increases the chances that users will notice it.

When we look at app stores, we can clearly see that users are more likely to spend more money on mobile games. According to statistics, out of top-10 apps on Google Play with the highest revenue, the vast majority of them are games that you can download free of charge.

You have a lot of options, even if you decide to release a free application. Read on to learn more about each possible solution.

HOW TO MAKE MONEY FROM AN APP: MONETIZATION STRATEGIES

There are eight top monetization strategies that companies are using to generate money with free apps. If you are looking for an answer to the question ‘how do free apps make money?’, this part will explain the topic in all the details necessary for making the right choice.

Statista states that in 2019, there were three leading monetization strategies among developers:

subscription model
freemium model
advertising model

Let’s take a look at how to make money from an app.

ADVERTISING

How do free apps make money, like millions of dollars?

This is the answer to your question. In-app ads are very popular among developers of free apps. Depending on the app type, in app ads revenue can be accounted in thousands of dollars.

Currently, there are 5 main types of free app advertising strategies that you can use to make money with your application:

Banners

How do free apps make money with ads without interrupting user experience?

Banners ads are the least intrusive type of in-app advertising. They don’t interfere with user experience, as they still can interact with your application without any limitations. At the same time, Click Through Rate of such applications (the number of customers that click of them) is not that high, around 0.06 percent.

Still, the average banner ad format CPM is around $1.

Videos

This type of in-app advertising is more intrusive, as it prevents users from using the app’s functionality. Such videos typically last for 10-30 seconds and can be added into apps and mobile games when there can be made natural pauses. That is why such video ads are often placed after a user finishes a game level.

You can use in-app ads as a form of a rewarding program. For example, users can get more lives in a game by watching video ads.

That is how to make money from an app with in-app advertising.

Native Ad

Ads of this type are a little more difficult to make, as such ads should not interrupt the user experience. They should perfectly fit into the app design and overall concept, allowing to naturally promote a brand or a product.

Usually, such native ads don’t create a distraction for users, ensuring a higher level of conversion.

Interstitial advertising

Such in-app ads are represented in the form of full-screen pop-ups that interfere with app usage. Ads of this type usually appear when users open or close an application. They have to either skip the add after watching them for a predefined type period or check the offering. Either way, such ads often irritate users as they don’t have a choice to simply ignore such ads without any further actions.

Incentivized Ad

The vast majority of users (84%) prefer to deal with this type of in-app advertising. Instead of interrupting ads, they can get rewards for taking some actions, like sharing content, leaving a review, filling out a survey, etc.

Incentivized ads work better combined with the system of in-app currencies and purchases.

While in-app ads are one of the most popular types of free apps monetization, it might be a good idea not to irritate users with too many ads. As a result of irritation, users are less likely to click on ads, decreasing the conversion rate and your app ads revenue.

REFERRAL MARKETING

When you look at the previous monetization strategy, you can see that it is just a part of referral marketing.

As a part of referral marketing effects, you can place some content inside your free app to promote someone’s application, products, services, etc. You get a commission for a number of clicks, app installations, etc.

Referral marketing works as a cost-per-action (CPA model) and includes the following types of rewards that you can get:

CPM (cost-per-mille, cost-per-impression) – you get a payment based on a number of impressions. Usually, you are charged every 1,000th time an ad is displayed. Such a model comes from a Latin word mille, which means a thousand.
CPC (cost-per-click) – you are rewarded based on the number of clicks made on ads inside your application.
CPV (cost-per-view) – you get a reward for each view of a video and ads interaction.
CPI (cost-per-install) you get a payment each time a is installed via the ads inside your applications.

How do free apps without ads make money?

The answer to the ‘how do apps make money?’ question doesn’t always include the mentioning of in-app ads. There are four more monetization strategies for free apps that you can use to generate revenue:

In-app purchase and a freemium model
Subscription model
Sponsorship model
Crowdfunding model
Email marketing
App merchandise & eCommerce

These models provide an uninterrupted user experience and don’t irritate customers with unnecessary actions needed to be taken.

Let’s find out how to make money from an app without built-in ads.

IN-APP PURCHASE IN THE FREEMIUM MODEL

The Freemium model is

Ways To Earn Money From Mobile App