How Do Free Apps Make Money?

MLSDev
4 min readDec 26, 2018

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Have you ever wondered how free apps make money?

In a nutshell, free applications make money from one of the following 8 most well-known monetization strategies:

  1. Advertising (banner ad | vdeo ad | native ad | interstitial ad | incentivized ad)
  2. Referral marketing (Amazon)
  3. In-app purchase & freemium model (PokemonGO)
  4. Subscription model (Wall Street Journal)
  5. Sponsorship (Weather Channel)
  6. Crowdfunding (Hello Earth)
  7. Email marketing (NY Times)
  8. App merchandise & e-commerce (Angry Birds)

1. Advertising

There are 5 different ad variants to utilize in a mobile app:

  • Banner Ads. These ads are placed at the top or bottom of the mobile device screen. In general, these are less intrusive, as users are still able to use the mobile app normally.
  • Video Ads. A video ad, lasting 10–30 seconds, is placed within the app where it plays automatically when there are natural pauses.
  • Native Ads. These ads are intended to be naturally integrated into an app. These added elements can be sponsored content or videos used to promote a particular brand or product.
  • Interstitial Ads. These ads are full-screen pop-ups shown in a specific moment within an app.
  • Incentivized Ads. With the help of a tool set, it is possible to provide users with rewards for a specific in-app action or engagement like: fill out a poll, content sharing, etc.

2. Referral Marketing

The referral marketing model can be used in the following ways:

  • promote another application
  • in-app advertisement
  • advertise products or services via in-app-store

There are also many affiliate network companies (AdMob, Flurry) that specialize in finding a suitable affiliate for your application. There are different software programs and tools that can help to integrate this model.

3. In-App Purchase & Freemium Model

In-app purchasing is a very popular strategy used in the freemium app model. It is possible to sell virtual or physical items, offer premium functionality or bonuses, block ads, or open new app content.

In-app purchase strategy has three categories:

  • Consumable: these items are used once, mostly in mobile games. Example: digital currencies, health points
  • Non-consumable: these are features used permanently. Example: ad blocking, extension in app functionality
  • Subscription (described in more detail below)- this allows one to unlock additional content and features for a particular amount of time. Example: monthly or annual service subscription

4. Subscription Model

The subscription model sets up revenue streams from the weekly, monthly, or annual fees for a specific service provided by the free app.

5. Sponsorship Model

This model is usually available for developed apps that already have regular users. You may contact sponsors in your industry to match their brand with ads, information in the app, or adapt the app design to the brand.

Two primary sponsorship deals:

  • Equally divide revenue from the app
  • Set a monthly sponsorship fee

6. Crowdfunding Model

Developers may use the following platforms to raise funds for app development and marketing needs: KickStarter, Indiegogo, CrowdFunder, and AppsFunder.

7. Email Marketing

Email marketing has always been a profitable strategy in any industry. This is an old technique of collecting user data, mostly emails, and sending corresponding marketing materials to heat up the subscribers’ interest in a product or a service.

It is possible to collect email addresses in several ways:

  • ask for the email with a pop-up message by offering something in return (app coins, bonus)
  • via Facebook SDK for user to sign up where it collects emails
  • through third-party tools for easy email collection

8. App Merchandise & E-commerce

Amazon offers the opportunity to earn a profit from this app model with the help of its Merch tool, an easy program allowing app owners to create and sell their branded items within their apps. All the logistics are managed by Amazon: production, selling, payment, and delivery, while you get a share of the profit.

4 Steps to Define the Best App Monetization Model

Step 1 — Research the Market for Competitive Products
Step 2 — Determine Your Target Audience
Step 3 — Create an Innovative App Concept/Idea
Step 4 — Identify a Successful App Monetization Strategy

In order to attract target users, the free app you develop should have precise app presentation with:

  • Catchy App Name
  • Clear and Specific App Description
  • Great App Previews (demo video, app screenshot, other visuals)

Leading Trends in App Monetization in 2018

  • In-app advertisement remains a popular method for how to get paid for your app, but with changing priorities.
  • Freemium app model popularity increases.
  • Growth of in-app purchases model.
  • Subscription method adoption.
  • Native ad placement.
  • Free app monetization models in emerging markets.

To Sum Everything Up

Each method has its pros and cons, making it necessary to understand the product you would like to develop in the first place.

  • What value will it bring?
  • What is the target audience?
  • Are there any competitive products?

You should create a well-planned business strategy to turn your customer satisfaction into monetary gains.

This is a brief summary of an article published on MLSDev blog. If you would like to learn more about monetization strategies, read the full article.

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MLSDev
MLSDev

Written by MLSDev

#IT #outsourcing. #Mobile and #Web Apps #Development. #iOS. #Android

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