How Do Free Apps Make Money?

Do you make money off free apps? If you now reading this, guess the answer is “no”. But If you wish to - this article will be helpful.

So, you have your application and want to know how do free apps make money? You've come to the right place! Or, you just interested in how to create an app and make money? Still, this might be interesting for you.

The first thing that you have to know is that free apps make money. The deceit is to find out how to accrue benefits from new users. And our article will help you understand this seemingly hard question (actually not).

We want to focus on that segment, where the money is (free mobile apps market in most cases - both on Android or iOS). They rapidly build their path to the global store and offer a long range of potential for income generation. That’s why app creators like it. Another fact that when you are trying to put on the price tag, you are creating another excess barrier between customers and application. Besides, how often do you pay attention to the application with the set price?

After all, this is pure human psychology - we all want to get something for nothing. Let's look at some “how to make money with apps strategy” for mobile market:

Freemium Upsell

To implement this method you will require the presence of a second paid version of the application. Most of these apps are labeled as "light" and "premium" version. The free version should have a link to another application that shifts the user to the Store.

This is a great option because the user will be able to get acquainted with the app or game that you offer. And then make a decision to purchase the full version (with more comprehensive functionality or bigger number of levels, etc.).

In-App Purchases & subscriptions

In-app purchases (IAP) work by allowing the user to buy extra bonuses, options or features. What apps make the most money at this point? Of course games! Most often it is the purchase of gold or another game currency to unlock certain levels or features. For example, in Hearthstone, you can buy a more powerful set of cards with which you are fighting with a rival. In the sensational game Pokemon Go, you can spend real money to purchase PokeCoins - in-game currency that could be exchanged for boosts, power-ups or other items.

Note: Pokemon Go players are spending more that $1.5 millions on in-app purchases every day.

Real also: How to make a game like Pokemon Go

When you design an application, you can make a one-time IAP (e.g. to unlock a particular function) or permanent (I want to buy 35 coins for $ 1.99). The implication is that you can buy it several times. You can easily start to increase the amount of income using the second option, but you will also need an extraordinary application that can justify such an approach.

The situation is similar with subscriptions. If you subscribe to any online magazine or newspaper, you can develop features that will take money every month. Or when the latest issue of the magazine will be at the store.

Real also: Why Do Magazines and Newspapers Need an App?

Push notifications

Advertisements are displayed as alerts in the system tray of a user device. CTR and conversion rates are blow-off since there can be no eventual clicks that often happens when we are applying internal ads. Advertisers pay for clicks. Unlike common mobile advertisements, notifications are not placed on the application. Each ad also referred to a proposal rejection and tag link. However, on iOS this might be a good "flyover" with this kind of alert.

Sponsorship

This technique is equally effective for both companies and individual developers. Sponsorship is a special type of commercial relations. The core point of the sponsorship is to launch the app on behalf of another publisher in exchange for limelight and assumption.

The main effect of this method of advertising is to create a feeling (to consumers and society) that the company is ready to participate in solving common problems and challenges. This activity results in attracting new customers and building trust among the existing ones.

However, for your first app or service, this could be the only chance.

Note: don't forget about the app store commission. Keep this in mind during the preliminary estimates of revenues and expenditures.

• Cost Per Install (CPI Networks):

This technique is a relatively new mechanism in the mobile marketing and is equivalent to the spa in the world of web marketing. In fact, everything is quite simple - this method is exactly what you hear. You pay for the installation, which you get. Speaking of examples, it is impossible to remember Chartboost and Playhaven. These are the third-party services that can be used to implement this method.

You've probably seen these pop-ups offering to try any game, in other applications?

In some networks, the price can range from $0.80 to $3.00. So, if you want to promote your app, you will pay Playhaven this amount each time a user downloads and installs a game. It really works.

And now the main point - how to make money through ads and how to get ad revenue from apps. This is so important and huge that we decided to break it down into several components. For us, it will be easier to describe the process, and for you - to understand the essence and principle of operation.

The mobile market is growing, and with it grows the advertising market. So when you choose a model for monetizing your application, you should pay attention to the possibility of monetization through advertising. Especially if you have “young” startup or small business.

This model is perfect for free apps that dominate the market. Indeed, in most cases, no more than 10-20% of users make purchases inside the app which allows advertising to monetize the remaining 80-90%. Alternatively, you can begin to show ads after you realize that the user will not make purchases inside the app

This type of monetization can be used for any application categories. It’s great if your app is used daily and it has a long session duration (for example, news application). Then you will definitely get a high revenue from the user. However, even if the average duration of the session is poor, the proper choice of advertising type can still be an effective way of earning.

The undeniable advantage of this model is the fact that advertising allows you todiversify risks even if your application will lose positions on the market and you will reduce the number of new users. You will still earn from ads on the existing ones.

Advertising

• Advertising inside the app:

One of the specifically common method among mobile application developers. "Indoor (actually in-app)" advertising works by displaying ads on the reserved space of the interface, which gives earnings for a certain number of views and/or transitions. This method truly works efficiently in games, news apps, and messengers. However, a blot on the landscape here is that you need to try to design such an app which must be used often and consistently.

• Pop-up ads:

When using this method, advertisements are displayed in a dialog box within an application, presenting the user a small call to action with OK and Cancel buttons. For example, it can ask the user, "Download new free 3D-game". Here advertisers pay on a CPC-base.

- Offers:

Advertisements for individual proposals placed on the interposer in the application where the user can decide to participate in the program or not. In this case, advertisers pay on CPC and CPA-based models.

- Commercials:

Quality videos are displayed directly through the application. Typically, the server demonstrates similar ads only to users who use wi-fi or 4g-internet connection, which makes it possible to be sure that the user can view the whole video. Here advertisers pay on CPM-based model.

Rich Media is a full landing page built into the app, with a fixed cancel button at the top, There can also be banners on the entire page: ads displayed in the internal advertising insert, with fixed close button at the top. Advertisers pay for this service on the CPC basis.

Whichever monetization strategy you choose, always keep in mind to make the real income from any mobile app monetization strategy. You seriously need to think through when, how and where advertising will be displayed, this might help to achieve a good result. Advertisements should always be offered as an integral part of the application. Those ads that stick to users, not just demolish the whole point of your application, but also lead to the loss of most of the potential clicks and conversions.

Remember: advertising should be a part of the interaction, not a problem.

Ads that blend in with the overall picture of the application, on the other hand, will attract users to participate actively. Interaction, unlike interrupts, will generate revenue to developers, and increase the convenience of users. This is a win-win for both parties.

The mobile advertising all bordered by providing users with relevant announcements. It is important to take into account location of the user, and the content that he is interested in. This will allow you increase conversions and total revenue.

Read also: How to Estimate Budget for Mobile App Marketing?

As the "indoor" advertising is one of the most actual forms of monetization of mobile apps, so let us talk a little bit about it. When we are talking about in-app advertising, it is significant to consider a few number of main aspects:

1. Text banners - placed on a separate screen;

2. Do not forget to "embellish" your ad so that it feels like a part of the application;

3. Limit the frequency - it allows you to make your advertising enough to catch one's interest, but it doesn’t worry the customer;

4. Interactive banners - easy and efficient;

5. Don’t interrupt users from the game. Use ads between scenes, levels or after the end of the game;

6. Banners must be "secured" when users scroll up or down the screen;

7. Use of the "Skip" in ads gives user the possibility to think for few seconds;

Now that you know how apps earn money, you better think about an app idea, calculate costs and profits. And we, here in Erminesoft, will help you realize your plans!