How Do Free Apps Manage To Generate Money?

Go to the App Store or Play Store and there is a barrage of free apps out there. Free apps get a lot of downloads, well because they are free and thus users give them preference over paid apps. But, then one begins to wonder as to how a free app can generate revenue for its makers. How do free apps make money and what is the monetization concept behind them?

This is perhaps the most thought of things when it comes to free apps and it is indeed true that this is one of the most popularly asked questions on popular forums and search engines. We’ve taken this topic in a bid to demystify the idea behind free apps and how they make money.

On average, free apps get downloaded more than 10 times the number for paid app downloads, and thus the download numbers are the key to understanding the working behind it. With a bigger user base, a wider revenue stream opens up for the free apps. There are a couple of tools and tricks that help mobile application development companies make money out of free apps; we have listed a couple of popular ways here; read on to learn more.

1. Having More Than One Version of the App

This is a popular technique wherein you can have a free app that is lighter and helps the user get a sense of what the app is all about. The other version of the app will be the heavier version which has extra features. You could either have extra features that could be bought from the app via an app store or play store or have an option wherein the user can upgrade the app to the full-fledged version by means of App Store or Play Store via in-app purchases.

This is an excellent strategy wherein you get an opportunity to grow your user app at a rapid pace and then convert them into customers who pay money for your app. This strategy is popularly referred to as the freemium strategy.

2. Advertisements

Ads as always are reliable sources of income! But then this depends on traffic and when the traffic is good, this can be looked at as a steady revenue stream. Sometimes, mobile app developers are paid per click, per install, or per visit. Some apps pop up on screen after a specific time period when a user is using another app (mostly some sort of a gaming app) and sometimes they are programmed to pop up when the user loses a game or has played for a long while or is browsing something specific in the app and so on. The user can then either click on the link and browse the app or simply close it.

These ads are called interstitial ads. Other kinds of ads include banner ads (found at the top or bottom of the screens), native ads (built specifically for a destination or landing site), and video ads(these are mostly used as a reward mechanism – if the user watches the video, he/she gets coins or points or app currency and so on. These are used particularly in games).

3. Subscription Fees

This is yet another important strategy that top mobile app developers employ and this is something that you would have come across quite frequently. There are many websites that do this and mobile apps are following suit. Consider an app that lets you read news and popular blogs online. If you have access only to a limited content set there, you would probably subscribe to the app and pay to become a premium member and read the content.

Say, for instance, you are reading an article about something that is very interesting to you and you get to read the full article only when you are a member or a subscriber, you would readily do so.

4. Sponsorship Arrangements

This is again similar to websites wherein you find a sponsor for your app. What happens here is that you need to design an app and make sure that it caters to a specific audience and then approach companies who might team up with you and explore this platform for mutual benefit. Once you land a sponsor, you may have to do some changes for your sponsor such as changing the app’s theme/ graphics to reflect the sponsor’s image and brand name, changing the app name, or going for an approach called white labeling. Herein, you make it look like the app is completely owned by the sponsor and get money from the sponsor for the same.

This is a very good revenue stream and is being explored aggressively in recent times as a viable revenue stream. You could also go for a revenue split or get the sponsor to pay a sponsorship fee on a monthly or quarterly basis. Such a platform is beneficial for both the mobile application development company and the sponsors.

There are many other ways to make money out of free apps such as email marketing, merchandise selling, affiliate marketing, and micropayments. We’ll be back with more such interesting blogs on commonly looked-up questions related to mobile apps and their development.