Among all the booming industries, mobile application development is increasing rapidly, making millions of dollars. This industry is estimated to hit $407.31 by the year of 2026. No doubt you will want to tap into this lucrative market. There are 5.50 million apps available to download in the Apple App Store and Google Play Store. It has made the field pretty competitive, but if you have a handful of knowledge on how free apps make money, you can get the jackpot in your name easily.

Let’s uncover the facts to enter in depth of how free apps make money

Know about Freemium and Paid Apps

Difference Between Free Apps  & Paid Apps

The Free apps are all available for download on Appstore and Google Play, and these follow the freemium model. The data from Statista says that 96.1% of the apps that can be downloaded on Google Play on the Apple App Store are free. This makes the Apple App Store incredibly money-making.

The increasing number clearly defines that the users are prone to choose the free apps available and turn off spending on apps. If you search on Google, you will see that the number of users downloading free apps is exceptionally high. This is why the developers are ditching paid apps and are more inclined to freemium apps.

The Market of Freemium Apps and Free Trial Apps

The freemium market has another form of free trial apps. Freemium apps allow users to use features for free, but a free trial app enables access to the features only for a limited period.

These apps start to get revenue when the users access premium features. The conversion rate of freemium apps ranges between 1%-30%, lingering at the lower boundary. However, the free trial app grabs a higher conversion rate, up to 30-50%.

What Amount Does the Free Apps Earn?

First, we should know whether people spend money on free apps or not. The data from Statistics reveal that the average user of an iPhone spent $79 to purchase apps in 2018, and now the number has increased by 36% compared to the previous year. The money is mainly spent on games rather than mobile apps.

The apps available on Apple App Store generated $46.6 billion in 2018, and in Google Play Store, they earned $24.4 billion. Most of the available apps in both the marketplaces are free to download and make quality revenue.

A popular first-person shooter game Fortnite gathered $1.8 billion in revenue in 2019, and a popular communication tool, Slack, brought $400.6 million for its financial year on Jan 31, 2019.

Before knowing how do free apps make money, you need to figure out the

  • The business goal of the app
  • Set up the value of it
  • Define the target audiences
  • Research your competitors and the risk of business failure
  • Evaluate the monetizing and metrics of the app
  • Calculate the economy
  • Go for user testing
  • Create MVP

How Free Apps Make Money?

Monetizing an app is the key part that generates a lot of revenue. Many ways are involved in this to do so. It depends on the type of the app. Say for a rewarding video advertising playing in games generates 75% revenue. It gives the users an option to watch the video to receive the items during the game or energies to cross the next levels.

Unlike paid subscriptions and downloads, freemium apps are another effective form of monetization by various advertisements. While those rank far beneath at only 14%.

Let’s jump out to the contributing facts on how free apps make money

First is advertising

The answer to this question of how free apps make money can be answered by pinpointing advertising alone. Ads have become the new normal and dominated multiple media connected to our lives, so they are proven to be effective. In a mobile app, the ads are displayed and monetized in various ways.

CPM- Cost per 1000 impressions. The app developer can earn revenue each time a CPM ad is played to your page and viewed by a user.

CPC- This will bring revenue based on each click on the ads.

CPV- This is a bidding method of video content that creates a pay when a viewer watches this for 30 seconds.

CPA– Installing or purchasing an app through the link will generate the commission for the developer.

The second is through freemium version

The Freemium model has gained immense popularity and dominated both the Google Play and Apple App Store. In this model, instead of charging a user at the initial state, it allows them to access the basic features. To utilize the premium features, the users need to pay a fee.

The strategies behind the monetization within the freemium model are

  • Through in-app purchase, the mobile games can be bought
  • Premium subscriptions offered by productivity apps remove the feature limitation on the apps

If you aim to decrease the cost of user acquisition by keeping your users stuck with the apps and making them purchase those, you can go with the freemium model.

To continue with the Skype To Go service and sell credits, Skype offers subscriptions for its users to use certain features. VCSO is a tool helping in editing photo and video creators, offering premium subscriptions along with its free app.

The third is by subscription methods

The subscription method is also one of the popular ones helping the free apps make money. It charges a recurring amount on a monthly or annual basis. This allows the users to earn a fixed amount of revenue until the users subscribe to the app.

The subscription is used for entertainment, media, news, and services. This subscription model isn’t that popular, as only 5% of successful apps are using subscriptions in their monetization approach.

For video and audio streaming services, the subscription model is the most profitable way to monetize. To engage the user signups, you can offer a certain money-back guarantee for the new users. Some popular apps like Netflix and Spotify follow the subscription model.

Fourth and less used sponsorship model

The sponsorship model is not as prevalent as that of the previous methods. It is related to finding a sponsor based on your niche and striking up compensation. To meet monetary compensation, the sponsor’s brand, advertise its products, or send users to its website could be used in this model.

You can take it as an example that if you’ve created an app for health planning, you can check out some health building and nutrition brands for a sponsorship deal.

‍Final thought

Now you have an idea of how do free apps make money. A myriad of app monetization models supporting money-making with apps is available. But each has its own benefits and pitfalls. To avoid any downtime, you must consider the suggestion and advice offered by the expert mobile app developers of reputable mobile app development firms.

Before settling on an app monetization strategy, one must consider the target audiences and work accordingly. It will help you to define the best strategy for how to make money from free apps. Contact our expert team to help you with the entire process of app development and launching it successfully. Consult with expert app developers with proven app development experience.

Appikr Labs

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