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How Do Free Mobile Apps Make Money?

App Development

03
Nov 2020
2206 Views 5 Minute Read
how do free mobile apps make money
podcast
In this digital era, businesses need to get their hands on the latest tools and technology. And while everything can’t be affordable, it is essential to know if it is worth the time, money, and effort. Speaking of which, mobile apps are critical for any business to run operating smoothly. However, when we talk about mobile apps, there is one question: how do free mobile apps make money?
 
It is not hidden that it takes a lot of time and money to develop an app, and of course, an app owner wants to make money through apps that took them all the time and effort behind it.
 
Free mobile apps dominate the mobile app market with 90.3% on App Store and 96% in Google Play, accounting for $71.3 billion in revenues. However, while these apps are free, wonder how do they earn?
 
How much money do free mobile apps make?
 
Today, the average user uses 7-8 apps daily. Simultaneously, only 5-10% of app users are ready to spend on a paid app, and about 98% of income is generated from free mobile app downloads. A vast number of mobile app users choose free apps, and this number is continually booming. In 2019’s first half, the no. of free app installs in Google Play rose by 16.4% and made $41.9 billion in revenue.
 
Let’s look at the graph of the past 10 years below:
 
graph 1
 
This graph shows that the usage of free apps has risen dramatically in the last 10 years from 25% to 88%, and there has been an unfortunate downfall in paid app usage from 75% to 12%.
 
This article will cover all the strategies for how free mobile apps that make money with detailed figures and charts. Let’s get started.
 
App Monetization Strategies
 
There are several app monetization strategies, and it varies with your business type. The list includes:
 
- Advertising and affiliate marketing
- In-app purchases
- Paid subscriptions
- Sponsorship
- Crowdfunding
- Freemium
- Affiliate Program
- And More
 
The below graph shows the app monetization methods used by famous mobile apps:
 
graph 2
 
In the above graph, you can clearly view, advertising tops all of them with 65% score, while subscriptions score the least with 5%. The popular mobile app uses in-app purchases methods by 50%, virtual currencies 25% and sponsorship, and influencer marketing method up to 15%.
 
1. In-App Advertising
 
According to the graph, this is the easiest and most widely used method to make money.
 
How does this work?
 
You let the ads show on your mobile app and get paid according to the number of clicks they get and the type of ads you are displaying.
 
Also, when you put up a video ad, you get paid more than a banner ad. The duration of the video ad also takes in play and how often you play it.
 
There are also native ads, which are considered less annoying than other ads because they are less distracting. They include sponsored content or videos and are integrated into the app layout.
 
Interstitial ads look like full-screen pop-ups, shown when the user opens or closes the app. The user has the option to close the ad or tap to learn more about the promotion.
 
2. In-App Purchases
 
This feature allows users to unlock some extra features or levels after purchasing an upgrade.
 
In-app purchases offer additional bonus, premium content, virtual currency for the game, or unlock any additional level.
 
This app monetization approach allows you to sell different types of items,
 
Consumable items: these are the ones users can use within the app, like digital currencies or health points.
 
Non-consumable items: these can be used permanently like maps, new games, or blocking.
 
This model increases user engagement and makes them addicted to the screen. This model includes integrating a native app store payment gateway because the app store charges 3% from each in-app purchase.
 
3. Subscriptions
 
This model allows you to make money on free apps using paid subscriptions. This model works for only 5% of mobile apps with high user involvement, like productivity or educational, video, or music streaming apps. The app subscription model allows the user to use the app on a trial basis, and after the end of the trial, they must buy a subscription to use it further. There are 2 types of subscriptions: automatic renewing subscriptions & non-renewing subscriptions.
 
4. Freemium
 
Freemium models allow you to make money from a free app. This model is similar to the subscription model. The difference is that the app user can use the free version with basic features without any time limitations. But to avail of premium features, users must pay a monthly or annual fee. As per stats, only 0.5-2% of users purchase a premium app version.
 
5. Crowdfunding
 
This is more common amongst startups and has been an effective way to raise funds. In North America alone, crowdfunding produced more than $17.2 billion during 2018. In 2017, 138 mobile apps raised funds through crowdfunding and made $10k-100k on Kickstarter.
 
In recent times, this concept is more prevalent for raising money for charitable institutions, causes, or a unique business idea. If you need to raise more funding for mobile app development, you can use over 400crowdfunding platforms where users can donate money.
 
6. Sponsorship
 
This technique is similar to ads, but the difference is the in-depth integration of the app. Besides running ads, you can place a sponsor’s logo or icon on the screen. The most important part here is to find the right sponsor for your app. This strategy works more effectively if you can find a sponsor with a similar target market.
 
7. Affiliate Program
 
This monetization strategy is where mobile advertisers and affiliates collaborate to serve their purpose. The mobile advertisers are app owners or businesses that sell products or services via mobile app; the affiliates conduct performance-based advertising for the advertisers.
 
This framework allows you to earn money by advertising relevant apps, products, or services offered by your affiliates.
 
The revenue can be in the form of cost per action, where you earn every time someone clicks on their ad or downloads their app.
 
Another form of revenue is where you will receive a percentage of revenue that you have generated for the advertiser.
 
Final Thoughts
 
In a nutshell, free mobile apps occupy more market than paid apps. As discussed in the article, many app monetization strategies allow you to earn money for your free mobile app. We highly recommend selecting the app monetization model based on your app type and your TA. In the end, it all depends on what works best for you.
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Harnil Oza is the CEO & Founder of Hyperlink InfoSystem. With a passion for technology and an immaculate drive for entrepreneurship, Harnil has propelled Hyperlink InfoSystem to become a global pioneer in the world of innovative IT solutions. His exceptional leadership has inspired a multiverse of tech enthusiasts and also enabled thriving business expansion. His vision has helped the company achieve widespread respect for its remarkable track record of delivering beautifully constructed mobile apps, websites, and other products using every emerging technology. Outside his duties at Hyperlink InfoSystem, Harnil has earned a reputation for his conceptual leadership and initiatives in the tech industry. He is driven to impart expertise and insights to the forthcoming cohort of tech innovators. Harnil continues to champion growth, quality, and client satisfaction by fostering innovation and collaboration.

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