There are paid apps—one pays to download and use them—for example, 1Weather, Bouncer, Scanner Pro, or MediaMonkey.
And then there are free apps, like WhatsApp, Facebook, Twitter, Instagram, Ludo King, Adobe Scanner, and millions of others.
Most Android and iOS users rely on “free” apps to connect to the world, entertain themselves, play games, and even make their daily lives more comfortable.
Most of the excellent-quality apps with great features have millions of downloads on the Play Store and the App Store. So how do these apps make money?
And more importantly, if you have a great idea for a killer app and wish to let it be used for free, how could you make money with it in 2024?
Do you ever wonder how free apps make money? Let us unsolve this mystery and find the most promising ways in which a great app can make money.
In many cases, some apps employ more than one approach to make money. The income from the apps could not only be your passive income but can become your biggest blockbuster.
According to Statista, the total number of apps (free and paid) downloaded is increasing every year. In 2016, it was at 140.68 billion downloads, and that has gone up to 218 billion in 2020. A stunning growth of close to 55% in just four years!
So, all these statistics point to one thing: free apps are big money-churners for their developers and owners and if you thought otherwise, then you must change your stance.
You need to find the killer combination of a great app offering a value proposition for its users and a sustainable monetization model for your free mobile app.
We believe you are reading this article because you already have a great idea for developing a mobile app—a game, an OTT service, a utility, a social media rage, or any other thing.
But probably you are wondering what the different monetization models for free apps are and how you could make money from them in 2022; isn’t each one of them already milked to the extreme?
Do not worry, you have come to the right place and we will show you the different monetization models and how to use the most suitable one (or combination) of them to make money from free apps in 2024.
As of 2022, report 96.7% of apps on Google’s Play Store were free, compared to 92.7% on Apple’s App Store. Free apps dominate the app market and will continue to do so for a long time.
The following table, summarized from Business of Apps, shows the growth that apps are witnessing in their revenues over the years:
| Year | App Revenue |
| 2016 | $ 43.5 billion |
| 2017 | $ 58.1 billion |
| 2018 | $ 71.3 billion |
| 2019 | $ 89.0 billion |
| 2020 | $ 111.0 billion |
| 2021 | $ 133.0 billion |
As is clear as day from the above dataset, the growth in revenue for mobile apps is going to be phenomenal at a CAGR of 26.39%. And if the same trend continues, which we expect to be faster than in the past years, then by 2025, the app revenues are going to cross $398 billion!
You may have a great and awesome idea for free app development, but that alone cannot make you money. You will need to consider many factors to make it user-friendly, popular among users, and then finally make money from it.
The idea must be unique or fill a vacuum that is left behind by existing popular apps in the same category. For example, when TikTok was banned in India in 2020, many short video apps came to fill the void.
Or, despite having too many wallets, PayTM is the clear market leader, as it was present in a critical mass way before any other micro-payment app was.
PayTM also offered person-to-person transfers before any other app could think of it, making it immensely popular.
There are some crucial factors that you must factor in before you launch your free app to make money:
Following are the most popular app monetization methods, in order of total revenue generation, according to a survey and research by Statista:
Let us discuss in detail the features, suitability, pros, and cons of each of these methods to monetize your free apps, one by one.
In-app advertising is the most common and most recalled manner in which one could make money from free apps. It is also the easiest method to build into the design of your apps, as it is also the oldest method on the Internet to monetize digital properties.
Networks like Flurry, the all-powerful Google’s AdMob, Facebook Ads, and AdColony are the top picks. The ads can be placed within your app in many forms, like banners, in-app native ads, video ads, interstitial or full-screen ads, animations, and rich media ads.
As an app owner, you must integrate the third-party API of the ad-server you have partnered with. You can define various levels, moments, and events when an ad will be displayed.
You can control its placement, type, total duration, minimum duration, genre, category, and other such parameters to manage what your users see.
The ads can be used to generate direct revenues, based on the impressions they make, and you can partner with them as an affiliate to earn commissions when users click on them and make purchases on the sponsor’s app or website.
If an ad is clicked, you get paid; if the user installs the app of the advertiser, you get paid; simply put, the monetization opportunities are infinite.
A full-screen pop-up covers the entire screen, and the ad is displayed for a limited duration. These ads can appear at specific intervals or when an event is triggered.
Banners are like posters that are displayed in assorted sizes at different locations on the screen. These are often smaller in size than the full-screen ads and less obstructive too, letting the user use the app while the ad is shown.
Free video sharing sites like YouTube and MX Player use in-app videos, as well as many games. In games, the users can ‘earn’ some reward points by watching these ads. Users get the option to skip the commercial after it has played for a minimum duration.
Native ads are integrated as internal elements in the app and showcase the benefits of using the product or service being marketed.
Go a step further and optimize your creatives to reach even more of your target audience. With the exact results apps provide, you’ve got an opportunity for improvement (and more profits) at every click and turn.
As the advertising becomes part of the app’s’storyline,,’ it cannot be skipped or closed and therefore is becoming more popular.
However, integrating them into the app can be challenging, as building a story around an unrelated product or service is not an easy task.
As the name implies, when a user makes any purchases from within your app, for non-e-commerce apps, the app developer gets either complete revenue or at least a commission on the proceeds.
Such purchases are simple and typically done to access special features, benefits, or contents within the apps. These may include data packs, powerups, more lives, cheat codes, special weapons, avatars, stickers, and access to restricted content.
Most gaming apps, video apps, research providers, and news portals have started using this model as regular subscriptions are considered costly or a waste of money by the users.
According to Forbes, this method is the highest revenue generator for original content developers and publishers, including games and gamers.
Although the gaming business takes away the lion’s share, other original content publishers also use this model very effectively, like publishers of scientific journals.
The best-suited apps to deploy this method and make money are those that offer limited access to a set of features, levels, tools, and content to users for free and then sell additional wares via in-app purchases.
Subscriptions are the go-to model for original content publishers, especially for news and entertainment content. Popular video streaming apps like Netflix and Amazon Prime, as well as Business Standard and The New York Times, all use paywalls to protect their content.
If the user wishes to consume their content, they must subscribe to their services through apps. Subscriptions can be annual, quarterly, monthly, or even for any custom range of duration, depending on their usability.
Some app publishers supply limited free content for either a limited period or access to a number of articles, episodes, or hours.
The difference between the subscription model and in-app purchases is that users get access to all features during their subscription period instead of to limited elements, as in the case of the latter.
If your app has unique features, such as avatars, characters, and quirky quotes, then you have an excellent opportunity to sell merchandise based on them. This merchandise can range from t-shirts to wrist bands, from mugs to pens, and from jewelry to caps.
You will have to partner with quality manufacturers of such merchandise and must ensure your suppliers can deliver reliably to customers who have placed the order on the app.
If the popularity of your merchandise is very high, you can also enter into distribution and sales agreements with retail chains and start selling them on eCommerce platforms.
It is one of the less used models of app monetization but can give you impressive results if you find the right set of patrons. In the case of a sponsored app, the developer earns by publishing the app and getting sponsors to promote their offerings exclusively on your app.
For example, you publish an app in the food genre, and then a restaurant chain, a fast-food chain, or a frozen food manufacturer may sponsor various elements in your app.
Customers may receive sponsored notifications about their latest offers, special discounts on booking via the app, and even discount codes on referrals or reviews.
Another example is Home depot sponsoring the Weather Channel App by putting an animated background where their appropriate ad is played according to the climate and season.
When you promote third-party products and services and users use a unique code linked to you to buy them, you will get a commission on such purchases, app downloads, and app usage.
This is called referral or influencer marketing, which requires your app to have sufficient influence over its users to nudge them in the right direction.
The most common form of referral marketing apps is the one in which you compare similar products or services and then go on to buy them from within the app.
For example, PolicyBaazar is a leading portal for buying insurance policies where a user can compare different policies from all insurers.
Once the user enters her details, she is presented with the most appropriate policies to choose from, and when she buys a policy online, the PolicyBaazar app earns a referral fee.
It can be considered similar to the direct sales commission, where each sale is tied to one of the multiple marketing channels.
Because the app works on providing choices, they can also make some listings to show before all by taking in sponsorships from the providers of those listings.
Different models of referral marketing are used by publishers, including:
The acquisition means that the users signs-up for the promoted services via the affiliates app.
The affiliate will earn a small amount with each click by a genuine user on the advertisement by the promoter of the services. Upon clicking the ad, or the link, the users are taken to the app or landing page of the promoter.
In this model, the number of impressions of the ad by the promoter will earn you money. These impressions can be of static images or full-screen animations and videos.
as the name implies, if the users download the app and install it on their mobile phones, your app will earn. It is similar to the CPA model but with a more tangible acquisition and more tangible monetary rewards for your app.
Every app collects loads of data about its users, including their usage statistics, their phones, networks, movements, and even transaction history.
If you can find a secure way to hide sensitive details such as email and phone contacts, names, and credit card details and sell the bulk data, you can have a great monetization tool.
In fact, each app does sell the data directly or indirectly to others or to other branches of its own business.
For example, Facebook or Google may not sell data to others directly but it will use the data to decide the rates of advertisements on their vast networks.
In this case, the users are the product that the apps are selling to their marketers; categorizations, consumer preferences, usage statistics, etc. are also very valuable for market research and statistical companies.
Freemium is coined by joining Free and Premium and means exactly that: some features of the app are free for all to use an unlimited number of times, but to access other advanced features, you must pay up. This payment can be one-time, like with an IAP or recurring, like with subscriptions.
For example, with Spotify, you can use most of its features for free, and this way they can make you fall in love with them.
But to gain ad-free access to its greatest audiobooks, exclusive labels, and popular podcasts, you must subscribe to its premium services.
This is an exceedingly popular strategy in the case of educational content, professional certifications, health check-ups, and news publishers.
Online and offline retail stores launch their free apps as a gateway for their consumers to browse and shop the products they sell. This is also applicable to service providers such as telecom or financial services.
The customer always has the choice to visit the store online on their website or a physical store but may choose the app for more convenience as well as for exclusive offers available on it.
An app also offers the convenience of making payments via conventional modes as well as their mobile wallets.
If you are offering an important and irreplaceable intermediary service, then you can charge a convenience fee or transaction fee from your customers.
For example, payment gateways make money on each transaction, PayPal and Western Union make money for each remittance, and utility providers charge for providing you added bandwidth.
As the name suggests, the publisher of the app appeals to a large crowd of people to support their app and make monetary contributions. .
Against the donations made by interested patrons, the app publisher may give them exclusive rights, premium access, or beta access to new features of the app.
Startups and students who are passionate about their apps, ideas, and causes make use of the model and register themselves on various platforms like Patreon, Kickstarter, Fundable, GoFundMe, Crowd Supply, and Chuffed to look for donors. They may use their social media links to promote the app.
By now, you must have already had a fair idea that which monetization model is most suitable for you. Still, if you are confused that which model is best suited for you, or if you must go for a hybrid model, then follow these simple tips to clear any remaining doubts.
As a mobile app publisher, you must understand that, in the end, any app that makes money adds some value to the lives of its users—entertainment, education, socializing, convenience, or some other such value proposition.
If you do not bring your unique value proposition, then no matter what you do, you cannot make money from it.
If you realize soon that your app can only make money when people use it, then your focus will not be on the money it makes, but on the benefits, it has to offer to its users.
Your users are always the kings and queens and they may vote by foot by uninstalling your app the moment they get a better value proposition from your competitor.
If you have any queries, doubts, or questions about apps, their development, or monetization models, feel free to contact the experts at Arka Softwares by filling out this query form.
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