How Do Free Apps Make Money? 7 Popular Monetization Methods

free apps

Since the launch of the iPhone in 2008, the app market has exploded faster than anyone could have predicted. Today, nearly 10 years later, over 77 percent of Americans own a smartphone that they use on a daily basis.

Contrary to what you might think, the app boom hasn’t ended; the market continues to expand. Even though less than 10 percent of mobile users won’t pay for an app, the app industry still is worth billions of dollars.

In fact, experts predict that between 2016 and 2020, revenue generated by apps will double! Interestingly, free apps are responsible for most of that revenue. Indeed, Google Play reported 98 percent of app revenue comes from free apps.

You might think free apps are not as profitable as paid apps but the truth is there are many ways to monetize free apps. You can even make more money from free apps than from a paid app.

If you recently decided to create an app and test the marketplace, then you came to the right place. There are numerous success stories of people who made free apps that bring in hundreds of thousands of dollars a day.

But before we get ahead of ourselves, let’s look at the most popular monetization methods for free apps.

1. Ad Revenue

The number one source of revenue for app developers comes from in-app ad-revenue. The vast majority of free apps depend on this source of revenue to remain afloat in the marketplace.

There are three types of ad revenue:

  • Cost per Thousand Impression (CPM)
  • Cost per Click (CPC)
  • Cost per Action (CPA)

CPM is preferred amongst free app developers because it doesn’t require the user to click on the advertisement in order for the developers to earn. The pay is less, but it’s less intrusive on the user experience.

Some ad networks to consider: InMobi, AdMobi, Google Ads, and Conversant.

2. Upgrade to Remove Ads

Most people don’t like to see ads in their apps, and they’ll be more than happy to remove them. Many app developers create two versions of their app; one for free with ads enabled, and an upgraded paid version with no ads. With the paid version, the revenue will come from direct sales and downloads, rather than ads.

free apps make money

3. In-App Purchases

In-app purchases are the number one source of revenue within the app industry.

In fact, in-app purchases make up about 47 percent of the total revenue generated from apps worldwide. If you’re planning to create a free app, including an in-app marketplace is one of the best things you can do for your business.

In multiplayer apps, such as Clash of Clans, users will always be interested in purchasing in-app items to gain the upper hand on their opponents.

4. Affiliate Programs

Most major companies such as Google, Microsoft, and Apple have affiliate programs that are open to app developers.

These affiliate programs usually don’t have high commissions (compared to specific partnerships) but you’ll be able to choose from a wide range of apps to promote. Find the hottest apps and promote them in your app to earn easy commissions.

It’s also recommended to look for businesses that have affiliate programs. The businesses that offer paid memberships usually have excellent affiliate programs where you can earn recurring commissions.

5. Sponsorships

Most app developers will seek investors to provide the funds to build their app and turn it into a successful business. One way to approach investors is to offer them free marketing within your product.

Surprisingly, collaborating with another app developer or business can be an excellent way to secure additional funding for your project. If you choose to partner with an established business, they’ll likely promote your app to their clients and fans, thus drastically improving download rates.

More and more businesses are beginning to understand the power of mobile marketing and are looking for opportunities. Your app could be the perfect marketing opportunity for them.

If you currently have a business, learning how to read app trends can be vital to your success. There are quite a few make money app trends that you should be aware of and monitor for investment opportunities.

6. Mobile Marketing Automation

If you offer a paid conversion in your app, it’s time to use multi-channel messaging to move users down the funnel. Some examples of conversions:

  • Encouraging users to purchase a product or service in an e-commerce app
  • Persuading users to book travel a flight, hotel, or activity in a travel app
  • Alerting users to buyable content, such as a new album in a music app

Convince users to spend money inside your app with mobile marketing automation. You can coordinate push notifications with email, in-app messages, and App Inbox to create an integrated campaign that reaches users outside of the app — at scale. Most importantly, you can utilize a tool such as Optimal Time to connect with individuals at the time they’re most likely to engage.

how do free apps make money

7. Combine Multiple Monetization Methods

To squeeze the most profit out of an app, combine several monetization methods. One common strategy is to offer in-game items in exchange for watching a video advertisement.

The longer the video, the more you’ll earn. There are also specific ad networks, such as Grey Stripe, that offer custom video advertisements.

Video advertisements tend to convert at a higher rate than plain-text ads; therefore advertisers are willing to pay more per viewer.

Take a look at the popular app ad-networks to find the best fit.  

How to Start Monetizing Today

Investing in free app development is an excellent idea as the return can be incredibly profitable. In order to make the most of your project, a strong marketing strategy should be created and implemented prior to launch.

Ideally, spend months building hype for your upcoming app and marketing the prototype as much as possible. Using that strategy, when you do launch the app, there will be a guaranteed number of sales, as opposed to launching it blindly and depending on luck for income.

So as you can see, there are a lot of things going on behind the scenes inside a free app.Just because it’s free, it doesn’t mean you can’t make money from it.

In fact, offering an app for free can sometimes provide you with more income opportunities than offering it for a solid price.

Remember, if you want to make an impact in the app marketplace, a powerful marketing campaign is required. Without one, the app likely won’t be a hit.