How Do Free Apps Make Money 2020 - [9 PROVEN Strategies]
If you’re an aspiring entrepreneur who wants to learn how do free apps make money, then you’ve come to the right place.
Mobile app development requires huge capital investment. Therefore, it’s critical to learn how to capitalize on your free app before the development process begins.
Now, when it comes to app monetization strategies, you will often come across the following three strategies:
- In-App Purchase
- Freemium Model
While all these strategies definitely work for the majority of the free mobile apps, but these are not the only app monetization methods that are out there.
In fact, if you’re planning to use only these three strategies, then achieving the million-dollar mark in revenues will probably take forever considering today’s market conditions and competition.
So, what are the other ways to make money with apps?
In this blog, we have shared 9 proven app monetization strategies that still work in 2019 and it will continue to work in the future as well.
Are you ready to learn how do free apps make money?
Let’s dive right in then!
1 – Advertising
Advertising is one of the easiest and most common app monetization options to make money from free mobile apps.
What’s more is that according to eMarketer, over 67% of all digital ad spending will soon go towards mobile.
Well, it’s mainly because mobile apps provide a dynamic environment in which the ads can be seamlessly integrated within in-app content.
In simple terms, ads in mobile apps look a relevant suggestion rather than an unwelcomed distraction, which ultimately increases users’ app experience.
Although, it’s imperative to choose the right ad format to ensure ads don’t annoy your users.
Below, we’ve shared all ad formats so that you can learn how each ad format will affect users’ experience while using your mobile app.
Now, when it comes to mobile app ads, there are two main categories – Video Ads & Display Ads.
Let’s start with Video Ads.
Video Ad Formats
As the name suggests, Video ads are basically short promotional videos that can effectively deliver brand messages across all users.
The following are the main 4 video ad formats you can consider to integrate within your free app.
Interstitial Video Ads: Interstitial video ads are basically full-screen advertisement videos that appear automatically when a user takes a natural break within the app.
For instance, when a user completes a level in a mobile game or is trying to go to the homepage of the application, the ad automatically pops-up and starts playing. Overall, the Interstitial video ad is extremely effective as it fills the user’s screen and allows telling a rich story.
Rewarded Video Ads: This video ad format is majorly used in gaming apps. It basically enables users to earn virtual points or goods to advance in-game faster in return for watching a video ad.
Unlike the Interstitial video ad, the rewarded video ad is opt-in, meaning the user has an option to skip it and continue using the app without having to watch the ad. And it’s for this reason, rewarded video ad has the highest viewability rate among all ad formats.
Outstream Video Ads: Outstream video ads basically don’t take up the entire screen of users’ devices. Instead, they are placed in between the in-app content as shown in the below image.
This video ad basically auto-play when the ad properly reaches the viewable area of the screen. And just like rewarded video ads, the Outstream video ad also has a high viewability rate as it also provides an option to close or pause an ad.
Instream Pre-Roll Video Ad: Instream pre-roll video ads basically play either before, in between, or after a video content within the app’s video player. This video ad format has increasingly become popular and is an effective way to grab users’ attention.
The best example of an instream pre-roll video ad is Youtube. Remember those “skip in 5-second ads” that appear at the beginning and sometimes in between a video you’re watching? – It’s an instream pre-roll video ad.
So, these are the main video ad formats you can consider using in your free app.
Now, let’s look at the display ad formats that you can also consider using.
Display Ad Formats
Display ads, as you might already know, are static or GIF image ads that help brands broaden their reach within the in-app environment.
Below are the main four display ad formats that you can consider using in your free app.
Interstitial Display Ad: Just like the interstitial video ad, the interstitial display ad is a full-screen ad that appears when a user takes a natural content break within the app.
Since this ad format covers the entire device screen, they’re believed to be one of the most engaging display ads.
Banner Display Ad: Banner display ad was probably the first-ever ad format introduced in the mobile apps. It is basically a tiny banner that is placed either at the top, in-between, or at bottom within the app’s content.
Though this ad format is small in size, but they still have huge reach and impact that can help in increasing a brand’s awareness.
Medium Rectangle Ad: Medium Rectangle Ad, to explain in simplest terms possible, is basically a large square ad.
Unlike the Banner Display ad, the Medium Rectangle ad provides much more room for promotional content with high viewability.
Native Display Ad: The Native Display ad basically fits in in a way that it doesn’t look and feel like an ad at all.
As a result, it creates a highly-impactful user experience in which the native display ads are perceived as a welcome idea.
So there you have it!
These are all best practices for the in-app advertisement using which you can to start making money with apps.
Now let’s move on to the next app monetization option.
2 – In-App Purchases
In-App Purchase is also another common app monetization strategy.
As the name suggests, the in-app purchase basically allows the app providers to sell different sorts of virtual items such as extra bonuses, virtual goods, game currency, or premium content within the app.
According to Forbes, free apps that have used the in-app purchase monetization model generate the highest revenue, and this model is also forecasted to continue dominating in the years to come.
That being said, here are the three categories of the in-app purchase model.
Subscription: You can provide an in-app subscription where users can unlock premium content for a limited period of time. Example: Insider News Stories.
Consumable: This could be a digital product that can be bought and used within the app. Example: Premium Stickers in a Chat app.
Non-Consumable: This could be a feature that users can buy for unlimited Usage. Example: Nutrition tracker in a Diet Tracking app.
By using any one or mix of these categories, you can easily start earning money from your free app.
3 – Freemium Model
Freemium basically means an app is offered to download and use for free of charge with minimal features.
Then, if users feel that the content of your app is worth paying for, then they can get access to all functionality by purchasing a PRO version of your free app.
Although, you can also implement this strategy even if you do not have any extra features to offer.
For instance, you can integrate different ads in the free version of your app and if users would like to enjoy an ad-free experience, they can do so by purchasing a PRO version of your mobile app.
The best example of this strategy is MX Player. It is a video player app in which the free version often shows both videos as well as display banner ads.
However, users can get rid of all ads in MX Player by purchasing its PRO version for a small amount of money.
4 – Referral Marketing
Referral Marketing basically means promoting a third-party service or product.
You, as an owner of a free app, can partner with brands and sell affiliate services and products based on different models.
There are 3 referral marketing models you can implement to make money with apps.
Cost per View (CPV)
Cost per View, as you might have guessed, is about the number of views an affiliate ad gets on your free mobile app.
You can implement this model by using the Interstitial Video ad format to display affiliate ads at regular intervals.
Cost per Click (CPC)
This referral marketing model is about the number of clicks a displayed ad receives in your free app.
In simple terms, you can earn money a fixed amount of money each time a user clicks on the displayed referral ad. The ad can be either a video or a display ad.
AdMob and Adfonic are two of the most popular platforms to partner with brands and earn money per click in your free app.
Cost per Acquisition (CPA)
In this referral marketing model, you basically promote mostly other apps through a pop-up video or display ad. If your users, for example, clicks on the ad and installs the advertised app, you will earn a fixed amount of money.
There are many CPA affiliate platforms you can join to start making money. To help you get started immediately, here is the list of best mobile CPA networks for you to check out.
5 – Subscription Model
The Subscription model is quite similar to the subscription category we discussed in the In-App Purchase strategy.
The difference between the two is that in this model you provide all features or content free of charge for a short period of time. And then, lock all features and charge a monthly/annual subscription fee to users who want to continue using your app.
The best example of this app monetization strategy is Netflix.
As you might all know that when you sign up on Netflix for the first time, you get free access to all content for 30 days, and if you want to continue watching on Netflix after 30 days, you’ve to purchase any of their subscription plans.
This app monetization model is often used in online music & video streaming apps such as Netflix, Amazon Prime Video, Spotify, and others.
6 – Sponsorship
The Sponsorship Model, to be honest, is not for everyone.
However, it is still one of the most powerful app monetization options if you’re building your app in the right niche.
For those who don’t know, App sponsorship is similar to website/blog sponsorship where sponsors approach app owners who have the same target audience as the sponsoring brands and companies.
To make the most out of this model, it’s wise to create a list of brands & companies that can benefit from the partnership before building the app.
Another way to embed the sponsorship model in your free mobile app is by allowing users to promote their own products or posts.
The best example of this is Social Media apps. Facebook, for instance, allows users to promote both their products as well as posts to a large target audience.
Similarly, if you’re building an app that allows users to post, share, or advertise something, providing paid sponsorship option is a powerful way to make money with apps.
7 – Selling Physical Products
This app monetization strategy is strictly for entrepreneurs, startups, and retailers who wants to sell their products online.
Today, the eCommerce industry is a booming market and the majority of the credit goes to mobile apps. Ever since mobile traffic surpassed desktop traffic in 2015, entrepreneurs from all around the world started investing in building Ecommerce apps.
According to MarketWatch, today 60% of traffic to eCommerce stores comes through mobile apps.
What this means is that if you own a retail store or want to start an ecommerce startup, then now is the time.
8 – Selling Merchandise
Selling Merchandise, as you might have guessed, is similar to the eCommerce model.
This model, however, is a sort of best fit for popular brands & companies. In this model, a brand or a company basically builds a mobile app to sell its own merchandise products such as toys, Tshirts, mobile cases, backpacks, stickers, and a lot of others.
Rovio, for example, the maker of Angry Birds game managed to earn an additional revenue of 1 million per month through this app monetization model.
A business, on the other hand, can use services like Amazon Merch to sell custom-branded products within their free mobile apps.
All you need to do is create & upload your artwork on Amazon and promote it among your followers. Amazon takes care of the delivery of items and payments.
9 – Selling User Data
Lastly, you can also make a handsome amount of money off your users’ data.
There are hundreds of thousands of companies and research firms that are always on the lookout for fresh users’ data.
Mobile apps, on the other hand, collect lots of different kinds of users’ data such as user behavior data, daily time spent, email addresses, personal preferences, social media accounts, etc., which you can later sell to international research companies.
All you need to do is build an app with a huge userbase and try to collect as much data as possible.
With this, we’ve come to the end of this blog.
We hope you found your answer to the question ‘how do free apps make money’.
As you saw, there are a lot of ways to monetize an app other than advertising, in-app purchase, and the freemium model.
Now, if you’ve now decided to go ahead, there is only one thing you need to keep in mind – don’t overuse the above-mentioned app monetization models.
We understand that after investing a huge amount of money, time, efforts, and resources into your mobile app development, it’s tempting to apply multiple monetization strategies all at once, especially when you’ve built a large userbase.
However, you must remember not to make your app inconvenient to use for users. Your app will bring profits only when users continuously use your app. And if they don’t feel comfortable or find ads annoying, they’ll uninstall your app instantly.
Therefore, make sure to deliver a great user experience and not worry about money in the beginning.
Now, if you’ve any further questions or doubts, feel free to reach out to our experts.
Q1 – What are the most common strategies to make money with free apps?
Advertising, In-app purchase, and freemium model are the three most commonly used app monetization strategies to make money with free apps.
Q2 – How do free apps make money without ads?
If you don’t want to annoy your users with unnecessary ad banners inside your app, there are still many ways to make money without ads. For instance, you can earn money from referral marketing, selling merchandise, selling physical products, and a lot more.
Q3 – How much do apps make?
According to reports, 25% of iOS app developers or publishers make $5000 USD from their apps, while only 16% of Android app developers make $5000 USD from their apps.
Q4 – Can you become a millionaire by making an app?
Of course, you can definitely become a millionaire by making an app. However, reaching the million-dollar mark in mobile app revenue is only possible with a kickass business model. If your app becomes becomes popular and is used by millions, there are many ways to earn millions from your mobile app.