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How Free Apps Make Money

Curious how free apps make money? It all comes down to their monetisation strategy. In this article we'll explain some of the top monetisation strategies for driving in-app revenue. These monetisation strategies will give you the tools and tactics to stand out in the mobile app world. It is predicted that global gross app revenue will reach $102 billion by 2020, and in this article we'll give you the tips you need so some of that ends up in your pocket too. I'll also let you in on three trends that app developers need to know to be able to monetise their apps successfully within the ever-changing mobile landscape.

5 Ways Free Apps Make Money

1. In-app purchase

In-app purchases are typically used with the freemium model. While the app is available for free downloads, users are given the option of purchasing virtual or physical products, or paying to unlock additional features or new content on the app.

This method is commonly implemented in most gaming apps. With gaming apps, a key consideration is presenting the right offers to the right players at the right time. Rather than display numerous options at every stage of the game, you’ll need to assess the purchases that different types of players are likely to make, and display these accordingly.

In-app purchases are also implemented by shopping and e-commerce apps. Etsy is a great example – the app’s simple on-boarding process and personalised product suggestions provides users with a seamless and unique purchase experience, and enables businesses to achieve a shorter sales cycle.

2. Subscription

With subscription-based apps, users are required to subscribe to gain access to exclusive content or unlimited usage. Content-based apps are the first type of apps that come to mind when we think about subscription models. One of the top meditation apps for example, Calm, offers a selection of mediations, stories and music tracks that are available for free, but most of its content is only accessible for subscribed users.

Music streaming apps like Spotify also implement this model, providing subscribers with exclusive content, additional features like sharing playlists with other users and ad-free music.

The second category are service-based apps. A wide-ranging array of apps fall under this category – from learning resources (Babbel) to management apps (Monday) and dating apps (Tinder).

The latter reportedly generated a whopping $285.3 million in revenue in 2016, with over 1 million users paying for additional features like unlimited swipes, Super Like or Tinder Boost, where individuals get to jump the queue to appear at the front of the feeds of other users.

3. Ads

Ads are one of the most common strategies used for app monetisation and is typically implemented by free and freemium apps. Here’s an overview of different types of mobile ads:

  • Video ads:Video ads are implemented in natural pauses during app navigation, and typically last between 15 to 30 seconds. With rewarded videos, users receive in-app rewards in exchange for watching a video in full. When it comes to video ads, it helps to abide by a few rules: keep it short and sweet, use an eye-catching screen grab and autoplay videos should be muted.

  • Banner ads: As the oldest form of mobile ads, banner ads have garnered a bad name for being intrusive, poorly designed and unengaging. However, it can be effective for apps that are gaining traction: Flappy Bird racked up an average of $50,000 a day from in-app ads at the height of its popularity. Banner ads remain widely implemented as it is a low-cost ad format, compatible across mobile and mobile-web apps and easy to implement.

  • Native ads:Native ads are content that integrate seamlessly with an app. With its non-disruptive approach, native advertising provide positive user experiences, and typically garners better results compared to traditional formats.

  • Interstitial ads: These are interactive ads displayed across the entire screen, often during key moments during navigation, such as launching the app, or in between games. User action is required, either to close the ad or tapping on a call-to-action to view the desired content.

4. Sponsorship

Sponsorships offer a more target, integrated presence compared to in-app ads. As sponsorships are often negotiated with a single company, the ads are likely to be more relevant to the needs of your users.

When Gayot, an app that offers restaurant reviews written by professionals launched its mobile application, it nailed an exclusive sponsorship deal with The Marriott Rewards Chase card.

The sponsorship was a good fit as Gayot appeals to business travellers who valued fine culinary and travel experiences – a key target audience that Marriott sought to reach out to.

5. Crowdfunding

Crowdfunding is a fairly new monetisation model, but it's gaining traction, especially here in Australia. Developers present their idea on platforms such as Kickstarter, Indiegogo, CrowdFunder or AppsFunder, seeking donations to fund the development and promotion of their app.

Mobile Growth Stack reports that non-gaming apps seem to be more successful in being crowdfunded: as of May 2017 on Kickstarter, there have been 138 non-gaming apps that raised funding between $10,000 – $100,000, compared to 29 mobile games that achieved a similar funding goal.

In conclusion

If you’re in the midst of figuring out your monetisation strategy, consider implementing a mix of these models, and ensure that your strategies are aligned with key emerging trends. And one final tip: it’s never too early to think about monetisation.

It starts from the concept stage; the type of app that’s developed, the potential target market and its features and aesthetics can impact the final monetisation strategy, so you need to think about how to monetise your app in a way that doesn’t affect your users’ experience right when you’re deciding on these factors.

//If you liked this article, check out our other article 'How Much Does it Cost to Make an App?' here.


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