How Do Free Apps Make Money? Build Your Strategy Bypassing Common Mistakes

When launching your application, it is essential that you earn on it. However, now you can get even more for free apps than for launching the paid apps. According to the Statistics Portal Statista, the revenue from free apps in 2017 will reach $37 billion, while the revenue from paid app downloads is going to be $29 billion. It happens because users prefer not to pay for the application but to get it for free. And some brainy entrepreneurs figured out how to make money from free apps.

There are lots of options how to earn money from free apps using various monetization strategies. In our article, we will consider not only the most popular ones but also check what apps can be monetized this way and which can’t.

In-app purchases. The method works when there are items which users can buy in the app. All money transactions are handled by the store where the app is placed and the owner gets the commission from every transaction.

Here you can get as much money as you want. The feature in your app can cost one, five or even fifty bucks. However, you’ll get your money only if the user believes that it’s worth it.

This way you can offer your customers to pay to unblock the functionality or to buy some virtual items (weapons, coins). Most of the games use this approach to maximize revenue. For example, in the game TheSimsFreePlay you have to pay up to 15 quid for a piece of furniture in a virtual house. The app by itself is free.

But not only games are monetized this way. There are lots of types of mobile applications that can use this scheme. The photo, video and music editors, various calculators, apps with AI or VR and any other apps that have unique, exclusive features which user can’t get anywhere for free. And of course, messengers that offer you to purchase funny stickers.

Affiliate Income. Promoting someone’s applications or products in your app, especially if these products are somehow connected with the topic of your app, can bring you serious income.

The approach works well in news and social media apps, especially if they are for specific niches. As well as in event applications and directories, where you can find only the shops or restaurants of affiliated companies.

Subscription. Is a nice model to make money. Free Android applications and iOS apps can earn if their content updates regularly. Users pay a monthly fee to get the freshest vids, music, news or articles. A common practice how free apps earn money is to provide some free and some paid content, to hook the reader (viewer, listener).

This model doesn’t work with static content apps or apps like games, e-commerce and messengers.

Freemium. When a user sees that he has options to download a free and a premium app, as a rule, he takes a chance and installs the app. When there is only a premium account in the app, the customer doesn’t know if it’s worth his money. Having an ability to try and test the product, users will buy premium if they like the functionality of the program.

This Monetization method is great for heavy-functional programs which offer Software as a Service. They can be the apps with computational functionality or professional editors. The key condition here is to offer customers some exclusive highly-demanded features.

Advertisement. When you’re choosing how to make money from a free app with the help of an advertisement, bear in mind that they can be small or big, static or in the form of animation or a video. The point here is to choose the most appropriate type according to your application. Besides, you can choose how you will be paid for the ads’ demonstration. You can get money every time a user sees the ads, every time he clicks on it, every time he buys something in an advertised app or every time he installs an advertised application.

Watch our video to find out why you need a landing page for your project promotion

This way is universally applicable and can be used in almost all types of apps. However, you have to be careful and strike a balance. The ads shouldn’t irritate the customer. The best solution is to use the ads close to the topic of your app. For instance, if you develop a social network for fishermen, they won’t be upset if they see a banner about fishing goods.

Sell your API. How do free apps make money without ads? Well, they probably don’t use the most well-known and common spread way to get money. However, it’s not the least effective way either. What is meant here, is that in case you (or your team) developed an outstanding, unique software solution, which gained popularity, you can sell the API to it, or the entire source code.

If your app copies an existing one and doesn’t have any unique functionality, then the approach is not for you.

After you have chosen the best way to monetize your app, you should think about customers. I mean about the number of them. It’s essential that the more users you attract, the more money you will get afterwards.

In our previous article about app monetization, we spoke about the visibility of an application on the market and the importance of this factor. In this research, we’ll continue talking about it and will offer some new hacks to achieve popularity.

It is obvious that if no one knows about your app - no one would download it. To maximize your revenue, you need to attract as many customers as possible. The more people know about a project, the more they want to download it. Promotion is one of the crucial steps that you need to think over long before the project launches. You can hire a professional team or do a lot of the work by yourself even for free, yet you have to remember some simple rules:

The process of monetization has lots of pitfalls and only a well-considered planning stage helps omit them.

Before you choose how to make money from a free app, think about the main rule: your monetization method shouldn’t annoy the users. If you use ads in the form of pop-ups, a user won’t like it when it appears right at the moment he is streaming his video. The point is how to make money on a free app according to the type of app you have and make it look natural in your product. If a customer uses your e-commerce app and sees ads of other shops, he doesn't think about it, because the ads look natural.

As we have already mentioned (probably more than a thousand times) you need to decide how to make money on a free app before the development starts.

One monetization strategy brings different results across different platforms. It happens not only because of the differences in UI but also because of the policy that every App Store follows. More than that, some formats of ads aren’t available on all platforms. If you decided to develop an Android app and an iOS app for your project, the monetization approaches should be different. So before you start development, think or search for the information about how free Android apps make money and iOS products as well.

Never ignore the Analytics! Analytics is gold! The information shows the number of installs, active users, app issues and even such data as the age, gender, location and income of your users. All this helps not only see how successful your monetization strategy is, but also draws you the path to follow. Now you can see what works and what doesn’t. Moreover, you finally found your target audience! The Analytics show who uses your app, and what features are the most popular. So all you need to do is to update the app using this data. 

The other issue here happens because developers don't want to think about app popularization. However, you have to remember that if you want to earn money with your project you need to be not only a developer but also a promoter and a sales manager.

Asking for too much. Actually, it's a two-edged sword. Some product owners charge too much (for freemium or in-app-purchases) and some don’t charge anything. The first category risks not get anything because people rarely pay much, even for really cool features. $0,99 or $1,99 is a price that most users feel ok to pay.

The second category of developers doesn’t monetize their apps at all. Well, even if you are a junior and think that your product is primitive and doesn’t deserve to be paid for, anyway, our advice is to try to get at least something from it. Think about it like it’s your practice before a big project.

All at once. Some product owners think that they can get more if they combine a few monetization methods in an app. Just think what a user feels when he opens a nice new photo editor and sees ads and banners. Suddenly a pop-up appears, and the majority of features are paid, not free? If I were that user, I would delete the app immediately. More doesn’t mean better.

What else you need to know is that if you are a novice here, you will make mistakes. Probably lots of them. But don’t worry, if you read our article attentively, you already got the most important tips to succeed. If you need any help with your app promotion or monetization, contact us and tell us how you make money from a free app.