5min read

How Do Free Apps Make Money: 8 Proven Strategies

It's not a secret that app development costs a lot of time and money. But when you see how much free mobile applications can generate revenue, you understand the development expenses justify themselves

So, how to get into the Top 200 free apps market? Usually people are willing to spend more when they have a free opportunity to try the app rather than to pay for it when they haven't opened it before. People go inside your app, they see the value, they can receive some emotion from using the app, and then they are ready to spend some money in it or on it.

When users get this pleasure from using your applications, they're actually ready to spend a few bucks on some perks that your apps give. When it comes to the app categories, the most popular one is games, making the biggest amount of money revenue. And still non game apps make good money too, a good example is Tinder, a dating application with a freemium model.

Monetization strategies

The first monetization strategy is advertising. But usually it is filled with banners which are so annoying that you often delete the app. The smart thing to do is to give enough advertising to your users to push them and to nudge them to buy paid subscriptions and remove all advertising.

The second monetization strategy is referral marketing. So, instead of banners with advertising, you can promote some affiliate company. And you get revenue per click, per install, per view or per any other action of your users. But what is interesting in this strategy is the higher monetization rate. Affiliate companies pay you more money for advertisement, then regular advertisements from Google or, or whatever other software that provides advertising.

You are free to choose whom to promote. So you can promote something that will give value to your users. Context and content matter here. So from a user standpoint, it is still advertising. But from app owner standpoint, this is higher monetization.

The third strategy is the sponsorship model, becoming popular just right now. It is not a very common strategy, and not all app publishers are aware of it. So if you work in this specific niche, and you already have a big user's data, and they have a high level of engagement with your application, companies who work in the same niche can be interested in putting their product and services in front of your users.

So also, sponsors have benefits for you and for your users. Sponsors can provide different benefits to your user, discounts or some interesting offers. For example, Nike is really interested in showing the advertising of their shoes in the gym. Nike can have an exclusive agreement with that gym.

And if the gym has some app, for example, a simple calendar where you can make an appointment with your coach, Nike advertising will be there and only Nike’s, but the price of this sponsorship is really higher than just simple Google Ad Sets.

Also, we have freemium: you download something for free. And then in case you want to get some kind of additional content, you need to pay for this. And one more interesting feature about the freemium is local currency. You buy for real money some kind of the local currency of an app that you technically may even not ever use.

And then you can spend it to get something or you may not, but the company who owns this app already gets the money. In case you make things too expensive, or the app will annoy users too often to buy some kind of additional thing, people will get mad and delete the app.

So, instead of making money, you will lose money. You need to use a very smart way to remind users to spend money at the right time and with the right frequency, otherwise it will ruin your business instead of helping you.

The next monetization model is subscription. The users who subscribe for your application are more engaged. And they use apps more often. This model requires you to provide regular updates, because if people subscribed, they want you to give them some valuable features and updates.

The next model is crowdfunding. So you can gather investments from Kickstarter, GoFundMe or Patreon. However, this is a model on which you can't really rely to provide you constant revenue, because revenue from the investment is not stable.

And also, getting investment from someone is a competition. You have to prove to investors that your idea and the concept are worth investing money in it. So, you can use this channel as an additional way of monetization, but for sure, not the only one.

The next monetization model is collecting and selling data. You can make some assumptions not about the single person but about the group of people and sell in this data to the special company. These may be really valuable because companies may provide them better value.

For example, you’re interested in Porsche, and you’re always getting advertising of some Russian cars. You don't want to see Russian cars over there, you want to see Porsche you’re interested in. But as you’ve blocked app’s access to your profile, you see some kind of crap that you don't like, because the app cannot analyze your profile.

And in the end, we will just tell you four simple steps on how to approach your app and find the best way to make money out of it.

How to find your monetisation model?

The first one is market research. When you decide to develop an app and you know which industry you want to work with, niche, what product type or target audience, go to the market and check your competitors.

What is their monetization strategy? What advertisements do they use? How did they use this? Do they have some missed points in their monetization strategy? Probably you can fill it in your app or probably they propose no relevant advertising, but you will do it better.

So, users will get additional value, for example, as we’ve talked about gym and Nike, so do the market research, understand what other people do and based on it, make some conclusion.

The second step is to discover the target audience for your app. I have a great example that is happening right now. We are developing a cryptocurrency app. The owner of this app created a small community of the alpha testers who are checking and generating ideas for them on how to implement it better before he released this app for the whole world. So, this is about discovering the target audience.

The third step is to share your app concept. So, think about the name brand, don't eliminate the importance of the description in the app store or on a Google Play Market, make really good marketing materials. Users usually spend three seconds of their attention scrolling through the list of apps. They have to catch you distinguishing yourself from others. Thus, branding, name and logo is still very important.

As a conclusion, clearly focus on the exact audience, choose your monetization, probably not the final monetization model, and alter it later.

When you have zero users, probably do not put too much advertising. It's better to make it free for the first half of the year to get some users, then give them a little bit of advertising, then think about what features are most usable. Make one feature paid by $1 and see who uses it. And only by these small steps, day by day, you will reach that Top 200 which makes the main market.

If you’d like to find out more our insight about monetization of free apps, please check our new podcast here.

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