Blog / App Monetization / Secret Formula: How Free Apps Make Money

Secret Formula: How Free Apps Make Money

Akhil Kumar By Akhil Kumar | November 19, 2019
How Free Apps Make Money

How many times did you get annoyed with those pop-ups when watching your favorite videos, many a time maybe. What you call annoyance is the app monetization strategies for businesses around the globe to expand their businesses. The same strategy works for mobile applications too- paid and free apps. 

In comparison to paid apps, free apps are dominating the app market carrying 96% in Google Play and 90.3% on App Store driving $71.3 billion in revenue. But the point here is- if these applications are free, how do they actually make money?

paid-vs-free-apps

So, if you are planning to develop a free mobile application for your business, or want to know how do free apps make money, this blog is the right platform to get all your answers about how to make money from free apps in just a few scrolls. But before unveiling everything about it, let us go through so many other aspects of it to understand it a bit more. 

Before getting started, get your favorite coffee, a few snacks, and a cozy corner as the blog is going to scale depth of how do free apps make money. With pre-suggested pampers, let’s start-

A look at a Few Famous Apps Making Money Dynamically

1. The Facebook-Owned Global Chatting Zone – WhatsApp

Whatsapp- one of the most popular apps in the world today is basically a messenger app that connects the world in just a click through the internet. Till now, no other app has got such stardom like WhatsApp and the most important thing about it is- it’s free.

How It Makes Money

Whatsapp has made money by selling the app for $1 to users while charging the other $1 after the very first year. Cutting the confusion created, the company’s uncomparable growth looks like this-

WhatsApp

Quite a good example to show how a free app can make money, earn fame and name.

2. The Reason to Celebrate of Never Getting Lost – Google Maps

Google is another company that is rising performance-wise every single day.

Here is How Google Makes Money

Google Maps carries different money-making tactics, a few among them are- 

  • Advertising

When it comes to how can you get revenue from free apps, the app knows how to pull out ad revenue through promoted pins and local search ads. In Google Maps, there are colored pins that pin nearby businesses- a fork and knife is meant for a restaurant, a shopping cart is shown for a grocery store, whereas bed is for the hotel. Meanwhile, brands who wish to show up instead of the generic pin, then you will get the exact information. 

Promoted pins are generally used in markets where there is stiff competition.

Moreover, Local search ads simply give an edge to a business on top of the Google Maps search results by increasing its visibility and this is how do free apps make money.

  • Google Maps APIs
Google-Maps-Api

Google Maps made money by allowing businesses to use its development platform in order to create customized map experiences. There are three types of Google Maps APIs

  • Partnerships

Ordering food through Google Maps is easy and efficient now. The platform with third-party services can let one place order without leaving the application. Apart from that, finding an available Uber or Lyft in the area can also be done.

Uber
  • AR for the future

The tech giant Google got big plans for the future of Maps that includes augmented reality upgrades much like Pokemon GO.

One of the smartest examples to earn money through an application. 

3. The Game One Can’t Resist Playing – Candy Crush

Before discussing a lot about it, let us have a look at the following data from SensorTower-

Top-mobile-games

So, the data is basically a way to let you see what is so sweet about Candy Crush.

Here is How Do Free Apps Make Money

Candy Crush Saga is still continuing to rule the center of the mobile app gaming industry by being one of the top 10 highest-grossing apps across all the categories in both Apple Play Store and Google Play Store. 

the mobile app gaming

Candy Crush Saga makes money through its in-app offering including boosters, extra lives, and spins. The makers of the game do know how to enchant a number of audiences by letting them seal special features by paying extra. 

King, the company behind the app franchise generates a whopping 3 million dollars per day from in-app purchases. 

A great way to see how in-app purchases are making Apprenuers generate revenue. 

4. This is How Professionals Kick-Start Their Day – Slack

Launched in 2014, Slack has become a leader in the SaaS community and an initiate for growing tech companies in the right way. 

This is How Slack Makes Money

What started as a gaming product has changed into a tool to monetize free apps. The quick growth and high valuations made the company attract more numbers of investors and many other big game companies signed up to use the device. 

Organizations can use the app for Free whereas companies that need more flexibility and support need to pay a premium for Slack based services.

Slack

It was reported last year that Slack has around 8 million total customers in which 3 million are paying. One of the most attractive features of this app is that one needs to pay for team members who actively use the app, otherwise if there is no activity for a certain period of time, there is no charge.

Free Apps Make Money

Also, Slack generates revenue through third-party partnerships. Meanwhile, the company is encouraging partnerships to reinvest. 

What say about slack?

5. The App Everyone Love – Pandora

When comes to music, Pandora is the app that is top-grossing apps that too in both app stores (Play Store and Apple App). Due to this, the app has 250 million registered users. After a few years, the company shifted its app monetization strategies from charging annual fees to paid advertising. 

Today, Pandora’s pricing approach is somehow similar to Spotify and Apple Music offering- 

  • Pandora (radio with ads) – Free
  • Pandora Plus (no ads, unlimited skips and replays, and limited offline listening) – Monthly or annual fee
  • Pandora Premium (no ads, unlimited skips, and replays, unlimited offline listening, ability to create playlists) – Monthly or annual fee

This is how Pandora is earning name, fame and great revenue.

6. The Place for Inspiration – Pinterest

An online scrapbook-meets-vision board meant for finding inspiration for everything starting from fashion to cooking to travel to science to what not all in the form of pinned images. The pins basically connect users to external sites

How Do Free Apps Make Money?

As per the report by Investopedia, the inspiration app Pinterest has generated over $700 million in paid advertising profits last year- 2018. Some of its pins are also buyable- means a user can buy the images from the platform itself. Also, it is integrated with payment services like Braintree, Stripe and eCommerce sites like Salesforce, Shopify, etc to make the payment easy and efficient. 

This is how these amazingly successful apps are generating not just revenue but also user retention, name, and fame.

Behind the success of these apps, there are various ways to monetize free apps that are actually adopted by popular apps for reaching such growth. This constant demand for such demanding applications is making opening up opportunities to mobile app development companies to follow the monetization rules and guidelines. Let’s have a look at them too-

Ways to Monetization Free apps

Here is the list of most commonly followed monetization methods used by applications to generate revenue by being free

1.Advertising

  • Video ad formats

Interstitial video ads

Rewarded video ads

Outstream video ads

Instream pre-roll video ad

Banner display ad

Medium rectangle ad

Display ad formats

2. Freemium

3. Email marketing

4. Sponsorship

5. In-app purchases

6. Collecting and selling data

7. Affiliate income and referral marketing

8. Physical purchase

9. Subscriptions

10. In-app purchases

Advertising

This is one of the most easier and free-flowing app monetization strategies to make money with free apps. 

It has seen that mobile apps have generated advertising revenue reached $159+ billion worldwide in 2018 and is expected to cross $250 billion in 2021.

Advertising

When talking about how do free apps make money, confusion about why and how is it possible to make money by being free is quite obvious. This is the reason, here we got you a few things which we here at Appventurez religiously follow to make an app just outstanding.  

Ads are the most prominent part of the applications providing a dynamic environment to seamlessly integrating within in-app content. We understand the difference between annoyance and enticing, which makes us choose the right ad format when developing applications.

Below are the formats which we have divided into video ads and display ads-

Video Ads Formats

Video ads are short promotional videos which effectively deliver message and concept a brand is trying to portray across all users. There are basically 4 types of video ad formats-

  • Interstitial Video ads

These are the full-screen advertisement videos that appear automatically in between natural break within the application.

Interstitial Video ads

For example- when a user completes a level of a tutorial app or maybe trying to go to the homepage of the application, the video ad automatically showed up on the screen. Such videos are the most effective way to tell a rich story in a few words. 

  • Rewarded Video Ads

These are the ads that are necessarily used in gaming applications by allowing users to earn virtual points for watching a video ad. 

Rewarded Video Ads

These apps are different as compared to Interstitial video ads, as, with Rewarded video ads, one can skip the ad and continue using the application. This is the reason, these apps got the highest viewability rate among other video ads formats. 

  • Outstream Video Ads

These videos do not take the entire screen of the user’s devices and are placed in between the in-app content. 

Outstream Video Ads

Similar to rewarded video ads, out-stream video ads also provide the option of closing or pausing the ad. 

  • Instream Pre-Roll Video Ad

Videos that are played either before, in between or after a video content within the app’s video player- one of the most effective and efficient ways to attract a large number of audiences. 

Instream Pre-Roll Video Ad

Remember those 5 seconds of ad with a tagline- “skip in 5 seconds” in Youtube is the most relatable example.

So, these are the video ad formats, let us now check out Display Ad Formats.

  • Display Ad Formats

These are the static or GIF image ads helping the brand expanding its reach in the in-app environment. 

Below are the ad formats which we often consider when building a free app-

  • Interstitial Display Ad

Somewhere similar to interstitial video ads, interstitial display ads are also the full-screen ad that appears when a user takes a natural content break. 

Interstitial Display Ad
  • Banner Display Ad

A first-ever ad format that is introduced in mobile applications, is a sort of a small banner either placed at the top of the app, in-between or at the bottom.

Banner Display Ad
  • Medium Rectangle Ad

Medium Rectangle Ad is basically a large square ad that provides more room to the content.

Medium Rectangle Ad

In-App Purchase

Next in the list of strategies to make money with free apps, In-App Purchase allows app providers to sell virtual items like virtual goods, game currency, extra bonuses or premium content within the application. 

This is the reason, as per Forbes, free apps generate the highest revenue and are expected to continue to increase in the years too. Also, there are categories lying under it, those are-

Subscription- a way through which users can unseal premium content for a limited period of time. 

Consumable- a sort of digital product that can be bought or used within the app like premium stickers in the messaging apps. 

Non-consumable– it is meant for unlimited usage like the tracker in the fitness application. 

Freemium Model

Freemium apps are offered to download without any charge but with minimal features. Also, if the user finds the content useful or relatable enough, users can get access to all other features and functionality of the app by paying for the PRO version of the free app. 

Referral Marketing

It is the type of marketing meant for promoting third-party service or a product. We often suggest such Apprenuers to go ahead with such kind of marketing by partnering with brands while selling affiliate services and products. 
There are basically three kinds of marketing tools that can be used for free money making apps-

Referral marketing

Cost Per View (CPV)

It is all about the number of views an ad gets out of the free app. One can use the method by making use of Interstitial Video Ad format. 

Cost Per Click (CPC)

This is all about the number of clicks a displayed ad receives in the app. The ad can either be used for display or video ads. 

Cost Per Acquisition (CPA)

This is the platform that promotes other applications through a pop-up video or display ad. There are CPA affiliate platforms for making money, a few among them are- 

Check out how much does it cost to develop an application to get started with. 

Subscription Model

Another strategy to go ahead with is subscription. Apprenuers generally offer features or content free of charge for a shorter period of time and then lock them up and charge a monthly fee or an annual subscription fee to those users who want to continue with the application. Also, the subscription model is quite to the subscription category and the core difference between lies that features or content is being offered for a particular time period. 

Netflix, Amazon Prime Video, Spotify are one of the best examples to justify the strategy. 

Sponsorship

Though the model is effective and the most powerful app monetization options but is not meant for everyone. 

The model is somewhat similar to website/blog sponsorship where sponsors single-handedly approach app owners to target certain sets of audiences for their brands and companies. 

Facebook is the example one can easily relate to as it allows users to promote both their products and services to a large number of audiences. 

Selling User Data

One of the best ways to generate a good amount by selling user’s data. There are many companies and research firms available who look for user’s data. 

There is no better device than mobile application as they are the best way to collect a good amount of user data such as behavior data, email addresses, daily time spent on which site, online activity and many more. 

Email Marketing

The saying called “old is gold” actually proved here as email marketing can be quite powerful when it comes to monetizing applications. 

The strategy is just an app and works wonderfully when the user is being asked for email and reaching the business through email notifications.

Physical Purchases and Merchandise

E-commerce businesses via free applications sell their physical goods and merchandise like t-shirts, toys, cell phones, etc. with support from email marketing. 

Angry Birds game has seen a boost in its revenue graph whereas a company called Rovio sells 1 million branded t-shirts, stickers, backpacks, etc. Meanwhile, Amazon is not left behind when it comes to generating a good amount of revenue.  

Affiliate Income and Referral Marketing

Just like the opportunities given to the app development companies, similarly, mobile app developers can promote and sell services and products based on the number of clicks and installs in mobile applications.

For effectively doing so, pop-ups or banners can promote someone else’s app or in-app store to advertise services and products. Amazon can not be neglected when showcasing the example of one such kind of app monetization strategy. 

Attended to a few of the ways through about how do free apps make money, there is another approach or better say how the app should be designed in order to bring in more user crowd for generating revenue. So, without further ado, let’s not skip the important phase we at Appventurez paid full attention to.

How An App Should be Designed and Developed

App Packaging is a Must

There are around 2.6 million apps in the Google Play Store whereas Apple App Store is stocked with 2.2 million applications. And there is no denying that due to this stiff competition, not paying attention to the quality, features, functionality of the application can cause an app to go into the pool of failures. 

When this was the first question, other questions like how many users will find the free mobile app? How many will download the app? How many will actually use the app etc are a few of the questions that come in the mind of the app developers before going ahead with the same.

Apart from that, we understand that no matter how many attractive features your app got or which app monetization strategies method you are using, there are higher chances that your app will fail miserably if it is not able to attract more customers without a clear app packaging. 

What makes an app attractive is the capability of the potential users quickly finding it through search in the Google Play Store and the Apple App Store. Thus, in order to make an app visible and easy to find, our app developers after developing the application do provide attention-grabbing names along with informative descriptions and screenshots too. 

Here Are a Few Quick Tips for Accomplishing the Challenge

  • Come up with a catchy and attracting name

Before functions and features, the name of the application is the first thing that reflects its major functions. Thus, we often do a lot of research for the final name of the application that can actually attract more number of users. Also, we never skip considering keywords when naming the application. 

Here is a pro tip for you- the name of the name should be impressive but at the same time it should be exceeded before 100 characters. Make sure the name of the app should be a perfect balance of keywords, characters, preciseness, features, and functionality. 

  • Description of the app is the essence

The very next step in the overall status of the app is to give a meaningful and informative description. 

Just like caring for attracting name, but often paid attention to the description of the app. Thus, we always make sure that the first several sentences of the app should describe the overall purpose and main idea of the app. It should be within the limit of 225 characters. Users often install the app just by reading the description of the app, thus not giving attention to the description is the priority. 

  • Screenshots are the live life of the app

Giving priority to the app’s name and description, we never ever underestimate the power of screenshots, thus we always bring out several catchy screenshots and choose the best one among many.

Adding some text in the screenshots can never go wrong because that gives the hint to the overall texture of the app. 

Here are screenshots for the Uber app for iOS and it’s costing part too

Just like understanding how much does it cost to develop an application or figuring out how long does it take to develop an application, knowing what makes an app a successful app in the stiff competition is the blend of art, strategy, research, hard work, and the right idea. 

Well, this is all about how do free apps make money and various kinds of monetization methods to look at. Attending all these things, it is the right time to hit another aspect of choosing the right free app monetization strategy. 

How to Pick the Best Free App Monetization Strategy

In order to select the most profitable yet effective app monetization strategy, here are the things we consider-

The Ultimate Goal of the Business

We understand that each and every business in the world carries its own set of goals, ultimately solving the issues and queries of the users. In order to accomplish the same, choosing the right monetization models for mobile apps is another requirement that will define how users are interacting with the app and in what ways a free app can actually generate revenue. 

One of the best ways to do so is to call for a subscription fee or maybe charging a bit for unsealing pro levels. Thus, a business should know what to choose along with blending the app with combined ads. 

Knowing the Target Audience

Not understanding those for whom you are making an application is the failure in itself. Users are the ultimate consumer of the application and not understanding their pressure points and things they can associate with will result in nothing but another failure piled up in the list of unsuccessful applications. 

Thus understanding, audiences will help in picking up the right monetization models for mobile apps. For doing so, MVP (Minimum Viable Product) is the best way to offer an application laid with core features and launching it in the real market for real users. After gathering useful recommendations and things a user does not want in the application can help in designing the final product as per the user’s need

Indulging in Competitor Analysis

An app that solves the issue of the user precisely can never fail in the market. And these successful apps are the competitor to your ultimate idea whereas the apps that fail to serve what a user wants are the ultimate lessons meant to be taken seriously. 

Thus, to make a suitable way to make money from free applications is to dig deeper and look at the competitors and other niche-based applications to understand what is so captivating about them and what is not. Once done with the same, picking up the right ways to monetize free apps will make the app generate a good amount of revenue in no time. This is how do free apps make money but the tale does not end here, there is a lot more lying beneath these words. To know more, connect with our experts and get started …!

Akhil Kumar
Akhil Kumar

Co-Founder & Managing Director of AppVenturez Mobitech. An entrepreneur who is tech-savvy and aims to build the largest software business through technological innovation, keen business strategist and a passionate technocrat. He firmly believes in learning and earning by planning and performing.

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