Many of us download applications from the Play store and App store for free and start using them immediately. But Have you ever thought about how free apps make money? Well, free apps are not free; they also make money from monetizing.

Have you ever noticed those ads that appear during a video stream on YouTube or banner ads that appear when you browse an online retailer? Yes, these are some of the most famous examples of monetizing apps. In this way, businesses monetize their sites – it also applies to paid and free mobile apps.

Free applications are ruling the market, with 94.2% in App Store and 97% in Play Store generating $71.3 billion in revenue. Although those are free apps, then how do applications make money?

If you are planning to create a free mobile application for your business and want to make money from them, then you have reached the right place.

In this blog, we will discuss the top 10 most popular monetization strategies and the difference between paid and free apps that can assist you in monetizing your application.

So let’s start the blog.

 

Current Market Stats of Free and Paid Apps

Here are some current market stats of free apps that you must consider before cross-platform development and monetizing. So let’s have a look at them.

 

 

• The majority of iOS applications—94.2%—were free as of November 2022. The percentage of free apps in the Google Play store was 97%.
• Approximately 97% of Android app development was free as of November 2022, while 3% needed payment.
• Spending on mobile applications is anticipated to total 161 billion dollars in 2026 and 72 billion dollars in 2026 on the Apple App Store and Google Play Store, respectively.
• In Poland during the studied time, HBO Max: Stream TV & Movies was the most downloaded free app in the Google Play store.

 

 

• About 82% of all Android apps accessed through the Amazon Appstore in November 2022 could be downloaded for free, while 18% required payment.
• Nearly 458 thousand free gaming applications and nearly 350 thousand free educational applications were hosted and delivered by the Google Play Store in the second quarter of 2022. Also, the Google Play Store offered around 20,000 premium gaming apps compared to over 19 thousand paid Android customizing applications.

Difference Between Free Apps and Paid Apps

Now that you are familiar with the free apps market, it is time to see the difference between free apps and paid apps. So let’s have a look at them.

 

Elements	Free Apps	Paid Apps
Visibility	The visibility of free apps is more.	The visibility of paid apps is less. .
Cost	Less expensive more	More expensive
Monetization	More monetisation options	Fewer monetization options customer
Customer expectation	Low customer expectations as they are free	Higher customer expectations as they are paid
Brand image	Easily build brand image because it is free to download	Difficult to create the brand image
Features and functionalities	Limited	Unlimited
Security risk	More prone to security risk	Less prone to online threat
Reliable	Less reliable	More reliable
Visual appearance	Less visually appealing & user-friendly	Attractive and alluring appearance & more user-friendly
Customization	Fewer customization options	More customization options

 

10 Most Popular Monetisation Strategies for How Do Free Apps Make Money

As you now know how large the free application market is, it’s time for the real work to begin. You must be thinking about how free apps make money.

Below is the list of 10 essential monetization strategies that can help you generate your app’s revenue. So let’s have a look at them.

 

1. Subscriptions

Another popular monetization strategy is offering a subscription service. It includes access to exclusive content or additional features that are only available to paying users. It is the most effective strategy that helps apps to make money.

This strategy works well for apps that offer ongoing services or content, such as news apps or music streaming services. Netflix is the most beloved example of a subscription strategy, available on the Play Store & App Store, in which users have to pay for monthly and yearly subscriptions.

2. Advertising

Advertising is the simplest way to make money from free apps. Once you are done with the mobile app development and ready for the launch, you can then choose if you want ads displayed on your application.

It is vital to know that every time the user views the advertisement, taps on it, and downloads the app through the ad, you will get paid for it. However, there are five types of ads you can utilize in your app.

• Banner ad
• In-stream video ad
• Native ad
• Interstitial ad
• Rewarded video

3. Freemium Model

The next monetization strategy is the freemium model. It involves offering a basic version of the app for free but charging for advanced features or services. It can be a good way to monetize a free app if it has a large user base and the advanced features or services are in demand.

The most popular example of the freemium model is the Spotify app, a well-acclaimed music player on Google Play & App Store with ads for the free version. Spotify premium is provided as the ad-free version with minimum charges.

4. Referral Marketing

Referral marketing is the next most popular monetization strategy. This strategy involves promoting other products or services within the app and earning a commission for each sale made through the app.

If you want to build a robust mobile app, then taking assistance from mobile app development services would be helpful.

However, it can be a great way to monetize a free app if it has a large user base and a strong niche market. Knowing that many big brands are opting for this model is vital. The biggest example of referral marketing is Amazon.

5. Collecting and Selling Data

The next monetization strategy for free apps is collecting and selling data. Several free apps make money by collecting and selling user data to third-party companies. This data can include information such as browsing history, location data, and demographic information.

Additionally, free apps often display advertisements to users, which can generate revenue for the business. Some apps may also offer in-app purchases or charge for additional features or content.

6. Crowdfunding

You must be thinking, how do apps make money? The best way free apps make money is through crowdfunding. It is the newest monetization strategy in the market to make money from free apps. However, it is so popular among startups and small enterprises that they share their ideas on famous platforms.

According to Statista, the worldwide crowdfunding marketplace, estimated at 13.64 billion USD in 2021, was expected to double in size by 2028, expanding at an 11.2% compound annual growth rate. By analyzing this data, you can figure out the growth of this strategy.

 

7. Selling Merchandise

Free apps make money by selling merchandise through an in-app store or by redirecting users to an external e-commerce website. It includes physical goods, such as clothing or accessories, and digital goods, such as in-game currency or additional features.

Another way is Affiliate marketing, where the app redirects the user to a website, and if the user purchases something from there, the app gets a commission from that sale. Some apps also make money through sponsored content or in-app advertising.

8. Email Marketing

One of the most popular and profitable monetization strategies is email marketing, which is a perfect practice for hybrid mobile app development. It is proven to be a very effective method for monetizing free apps. It involves collecting email addresses from users and sending them targeted advertisements or promotions.

Additionally, an app can also collect data from users and sell it to third-party companies for targeted marketing. Another way is through sponsored content, where the app displays ads or sponsored content within the app and receives payment from the advertiser.

9. In-App Purchase

In-app purchase is a monetization strategy where users can purchase additional features, virtual goods, or subscriptions within a free app. It allows businesses to monetize their apps without charging an upfront cost to download. The in-app purchase model is popular among mobile games, allowing players to purchase virtual currency, power-ups, or additional levels.

In-app purchases can also include subscriptions to access premium content or services, such as a music streaming app offering a subscription for ad-free listening. The most famous example of an in-app purchase model is Youtube.

10. Sponsorship

The not-so-popular strategy for monetizing your free app is sponsorship. But it can provide you with a lot of money if your app gets a sponsor. Knowing that this strategy only works for applications with a huge user base in a particular niche is essential.

However, with this monetization strategy, organizations partnered with other firms for brand promotion within the application. This way, your app will get sponsored and generate enough revenue without directly charging users. One perfect example of a sponsor model is Snapchat.

How To Decide On The Best Monetization Strategy?

Several monetization strategies for free apps include in-app advertising, in-app purchases, subscriptions, and sponsored content. Of course, the best strategy for a particular app will depend on the type of app and its target audience.

However, here are a few general tips for choosing a monetization strategy for a free app:  

1. Understand Your Audience

Consider the demographics, interests, and behavior of your target users. It will help you choose a monetization strategy that aligns with their needs and preferences.

2. Evaluate the App’s Features

Some app features lend themselves better to certain monetization strategies. For example, a gaming app may be well-suited for in-app purchases, while a news app may be better suited for sponsored content.

 

3. Test Different Strategies

It’s a good idea to try out different monetization strategies and see which one works best for your app. A/B testing can help you identify the strategy that generates the most revenue.

4. Consider User Experience

Choosing a monetization strategy that doesn’t negatively impact the user experience is important. For example, users may be more likely to tolerate in-app advertising if it’s relevant and not too intrusive.

5. Keep in Mind the App Store Rules

Be sure to comply with the rules of the app store you are using, as some monetization strategies may not be allowed.

Conclusion

Free applications have a notable market dominance when compared with paid applications. Also, a free app can generate even greater revenue than a paid app. You can monetize your application in various ways, but those mentioned above are the most effective methods.

Also, a better monetization strategy is one that fits your application better. So, now you know how free apps make money, you may give your idea a go and turn it into a real-life app.

However, taking assistance from an experienced and accomplished mobile app development firm would help monetize your app and help your business reach greater heights.

Frequently Asked Questions