The number of apps with rich functionality is growing annually, resulting in harsh app market competition among developers. As of 2018, there are 3.8 million apps on Google Play and 2 million in the App Store. According to Statista, the top grossing apps are all free of charge. These days, users have become picky and usually have only 4-9 daily active applications. Additionally, Gartner Research Group states that 24% of users would interact more via in-app purchases rather than paid apps. Once an app proves its value, the users are prone to conducting more in-app transactions, purchases, and to unlock extended functionality. The next decision is to choose your free app monetization strategy correctly. Neither the Google Play nor Apple App Store pays for app downloads, even there are millions of users who completed this action. Based on the statistical data, the most effective monetization method in 2017 was the use of rewarded video ads. Currently, 7 out of 10 apps has embedded commercials that generate payments per its display, per click, or per install.
Free Apps make money by:
1. Advertising: Advertising is probably the most common and easiest to implement when it comes to free app makes money. And it is also done via a third-party ad network. Using ads to monetize apps and make money is quite simple. An app owner just needs to display commercials inside their mobile application or opt for affiliate marketing and get paid from the third-party ad networks. You can get paid every time an ad is displayed, per click on the ad, and when a user installs the advertised app.
2. Subscription: App publishers can choose to offer free content in their apps for a limited amount of time and then charge users for a subscription fee that will allow them to access full content without any restrictions. The popular and common technique used by the majority of free app publishers is to offer a free trial period and then charge the subscription fee to those who wish to continue to access the app content. In the present model, Apple will maintain its current 70/30 revenue split for the first year of subscription. After one year, the new 85/15 revenue share will automatically be implemented.
3. Selling Merchandise: To encourage app publishers to use this strategy, Amazon has started a service called Merch by Amazon that allows publishers to create their artwork, upload it to their platform and promote their products.
4. In-App Purchases: In-app purchases are directly made from within the free mobile apps and are usually quite a simple process. The best free game apps like Clash of Clans, Angry Birds, have enhanced their user experience by providing users with in-app purchases. According to Forbes, apps with in-app purchases generate the highest revenue for their publishers. Overall, this is an interesting model for converting non-paying app users into paying users without being too intrusive. Although, you’ve to keep users hooked in your free mobile apps so that they keep paying. According to the survey by tech company Fyber, “Among ad agencies and brands, there are a number of brands, approximately 77%, which have asked their agencies to invest in the in-app purchases inventory”.
5. Sponsorship: A good example of this how do free apps make money through sponsorship deals is Home Depot sponsorship on the Weather Channel App. Now, have a look at these pros and cons that will help you in deciding whether to select this app monetization model for your free app idea.
6. Referral Marketing: Referral marketing involves promoting a third-party product or service to optimize revenue opportunities. There are different types of referral marketing models that publishers use in their development.
7. Collecting and Selling Data: As you know, apps collect a lot of users’ data, in terms of user behaviour or other app usages. All these user behavioural data are desired by many researchers in different fields. The data generally contains users’ email addresses, social media accounts, and personal preferences. There are two ways to benefit from this model. From a marketing point of view, companies want to pay for displaying ads to the most relevant audience.
8. Freemium Upsell: When it comes to talking about freemium upsell, freemium apps are available free of cost to download but contain paid or premium features. In this type of freemium model apps, users download the app without paying any charge, and if they like the content of it, they can get full access to functionality by committing a purchase. Moreover, this strategy is extremely common for education and health and sports application, allowing users to get premium features at a particular cost.
9. Physical Purchases: There are many eCommerce businesses and start-ups that have started using free applications for selling their products or physical goods like mobile cases, t-shirts, toys, etc. via developed apps on the app store. Through this free gaming app, Rovio company sells approximately 1 million branded t-shirts, backpacks, and stickers every month. Before concluding this business model, let us have a look at this monetization strategy’s pros and cons which will make your vision clearer while thinking about how free apps make money.
10. Transaction Fees: The best way to monetize your apps is transaction fees. It is especially possible with those apps that provide a platform, where digital transactions occur on a regular basis. You can charge a small fee for every single transaction that occurs on your app and makes a lot of money.
11. Crowdfunding: Another monetization way to make money from free apps is crowdfunding, which is new in the industry. As of May 2017, there were approximately 138 non-gaming apps that known to raised funds between $10,000-$100,000 as compared to 29 mobile games that got a similar funding goal.
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