The number of apps grows steadily year by year. According to Statista, the world's two largest app stores, the Google Play and iOS App Store, together offer about 5 million apps to download. It is noteworthy that over 90% of them are free.
It takes time and money to create an application (even a free one). So why are there so many free apps, and how do free apps generate income, you ask?
In this article, we'll cover:
- effective methods of monetising apps
- pros and cons of main free app monetisation methods
- what to consider when choosing a monetisation method for your free app
Free App Monetization methods
We have prepared an overview of the most relevant ways to monetise free apps in 2021, in our opinion.
Here are 4 of them that will allow you to make money with mobile apps:
1. In-app advertising to monetise free apps
According to last year's poll by AdColony, 89% of publishers of the most profitable mobile apps and games chose video ads to make money from their apps.
The main types of advertising are:
Banners are one of the cheapest and most popular ad placement types used quite often in apps.
Banners can be static or animated. They appear on the screen of the device at a particular stage of using the application.
To avoid user dissatisfaction, you need to place banners in the application not to interfere.
Rewarded Video is a video format ad that users can either watch or skip. It is often used in gaming applications, where users receive bonuses as a reward for viewing ads, for example:
- virtual currency
- character updates
- additional moves, etc.
This ad format is highly engaging.
It is a full-screen ad that you cannot skip. It only appears for a few seconds.
Video Interstitial is a full-screen video ad that you can skip.
This type of ad is disguised as standard content. Native ads are inline ad units that integrate seamlessly with app content (using icons or a short description).
Native ads are often considered the best mobile ad format.
- A variety of formats, which in some cases can improve the user experience
- The ability to combine different views in one application
- Advertising is the easiest way to monetise apps.
- It is much easier to attract users to a free mobile application, which means you can start monetising it early.
- User irritation and fatigue from ads (Banner blindness)
- Doesn't work well for niche apps that address a user's immediate need (e.g., ordering a taxi)
- The low income per user - you need a broad user audience to start making money.
2. In-App Purchases to monetise free apps
Another popular way to monetise apps is in-app purchases. It is most commonly used in gaming applications.
Users first install the application on their device, and then buy virtual currency for real money, which they then spend on any application items (e.g., World of Tanks, Mobile Legends).
- Convenient for users as they have the choice to pay or not pay
- Increasing the engagement of the interested audience
- Very few users make purchases.
- There are some technical difficulties with the integration of in-app purchases.
3. Freemium to monetise free apps
Freemium is one of the most familiar ways to monetise apps. The developer opens free access to essential functions, while advanced ones are available only for a fee.
This monetisation model is often used in business applications. For example, in the Todoist task tracker, you can keep a to-do list for free. You will have to pay for additional integration of third-party services.
- Attracting a loyal audience quickly and consistently, since the application itself remains free
- Ease of implementation
- A small number of users willing to pay
- The need to think about the functionality you offer for free to keep users motivated to pay for an additional one.
4. Subscription method in monetising free apps
This method of monetising free apps is perhaps the most popular today.
It is similar to freemium, but users pay money regularly. There is some free part or content in the application, and additional is available only for a monthly fee.
An example of an application with such a monetisation model: Smule is an application for karaoke singers. For a monthly payment, users get the opportunity to expand the selection of tracks, perform selected parts in songs, etc.
- Regular cash receipts from subscriptions
- Favour and encouragement from hosting platforms. For example, for the second year, Apple takes away not the standard 30%, but only 15% of the subscription price.
- It is difficult to collect a loyal solvent audience.
- You need premium content that people would like to pay for regularly.
- Comparative complexity of technical implementation and tracking of subscription activity
What influences the choice of how to monetise free mobile apps?
The choice of method for monetising free apps is very individual for each app. To find the one that will help your free money making app, we recommend considering the following parameters:
Age and preferences of the target audience
You must know your audience and understand what potential users will pay for and what functions they will not be interested in.
For example, mostly middle-aged and older people agree to turn off ads in e-book reader apps like Cool Reader. Meanwhile, younger people will readily pay for subscriptions in fitness apps.
Advertisers are willing to invest in apps, but for that, you need to get them interested. That is why it is most convenient to work on a specific topic.
For example, sellers of sports nutrition or sports and health products are more likely to advertise in fitness apps. In turn, the weather widget is a great place to promote consumer goods and services based on a specific region.
Demand for paid services depending on the type of application
This point is more about ways to monetise apps like in-app purchases and subscriptions. For example, if you use such a method to monetise a business application, it may be relevant. In the case of entertainment applications or, for example, music applications for which there are free analogues, it makes no sense to charge a fee. It is better to set up ads and offer payment for extra comfort.
We reviewed the four main ways to monetise free apps, their advantages and disadvantages, and points to look for when choosing a particular free app monetisation method.
Remember that an application’s successful monetisation depends on a detailed study of the target audience and can combine several strategies at once and necessarily include analytics.
Do not repeat competitors’ actions exactly, because what is suitable for some applications may not work with yours. Experiment, combine different app monetisation models and make money with your free app!