How do free apps make money? During the last few times we have received many questions about the hottest topics on the application market. Well, it's time to reveal the truth behind application monetization magic.
Since the free application definitely outpaces the paid ones (considering the download numbers), this is mainly about finding out how these new users can be used, for example by monetizing application data. Without further advice, let us unveil the main benefits of the most efficient strategy for free application and monetization.
How to make money with a free application
The main application monetization strategies include:
Advertising: bro, video, original, incentives, display ads and banners
Email Marketing
Sponsorship
Subscribe
In-app purchases
Freemium Upsell
Amazon Underground
Physical purchases and merchandise
Collect and sell data
Referral affiliate and marketing earnings (from CPA to CPI)
The best tool for monetizing free applications:
Ad tools in the application
Advertisements in applications for game applications
Freemium model of application monetization
Video ads in the application
Overview of the Application Market
The global application economy is large and will continue to grow. In 2016, there were more than 2 million applications on the Apple App Store and 2.4 million on the Google Play Market, making it the most popular distribution platform in the world. It is projected that the revenue generated from mobile applications, including advertisements and in-app purchases, will double by 2020. By the way, you can check our research on how much it costs to build applications.
Taking into account that the use of tablets and mobile devices has reached an unprecedented record, this is the right time for your business to have its own application if you don't have it. But what type of application should you choose? How can you get income from a free application? Let's take a closer look at the mobile app market.
Paid vs. Free application
According to TechCrunch, more than 90% of applications on the market are now free. Earnings generated from applications such as Uber, which are subject to fees for downloads are expected to decline in the coming years. Statista presents a view of the past and future estimates for the free and paid application market from 2012 to 2017.
In fact, statistics show that the number of paid application downloads has decreased greatly in 2016 compared to previous years. The Gartner Research Group disclosed the report, which he said customers would spend 24% more on in-app purchases than on paid applications, which showed that people tend to generate in-app transactions and pay for features in the application, once they believe that the application can bring value real.
Overall, surveys conducted in China, the US and the UK show that spending for the 3-month period on paid applications amounts to $ 7.40 and $ 9.20 to purchase features in the application. What's more, Gartner said that application users between 18 and 34 years old enjoy a more flexible involvement with transactions in the application, that older customers, prefer to pay for applications to own and use.
The survey results indicate that application developers must provide various options for users for in-app transactions and improvements for expanded features. While we talk about this side, check the cost of hiring Android developers.
During the previous year, the most popular free application revenue stream was advertising, but it was also the most annoying (for users). About 20% of users surveyed indicated that they usually click on ads produced by mobile applications, but nearly two thirds said they never clicked on ads in the application. However, 63% of developers choose advertisements to monetize their applications, making this model the main revenue producer in 2016, the In-Mobi report.
So there are some significant gaps between how application developers and users see channel values to generate revenue. That is why application publishers must consider a mix of strategies to provide additional value not only through advertising and transactions in the application but provide users with new experiences and interaction channels, the ability to purchase additional features if desired.
How do free apps make money?
By considering the study of the stage of developing a mobile application, let's analyze the main revenue model for free applications:
Advertisement
Mobile advertising remains the most profitable application revenue model. 7 out of 10 application providers use it in 2016, 18% plan to use it in the near future. Using ads to monetize the application is quite simple, all that is needed is to display ads within your mobile application and get paid from the ad network.
monetization of game applications
According to the Sweetpricing report, 32.5% of the largest cellular providers use in-app advertising as the only source of income in the application. You can be paid every time the ad is displayed (per impression), per click on the ad, or when the user installs the advertised application (per install).
Default ads, banners and brokers are the top 3 formats used by developers to earn revenue from their inventory.
Intermediary advertisements
is a full screen pop-up, which is displayed at a certain time period. Additions can be closed by opening the promoted page or with the close button in the ad corner. This method to increase application revenue efficiently during natural breaks is mostly for messaging applications and content, Messages and for games before or after the expected content or feature (e.g., game levels) and can be used to maximize impressions.
Banners or display ads
usually appears in various sizes and stretches at the top or bottom of the screen. They are small and less prominent so users can freely interact with the application. In addition, application developers can target users who are customized based on previous demographics and behavior. However, they have a low engagement rate of around 0.1% CTR.
A study by Medialets illustrates the best performing banners based on position and size, showing that the bottom of the application is the most effective in directing conversations. Applications like Tinder and Uber are great examples of this idea.
how free apps make money - benchmarking devices
Video ads in the application
displayed automatically, or used as a 'appreciated video' - opened as requested in return for prizes in the application. For example, users can get application currencies, extra lives in games or additional features to watch videos. This is a win-win strategy for both application providers and customers.
Original ad
made to fit the design of the main concept and appear in the application as a natural element. Mostly, it manifests as sponsored content or video, which aims to promote the product. Because original advertisements considered by users are not too annoying and annoying, they get a more popular revenue stream for application providers.
Using a mix of formats and ad placement can generate maximum revenue for developers and user involvement.
Weaknesses: Ad revenue can be very low for applications with a small audience. Although advertising is widely used by developers, advertising remains the most hated by users, so it must be part of the interaction and act as a natural part.
Ads with incentives (user prizes for application involvement)
84% of application users prefer the rewards application to applications that contain advertisements. There are a number of tools that allow satisfied consumers to complete actions in a particular application, ad interaction, through filling out surveys. This strategy enables better engagement and builds a positive brand attitude. Application developers earn revenue from promoting currencies in their applications with sponsors and getting happy and loyal users.
84% of users prefer the award application rather than the application that contains advertisements
91% of users who interact with ads with active incentives pay attention to the brands behind them. RunKeeper is a pioneer in using this revenue model. Application to track activities and exercises that run using incentive ads, providing the ability for users to unlock prizes and exclusive features without interfering with engagement and display advertisements.
how the free application generates money keepers
Weaknesses: Gifts must look like part of application interaction and it is difficult to keep users involved in the application.
Email Marketing
Despite the fact that Email Marketing is a relatively old technique, it can be very powerful when it comes to monetizing applications. This strategy works best when you respectfully request a user's email when signing in. And, as a result, get the possibility to reach them with email notifications.
Meanwhile, the mobile app offers new opportunities to collect email addresses. This makes email marketing one of the most effective strategies on the web, which also has pros and cons.
So, here are some ways to collect email addresses from within the mobile application:
The first and foremost way is to simply ask users for their email address with a pop-up box. In return for free features, in-app currencies, or whatever you want to offer, it becomes profitable for both parties.
Another way to get user emails through Facebook SDK. By activating the FB login in the application, you can use it to collect email addresses. Don't forget to notify your users that they might get an email, if they are signed in with an FB account.
Or ... use some third party tools to facilitate email collection. There are several 3rd party SDKs that can be integrated into your mobile application (by adding only a few lines of code to your application). Simple and effective, right?
how free apps make money - email marketing
Collecting user emails in your database might be very helpful in situations where customers have not used your application for a while. Reaching them via email can be an interesting tool to notify new features and improvements.
Weaknesses: Email marketing is widely used on the Internet. Meanwhile, most giants take advantage, it's not efficient for most small players.
Sponsoring
Placing sponsors in the application can be a powerful monetization application model if the vendor creates the right niche application for custom users and launches it on behalf of other companies. The biggest challenge is to find sponsors with the same or the same target group and the same white label applications or to adapt their designs to the sponsor's brand.
The main types of sponsor offers:
Breakdown of approved income generated by the application.
Monthly sponsorship fees are paid by the funder for maintenance or use of the application.
This strategy is also beneficial for developers to generate and expand user audiences and promote applications, because most sponsors already have good website traffic and loyal customers.
A good example is a Home Depot sponsor on the Weather Channel application. The background of the animation application behind temperature measurements is the advertisements placed by sponsors, in line with the target users of Home Depot - homeowners who are interested in destroying their homes.
how free apps make money - Examples of application sponsors
Weaknesses: It is difficult to find a sponsor company and present applications for certain areas.
Subscribe
For free applications with limited content or features available for a limited time, users can pay subscription fees to get full access and open them. This type of income is often used for cloud services, streaming video and audio, newspapers or online magazines. Developers can provide free trial periods to users and charge subscription fees for unlimited access.
According to Sweet Pricing reports, only 5% of the most successful applications use subscriptions, making it one of the most rarely used monetization models among developers.
Only 5% of developers have successfully used subscriptions to monetize their mobile applications.
Google and Apple provide the ability to handle subscription transactions through their platforms, making it easier for developers to implement them. Apple takes 30% for the first year of any subscription, and then 15% after one year of paid service. Google introduces better requirements, taking 15% of subscription revenue even during the first year.
The income model was successfully used by the Umano application for voice articles. Umano gives limited number of podcast users for a fixed amount of time until they subscribe to a premium account.
The leading New York Times paper application and the Wall Street Journal have each acquired 1 million online customers.
Weaknesses: Application developers must continually provide valuable content and services to guarantee subscriptions, besides it is difficult to determine the best time and location to place paywalls. This model is also suitable for verticals that are customized as entertainment, news and lifestyle applications.
In-app purchases
In-app purchases provide the ability to sell a variety of virtual items directly from within your application - including additional bonuses, premium content, game currency, and merchandise or opening game levels.
This strategy falls into the category:
Consumable - a product that can be purchased and used once in the application. Example: virtual currency.
Non-consumption - a superior product purchased for permanent use, which does not expire. Example: new game level or map.
Subscriptions are used to unlock features and content for a limited period of time. Example: subscribe to annual news.
50% of the leading applications use purchases in the revenue stream application, and the model is expected to dominate in the coming years. This is usually preferred among game developers, mostly because of digital money, used by users to buy content in the application or to open new levels. That's more, half of the game provides more than one virtual currency - 'coins', 'gems' or 'gold'.
Used wisely, in-app purchases can generate good revenue - Supercell mobile game developers brag to get $ 1 million per day from their in-game Clash of Clans purchases. Pokemon Go users spend around $ 1.5 million on in-app purchases every day.
Pokemon Go users are reported to spend up to $ 1.5 million a day just for in-app purchases.
Weaknesses: This application must hold a leading market position and always make users addicted. This model also provides more technical challenges because it requires a payment system, such as PayPal, and requires additional fees for companies that hold payments.
Freemium sales
The Freemium application is provided free but contains paid or premium features, accessed through in-app purchases. Users download the free version of the application and if the content is worth paying for, get full access to functionality by making a purchase. This is a great way to get new users at a faster rate, because premium features are optional.
Technically, this is the easiest revenue model for application publishers, because it requires the creation of two versions of the application - light and full.
15% of applications use the paid sister version to unlock additional features, rather than applying in-app purchases
15% of applications still use the paid brother application, which contains exclusive functions that can be purchased in addition to all the free version's functionality and content. This strategy is popular among training and education applications. LinguaLeo uses this model - this application has free and paid English lessons, provides premium subscription mode.
Weaknesses: Users can decide to only use the free version, it is difficult to convince to buy additional features. Application publishers must provide users with the right number of free features, only to create the right application experience.
Amazon Underground
One relatively new way to make money through the Amazon App Store is Amazon Underground. Even though it doesn't require advertisements or in-app purchases, let's see how it works.
Become a newcomer to the world of mobile applications, Underground offers its users to access a number of unlimited solutions that contain premium features for free. Conversely, Amazon Underground pays applications around 2 cents per minute of use, per each user.
Amazon Underground is an independent application store, with its own mobile application that must be used to get access to the store. To use this innovative strategy, application publishers are not permitted to apply for ad purchases or in applications in their applications.
If you use an in-app purchase in your application, you agree to release the fee through a listing on Amazon Underground. That means users are offered to 'buy for free' your unlimited number of IAPs, while developers are paid directly by Amazon. Amazon also provides developers with a free Income Forecast Calculator to estimate their potential income.
The platform changes to be very effective. A good example is Goat Simulator - one of the top 30 paid apps, which costs $ 4.99 and has been downloaded more than millions of times on the Google Play store. However, the application publisher reported that the Goat Simulator in Underground revenue has outperformed the Google Play application version by 30%.
Weaknesses: If your application has a relatively short average session length, this might not be the most efficient application monetization strategy (contrary to purchases and advertisements in the application). Meanwhile, this type of income is good for those who are unsuccessful with in-app purchases but have high application session lengths and provide real value to users.
Physical purchases and merchandise
E-commerce businesses use a free application to sell physical goods or branded merchandise: toys, t-shirts, cellphone boxes, etc. Through email marketing or specifically developed applications.
One of the first and most successful applications to increase revenue from branded merchandise is the Angry Birds game. The Rovio Company once sold 1 million t-shirts, as well as backpacks, and the most branded stickers every month. Plus, they reportedly succeeded in producing up to 1 million per month with only plush toys.
Rovio company sells 1 million plush toys from the Angry Birds game every month.
Amazon provides the ability to earn income from merchandise by creating a Merch supermarket program that allows app publishers to sell specially branded t-shirts from within their application.
All you need is to create and upload your own artwork and promote it using the Amazon tool. Branded shirts will be produced, sold by Amazon and you get a share of your income. The application developer does not handle payment and fulfillment, making this whole process very easy and useful.
Disadvantages: You need to generate lots of users and sell something that people want to buy.
Collect and sell data
Yes, this might not be the most extensive and ethical way of monetizing applications (and that's great), but collecting and selling personal data is still one of the most effective approaches to generating profits.
Some companies that offer free mobile applications sell their databases to third parties. This information can contain the user's email address, social media account, and personal preferences.
The application generates a lot of data in terms of user behavior, which is very desirable for those in different fields of research.
So application developers can sell this kind of information to researchers and produce a pretty good refund. Actually, there are two ways to generate sales data: track what users do and sell data to outside companies or use the raw data itself for your own purposes.
From a marketing point of view, companies want to pay to display advertisements to the most relevant audience; while on the other hand, not every service can collect the same data as Facebook or Google. However, if your application can collect relevant data, you may have a way to benefit from it.
Weaknesses: even the worst applications can infiltrate call history and contact lists or access users' social media accounts. The good thing is that there are anti-surveillance tools that can help you protect yourself from spies (eg Safe Text, Red Phone, Onion Browser, Orbot, etc.).
Affiliate Income and Marketing Reference (from CPA to CPI)
The developer can promote and sell services or affiliate products for revenue sharing based on a number of installations and clicks. You can use pop-ups or banners to promote other people's applications or use 'shop in the application' to advertise products or services.
Amazon store is the best example of how big affiliate marketing can be. Simply take the product to advertise to your application users, get income from all purchases that meet the requirements and through advertising costs.
Cost Per Action, network cost per acquisition (BPA)
There are also a number of affiliate networks, which will help you find affiliates that match your own mobile application. Networks are generally based on cost per action (BPA model) or sharing of revenue generated for advertisers.
There are several ways to use the monetization model of this application.
Promote other applications
Advertise products through pop-ups or banners
Promote products through 'shop in application'
Cost per mile or cost per impression (CPM) - is a payment model based on a number of impressions. Advertisers are charged every 1,000 times an affiliate ad is displayed (mille is a Latin translation for thousands). IOS ads are generally more expensive than Affiliate ads that are displayed on Android devices and can differ by up to 30% from the platform.
Average cellular income per thousand impressions (RPM):
Banners: iOS ($ 1.20 - $ 3.00) vs. Android ($ 1.15 - $ 2.50)
Introducing: iOS ($ 4.00 - $ 6.00) vs. Android ($ 3.00 - $ 4.00)
The highest end of the CPM rate belongs to the AdMob network operated by Google. In July 2016, CPM rates have reached $ 6 for Android and $ 10 for iOS per 1,000 mobile ad impressions.
Cost per click (CPC) - is a revenue model based on the number of clicks on the ad that is displayed. Popular ad networks like AdFonic and Google AdMob in general are PPC, which provides text and display ads.
The Pink Pointer game developer uses original advertisements to make money from their free puzzle application. The CTA network helps developers to achieve a 50% increase in the Click-through ratio (CTR-number of ad clicks), resulting in higher revenue.
Network cost per sale (CPS). With the CPS revenue model, also known as pay per sale, application developers are only billed after the purchase has finished. The issuer of the application gets a fixed commission or percentage of sales. ShareASale, Rakuten Linksh, and Amazon Associates are high-paid and secure CPS networks, especially those that are popular among developers.
Cost per display (CPV) - is a type of filling based on the number of video views or ad interactions, such as clicking on banners or call-to-action overlays. Mobile game developer, Brighthouse managed to operate the Cost per view network to increase application revenue by 130%. They used video ads and brokers in their application White Tiles 4 to make a natural break between game sessions.
Cost per network installation (CPI) - is a type of application monetization that is equivalent to the cost per acquisition used in web marketing. The publisher is paid every time the advertised application is installed by the user. There are a number of platforms that provide software to install into your application. Costs range from $ 0.80 - $ 3.00, and online affiliate networks have various campaigns to generate global traffic while promoting other applications, making it a profitable market to play.
Rovio uses the Google AdMob network to improve their Angry Birds downloads among Android users.
How do applications make money?
Mobile application development can make you rich if you do it right. And if you are still worried about whether you can make money with a free application, immediately get our "yes-reply"!
25% of iOS developers and 16% of the top Android developers make more than $ 5,000 per month with their free application
Using the figures above as a rough guide, we can state that almost 20 percent of applications on the market are very good, 30 percent of applications are fine and half of all applications are actual garbage, which sometimes isn't even worth your attention .
And if you are on the top 20% with high-quality applications with your perfect code, there is no other opportunity than to get rich with a good monetization strategy afterwards. It goes without saying that if you want to see your application in the first row of the chart, you need to know how to create an application and how to monetize your application.
Creating an application is a slightly different topic, but you can still get some instructions through the Secret Tips to Take Us below or contact us for more information.
So for now, let's find out how much money you can make with your free application! Let's start with the difference between paid and freemium services. Graphs are displayed in Google search terms.
Freemium vs Premium application search
And then look at the application categories that produce the best profits. As you can see, games make more money. However, you should consider that these numbers are only average, and some applications are far more profitable than games.
Best-selling applications by category until 2018
Another factor to note is the platform to use when creating applications. Let's take a benchmark of income in $ 5 per application per month, which is below the average salary of developers employed in the US and Western Europe, while in some countries it is the same as the salary of the entire team.
The highest income model (when the income benchmark is still $ 5bb per application per month) is per device royalty or license fee. Although, this might be a very desirable source of income, it is important to understand that it is not available for all applications. Meanwhile models such as affiliate programs and CPI are often more difficult to implement, but this study shows that these efforts may be commensurate.
The most interesting are the two last lower end income models. The difference between them is only 1%. So what's better: paid downloads or free apps with in-app purchases? Just look at the best-selling iPhone mobile game application in the US in January 2017, by Statista.
Actually, there are many ways you can target applications and choose revenue models. And to increase the chances of your financial success, look at the best tools to help you make money from your free application.
The Best Tool to Help You Make Money from Your Free Application
Now, when you say that the application is "free", it can only mean that it's free to download. But there is always a way for free apps to make a lot of money. Look at the best tools that offer many ways to turn your free application into a source of income.
In-app Ad Monetization Tool
When it comes to in-application advertising tools, the first thing you will face is finding an ad network. So: The first mentioned is Google AdMob, which allows users to use Google Analytics to better understand their audience, improve their ads, and get new customers / consumers.
InMobi is a tool that helps you focus on creating a better UX. This is more visually appealing than most advertising platforms. InMobi allows users to leave feedback about advertisements, and, consequently, increase the value of targeting for advertisers.
The Facebook advertising system offers to display ads within your application, making targeting more precise and better for revenue. Apple also has their own advertising tool for the application, which integrates the desired ad into your application and into one platform.
Among the popular and effective advertising application monetization tools that work best for free applications are the Amazon ad system (which still pays per impression), an automation tool with Tapjoy's predictive analytics, Appsfire that tries to choose the ad that best fits the application. design, StartApp (which prioritizes ads and increases click-through ratio), etc.
Advertisements in the application for game applications
Given the fact that game applications are one of the most popular application categories today, some ad systems are specifically for them. So, the list of ads in the application for game applications starts with Unity, because it focuses entirely on games and targets ads only for gamers. In short, this tool allows easy application money for the entire player base.
NativeX provides videos without great pauses along with some pretty good ad units. Chartboost is the largest mobile advertising special network, which offers free cross sales and Direct Deals Marketplace makes monetization of game applications and user acquisition easy and successful.
Freemium Model of Application Monetization
If you prefer to make users enjoy your application for free instead of making them see your ad, there are also tools that can help you improve UX and support the freemium application monetization model. If your application is developed without a digital storefront integrated into the code, you will find these tools useful:
Android handles their developers and offers its own solution for freemium called the Android In-app Billing tool. Meanwhile Apple also has an original system that offers users to buy content or subscriptions in your application. But it shows it as a software download from the store. Well, yes, it takes 30% of revenue but manages transactions instead.
If you are looking for a simple digital storefront tool that allows in-app purchases, Swarm is ready to help. This opens additional features that are not available in the free initial version that is downloaded. If you prefer to combine ads and freemium models on your system, try AdWorkMedia. It implements various application monetization tools that you want.
In-app Video Advertising
Other types of tools that are worth mentioning work with video ads in the application Yes, video ads may match your application. That is a fact. Especially if they reflect the type of content expected. The following tools can easily help you monetize your free application:
Inneractive combines innovative ad units with perfect reporting and analytics. This makes it possible to monetize mobile applications without really sacrificing UX. At the same time, YuMe is also on the list. This uses PQI, the real-time inventory valuation algorithm to bring the best inventory campaign.
While Adcolony is there to use their Instant Play HD technology combined with buffer-free video playback, Vungle is the only one that displays the SDK that is suitable for iOS, Android and Windows. At least they say that.
Conclusion
There are many effective ways to monetize free applications, but it will require some overall planning and marketing strategies. Advertising still holds the leading position as an application monetization method, with 65% of all applications on the market. (Source: Expensive price report). However, developers use a mixture of application monetization: in-app purchases and advertisements.
Application publishers must conduct market research, determine target users, examine the success stories of other application developers. The main challenges are getting awareness, getting loyal users, and choosing the right income model. Developers must plan more targeted advertising campaigns to promote applications and releases, constantly providing feature updates, using more mixed and unique revenue models to provide value to users. This will generate greater profits and help your customers be satisfied.
Since the free application definitely outpaces the paid ones (considering the download numbers), this is mainly about finding out how these new users can be used, for example by monetizing application data. Without further advice, let us unveil the main benefits of the most efficient strategy for free application and monetization.
How to make money with a free application
The main application monetization strategies include:
Advertising: bro, video, original, incentives, display ads and banners
Email Marketing
Sponsorship
Subscribe
In-app purchases
Freemium Upsell
Amazon Underground
Physical purchases and merchandise
Collect and sell data
Referral affiliate and marketing earnings (from CPA to CPI)
The best tool for monetizing free applications:
Ad tools in the application
Advertisements in applications for game applications
Freemium model of application monetization
Video ads in the application
Overview of the Application Market
The global application economy is large and will continue to grow. In 2016, there were more than 2 million applications on the Apple App Store and 2.4 million on the Google Play Market, making it the most popular distribution platform in the world. It is projected that the revenue generated from mobile applications, including advertisements and in-app purchases, will double by 2020. By the way, you can check our research on how much it costs to build applications.
Taking into account that the use of tablets and mobile devices has reached an unprecedented record, this is the right time for your business to have its own application if you don't have it. But what type of application should you choose? How can you get income from a free application? Let's take a closer look at the mobile app market.
Paid vs. Free application
According to TechCrunch, more than 90% of applications on the market are now free. Earnings generated from applications such as Uber, which are subject to fees for downloads are expected to decline in the coming years. Statista presents a view of the past and future estimates for the free and paid application market from 2012 to 2017.
In fact, statistics show that the number of paid application downloads has decreased greatly in 2016 compared to previous years. The Gartner Research Group disclosed the report, which he said customers would spend 24% more on in-app purchases than on paid applications, which showed that people tend to generate in-app transactions and pay for features in the application, once they believe that the application can bring value real.
Overall, surveys conducted in China, the US and the UK show that spending for the 3-month period on paid applications amounts to $ 7.40 and $ 9.20 to purchase features in the application. What's more, Gartner said that application users between 18 and 34 years old enjoy a more flexible involvement with transactions in the application, that older customers, prefer to pay for applications to own and use.
The survey results indicate that application developers must provide various options for users for in-app transactions and improvements for expanded features. While we talk about this side, check the cost of hiring Android developers.
During the previous year, the most popular free application revenue stream was advertising, but it was also the most annoying (for users). About 20% of users surveyed indicated that they usually click on ads produced by mobile applications, but nearly two thirds said they never clicked on ads in the application. However, 63% of developers choose advertisements to monetize their applications, making this model the main revenue producer in 2016, the In-Mobi report.
So there are some significant gaps between how application developers and users see channel values to generate revenue. That is why application publishers must consider a mix of strategies to provide additional value not only through advertising and transactions in the application but provide users with new experiences and interaction channels, the ability to purchase additional features if desired.
How do free apps make money?
By considering the study of the stage of developing a mobile application, let's analyze the main revenue model for free applications:
Advertisement
Mobile advertising remains the most profitable application revenue model. 7 out of 10 application providers use it in 2016, 18% plan to use it in the near future. Using ads to monetize the application is quite simple, all that is needed is to display ads within your mobile application and get paid from the ad network.
monetization of game applications
According to the Sweetpricing report, 32.5% of the largest cellular providers use in-app advertising as the only source of income in the application. You can be paid every time the ad is displayed (per impression), per click on the ad, or when the user installs the advertised application (per install).
Default ads, banners and brokers are the top 3 formats used by developers to earn revenue from their inventory.
Intermediary advertisements
is a full screen pop-up, which is displayed at a certain time period. Additions can be closed by opening the promoted page or with the close button in the ad corner. This method to increase application revenue efficiently during natural breaks is mostly for messaging applications and content, Messages and for games before or after the expected content or feature (e.g., game levels) and can be used to maximize impressions.
Banners or display ads
usually appears in various sizes and stretches at the top or bottom of the screen. They are small and less prominent so users can freely interact with the application. In addition, application developers can target users who are customized based on previous demographics and behavior. However, they have a low engagement rate of around 0.1% CTR.
A study by Medialets illustrates the best performing banners based on position and size, showing that the bottom of the application is the most effective in directing conversations. Applications like Tinder and Uber are great examples of this idea.
how free apps make money - benchmarking devices
Video ads in the application
displayed automatically, or used as a 'appreciated video' - opened as requested in return for prizes in the application. For example, users can get application currencies, extra lives in games or additional features to watch videos. This is a win-win strategy for both application providers and customers.
Original ad
made to fit the design of the main concept and appear in the application as a natural element. Mostly, it manifests as sponsored content or video, which aims to promote the product. Because original advertisements considered by users are not too annoying and annoying, they get a more popular revenue stream for application providers.
Using a mix of formats and ad placement can generate maximum revenue for developers and user involvement.
Weaknesses: Ad revenue can be very low for applications with a small audience. Although advertising is widely used by developers, advertising remains the most hated by users, so it must be part of the interaction and act as a natural part.
Ads with incentives (user prizes for application involvement)
84% of application users prefer the rewards application to applications that contain advertisements. There are a number of tools that allow satisfied consumers to complete actions in a particular application, ad interaction, through filling out surveys. This strategy enables better engagement and builds a positive brand attitude. Application developers earn revenue from promoting currencies in their applications with sponsors and getting happy and loyal users.
84% of users prefer the award application rather than the application that contains advertisements
91% of users who interact with ads with active incentives pay attention to the brands behind them. RunKeeper is a pioneer in using this revenue model. Application to track activities and exercises that run using incentive ads, providing the ability for users to unlock prizes and exclusive features without interfering with engagement and display advertisements.
how the free application generates money keepers
Weaknesses: Gifts must look like part of application interaction and it is difficult to keep users involved in the application.
Email Marketing
Despite the fact that Email Marketing is a relatively old technique, it can be very powerful when it comes to monetizing applications. This strategy works best when you respectfully request a user's email when signing in. And, as a result, get the possibility to reach them with email notifications.
Meanwhile, the mobile app offers new opportunities to collect email addresses. This makes email marketing one of the most effective strategies on the web, which also has pros and cons.
So, here are some ways to collect email addresses from within the mobile application:
The first and foremost way is to simply ask users for their email address with a pop-up box. In return for free features, in-app currencies, or whatever you want to offer, it becomes profitable for both parties.
Another way to get user emails through Facebook SDK. By activating the FB login in the application, you can use it to collect email addresses. Don't forget to notify your users that they might get an email, if they are signed in with an FB account.
Or ... use some third party tools to facilitate email collection. There are several 3rd party SDKs that can be integrated into your mobile application (by adding only a few lines of code to your application). Simple and effective, right?
how free apps make money - email marketing
Collecting user emails in your database might be very helpful in situations where customers have not used your application for a while. Reaching them via email can be an interesting tool to notify new features and improvements.
Weaknesses: Email marketing is widely used on the Internet. Meanwhile, most giants take advantage, it's not efficient for most small players.
Sponsoring
Placing sponsors in the application can be a powerful monetization application model if the vendor creates the right niche application for custom users and launches it on behalf of other companies. The biggest challenge is to find sponsors with the same or the same target group and the same white label applications or to adapt their designs to the sponsor's brand.
The main types of sponsor offers:
Breakdown of approved income generated by the application.
Monthly sponsorship fees are paid by the funder for maintenance or use of the application.
This strategy is also beneficial for developers to generate and expand user audiences and promote applications, because most sponsors already have good website traffic and loyal customers.
A good example is a Home Depot sponsor on the Weather Channel application. The background of the animation application behind temperature measurements is the advertisements placed by sponsors, in line with the target users of Home Depot - homeowners who are interested in destroying their homes.
how free apps make money - Examples of application sponsors
Weaknesses: It is difficult to find a sponsor company and present applications for certain areas.
Subscribe
For free applications with limited content or features available for a limited time, users can pay subscription fees to get full access and open them. This type of income is often used for cloud services, streaming video and audio, newspapers or online magazines. Developers can provide free trial periods to users and charge subscription fees for unlimited access.
According to Sweet Pricing reports, only 5% of the most successful applications use subscriptions, making it one of the most rarely used monetization models among developers.
Only 5% of developers have successfully used subscriptions to monetize their mobile applications.
Google and Apple provide the ability to handle subscription transactions through their platforms, making it easier for developers to implement them. Apple takes 30% for the first year of any subscription, and then 15% after one year of paid service. Google introduces better requirements, taking 15% of subscription revenue even during the first year.
The income model was successfully used by the Umano application for voice articles. Umano gives limited number of podcast users for a fixed amount of time until they subscribe to a premium account.
The leading New York Times paper application and the Wall Street Journal have each acquired 1 million online customers.
Weaknesses: Application developers must continually provide valuable content and services to guarantee subscriptions, besides it is difficult to determine the best time and location to place paywalls. This model is also suitable for verticals that are customized as entertainment, news and lifestyle applications.
In-app purchases
In-app purchases provide the ability to sell a variety of virtual items directly from within your application - including additional bonuses, premium content, game currency, and merchandise or opening game levels.
This strategy falls into the category:
Consumable - a product that can be purchased and used once in the application. Example: virtual currency.
Non-consumption - a superior product purchased for permanent use, which does not expire. Example: new game level or map.
Subscriptions are used to unlock features and content for a limited period of time. Example: subscribe to annual news.
50% of the leading applications use purchases in the revenue stream application, and the model is expected to dominate in the coming years. This is usually preferred among game developers, mostly because of digital money, used by users to buy content in the application or to open new levels. That's more, half of the game provides more than one virtual currency - 'coins', 'gems' or 'gold'.
Used wisely, in-app purchases can generate good revenue - Supercell mobile game developers brag to get $ 1 million per day from their in-game Clash of Clans purchases. Pokemon Go users spend around $ 1.5 million on in-app purchases every day.
Pokemon Go users are reported to spend up to $ 1.5 million a day just for in-app purchases.
Weaknesses: This application must hold a leading market position and always make users addicted. This model also provides more technical challenges because it requires a payment system, such as PayPal, and requires additional fees for companies that hold payments.
Freemium sales
The Freemium application is provided free but contains paid or premium features, accessed through in-app purchases. Users download the free version of the application and if the content is worth paying for, get full access to functionality by making a purchase. This is a great way to get new users at a faster rate, because premium features are optional.
Technically, this is the easiest revenue model for application publishers, because it requires the creation of two versions of the application - light and full.
15% of applications use the paid sister version to unlock additional features, rather than applying in-app purchases
15% of applications still use the paid brother application, which contains exclusive functions that can be purchased in addition to all the free version's functionality and content. This strategy is popular among training and education applications. LinguaLeo uses this model - this application has free and paid English lessons, provides premium subscription mode.
Weaknesses: Users can decide to only use the free version, it is difficult to convince to buy additional features. Application publishers must provide users with the right number of free features, only to create the right application experience.
Amazon Underground
One relatively new way to make money through the Amazon App Store is Amazon Underground. Even though it doesn't require advertisements or in-app purchases, let's see how it works.
Become a newcomer to the world of mobile applications, Underground offers its users to access a number of unlimited solutions that contain premium features for free. Conversely, Amazon Underground pays applications around 2 cents per minute of use, per each user.
Amazon Underground is an independent application store, with its own mobile application that must be used to get access to the store. To use this innovative strategy, application publishers are not permitted to apply for ad purchases or in applications in their applications.
If you use an in-app purchase in your application, you agree to release the fee through a listing on Amazon Underground. That means users are offered to 'buy for free' your unlimited number of IAPs, while developers are paid directly by Amazon. Amazon also provides developers with a free Income Forecast Calculator to estimate their potential income.
The platform changes to be very effective. A good example is Goat Simulator - one of the top 30 paid apps, which costs $ 4.99 and has been downloaded more than millions of times on the Google Play store. However, the application publisher reported that the Goat Simulator in Underground revenue has outperformed the Google Play application version by 30%.
Weaknesses: If your application has a relatively short average session length, this might not be the most efficient application monetization strategy (contrary to purchases and advertisements in the application). Meanwhile, this type of income is good for those who are unsuccessful with in-app purchases but have high application session lengths and provide real value to users.
Physical purchases and merchandise
E-commerce businesses use a free application to sell physical goods or branded merchandise: toys, t-shirts, cellphone boxes, etc. Through email marketing or specifically developed applications.
One of the first and most successful applications to increase revenue from branded merchandise is the Angry Birds game. The Rovio Company once sold 1 million t-shirts, as well as backpacks, and the most branded stickers every month. Plus, they reportedly succeeded in producing up to 1 million per month with only plush toys.
Rovio company sells 1 million plush toys from the Angry Birds game every month.
Amazon provides the ability to earn income from merchandise by creating a Merch supermarket program that allows app publishers to sell specially branded t-shirts from within their application.
All you need is to create and upload your own artwork and promote it using the Amazon tool. Branded shirts will be produced, sold by Amazon and you get a share of your income. The application developer does not handle payment and fulfillment, making this whole process very easy and useful.
Disadvantages: You need to generate lots of users and sell something that people want to buy.
Collect and sell data
Yes, this might not be the most extensive and ethical way of monetizing applications (and that's great), but collecting and selling personal data is still one of the most effective approaches to generating profits.
Some companies that offer free mobile applications sell their databases to third parties. This information can contain the user's email address, social media account, and personal preferences.
The application generates a lot of data in terms of user behavior, which is very desirable for those in different fields of research.
So application developers can sell this kind of information to researchers and produce a pretty good refund. Actually, there are two ways to generate sales data: track what users do and sell data to outside companies or use the raw data itself for your own purposes.
From a marketing point of view, companies want to pay to display advertisements to the most relevant audience; while on the other hand, not every service can collect the same data as Facebook or Google. However, if your application can collect relevant data, you may have a way to benefit from it.
Weaknesses: even the worst applications can infiltrate call history and contact lists or access users' social media accounts. The good thing is that there are anti-surveillance tools that can help you protect yourself from spies (eg Safe Text, Red Phone, Onion Browser, Orbot, etc.).
Affiliate Income and Marketing Reference (from CPA to CPI)
The developer can promote and sell services or affiliate products for revenue sharing based on a number of installations and clicks. You can use pop-ups or banners to promote other people's applications or use 'shop in the application' to advertise products or services.
Amazon store is the best example of how big affiliate marketing can be. Simply take the product to advertise to your application users, get income from all purchases that meet the requirements and through advertising costs.
Cost Per Action, network cost per acquisition (BPA)
There are also a number of affiliate networks, which will help you find affiliates that match your own mobile application. Networks are generally based on cost per action (BPA model) or sharing of revenue generated for advertisers.
There are several ways to use the monetization model of this application.
Promote other applications
Advertise products through pop-ups or banners
Promote products through 'shop in application'
Cost per mile or cost per impression (CPM) - is a payment model based on a number of impressions. Advertisers are charged every 1,000 times an affiliate ad is displayed (mille is a Latin translation for thousands). IOS ads are generally more expensive than Affiliate ads that are displayed on Android devices and can differ by up to 30% from the platform.
Average cellular income per thousand impressions (RPM):
Banners: iOS ($ 1.20 - $ 3.00) vs. Android ($ 1.15 - $ 2.50)
Introducing: iOS ($ 4.00 - $ 6.00) vs. Android ($ 3.00 - $ 4.00)
The highest end of the CPM rate belongs to the AdMob network operated by Google. In July 2016, CPM rates have reached $ 6 for Android and $ 10 for iOS per 1,000 mobile ad impressions.
Cost per click (CPC) - is a revenue model based on the number of clicks on the ad that is displayed. Popular ad networks like AdFonic and Google AdMob in general are PPC, which provides text and display ads.
The Pink Pointer game developer uses original advertisements to make money from their free puzzle application. The CTA network helps developers to achieve a 50% increase in the Click-through ratio (CTR-number of ad clicks), resulting in higher revenue.
Network cost per sale (CPS). With the CPS revenue model, also known as pay per sale, application developers are only billed after the purchase has finished. The issuer of the application gets a fixed commission or percentage of sales. ShareASale, Rakuten Linksh, and Amazon Associates are high-paid and secure CPS networks, especially those that are popular among developers.
Cost per display (CPV) - is a type of filling based on the number of video views or ad interactions, such as clicking on banners or call-to-action overlays. Mobile game developer, Brighthouse managed to operate the Cost per view network to increase application revenue by 130%. They used video ads and brokers in their application White Tiles 4 to make a natural break between game sessions.
Cost per network installation (CPI) - is a type of application monetization that is equivalent to the cost per acquisition used in web marketing. The publisher is paid every time the advertised application is installed by the user. There are a number of platforms that provide software to install into your application. Costs range from $ 0.80 - $ 3.00, and online affiliate networks have various campaigns to generate global traffic while promoting other applications, making it a profitable market to play.
Rovio uses the Google AdMob network to improve their Angry Birds downloads among Android users.
How do applications make money?
Mobile application development can make you rich if you do it right. And if you are still worried about whether you can make money with a free application, immediately get our "yes-reply"!
25% of iOS developers and 16% of the top Android developers make more than $ 5,000 per month with their free application
Using the figures above as a rough guide, we can state that almost 20 percent of applications on the market are very good, 30 percent of applications are fine and half of all applications are actual garbage, which sometimes isn't even worth your attention .
And if you are on the top 20% with high-quality applications with your perfect code, there is no other opportunity than to get rich with a good monetization strategy afterwards. It goes without saying that if you want to see your application in the first row of the chart, you need to know how to create an application and how to monetize your application.
Creating an application is a slightly different topic, but you can still get some instructions through the Secret Tips to Take Us below or contact us for more information.
So for now, let's find out how much money you can make with your free application! Let's start with the difference between paid and freemium services. Graphs are displayed in Google search terms.
Freemium vs Premium application search
And then look at the application categories that produce the best profits. As you can see, games make more money. However, you should consider that these numbers are only average, and some applications are far more profitable than games.
Best-selling applications by category until 2018
Another factor to note is the platform to use when creating applications. Let's take a benchmark of income in $ 5 per application per month, which is below the average salary of developers employed in the US and Western Europe, while in some countries it is the same as the salary of the entire team.
The highest income model (when the income benchmark is still $ 5bb per application per month) is per device royalty or license fee. Although, this might be a very desirable source of income, it is important to understand that it is not available for all applications. Meanwhile models such as affiliate programs and CPI are often more difficult to implement, but this study shows that these efforts may be commensurate.
The most interesting are the two last lower end income models. The difference between them is only 1%. So what's better: paid downloads or free apps with in-app purchases? Just look at the best-selling iPhone mobile game application in the US in January 2017, by Statista.
Actually, there are many ways you can target applications and choose revenue models. And to increase the chances of your financial success, look at the best tools to help you make money from your free application.
The Best Tool to Help You Make Money from Your Free Application
Now, when you say that the application is "free", it can only mean that it's free to download. But there is always a way for free apps to make a lot of money. Look at the best tools that offer many ways to turn your free application into a source of income.
In-app Ad Monetization Tool
When it comes to in-application advertising tools, the first thing you will face is finding an ad network. So: The first mentioned is Google AdMob, which allows users to use Google Analytics to better understand their audience, improve their ads, and get new customers / consumers.
InMobi is a tool that helps you focus on creating a better UX. This is more visually appealing than most advertising platforms. InMobi allows users to leave feedback about advertisements, and, consequently, increase the value of targeting for advertisers.
The Facebook advertising system offers to display ads within your application, making targeting more precise and better for revenue. Apple also has their own advertising tool for the application, which integrates the desired ad into your application and into one platform.
Among the popular and effective advertising application monetization tools that work best for free applications are the Amazon ad system (which still pays per impression), an automation tool with Tapjoy's predictive analytics, Appsfire that tries to choose the ad that best fits the application. design, StartApp (which prioritizes ads and increases click-through ratio), etc.
Advertisements in the application for game applications
Given the fact that game applications are one of the most popular application categories today, some ad systems are specifically for them. So, the list of ads in the application for game applications starts with Unity, because it focuses entirely on games and targets ads only for gamers. In short, this tool allows easy application money for the entire player base.
NativeX provides videos without great pauses along with some pretty good ad units. Chartboost is the largest mobile advertising special network, which offers free cross sales and Direct Deals Marketplace makes monetization of game applications and user acquisition easy and successful.
Freemium Model of Application Monetization
If you prefer to make users enjoy your application for free instead of making them see your ad, there are also tools that can help you improve UX and support the freemium application monetization model. If your application is developed without a digital storefront integrated into the code, you will find these tools useful:
Android handles their developers and offers its own solution for freemium called the Android In-app Billing tool. Meanwhile Apple also has an original system that offers users to buy content or subscriptions in your application. But it shows it as a software download from the store. Well, yes, it takes 30% of revenue but manages transactions instead.
If you are looking for a simple digital storefront tool that allows in-app purchases, Swarm is ready to help. This opens additional features that are not available in the free initial version that is downloaded. If you prefer to combine ads and freemium models on your system, try AdWorkMedia. It implements various application monetization tools that you want.
In-app Video Advertising
Other types of tools that are worth mentioning work with video ads in the application Yes, video ads may match your application. That is a fact. Especially if they reflect the type of content expected. The following tools can easily help you monetize your free application:
Inneractive combines innovative ad units with perfect reporting and analytics. This makes it possible to monetize mobile applications without really sacrificing UX. At the same time, YuMe is also on the list. This uses PQI, the real-time inventory valuation algorithm to bring the best inventory campaign.
While Adcolony is there to use their Instant Play HD technology combined with buffer-free video playback, Vungle is the only one that displays the SDK that is suitable for iOS, Android and Windows. At least they say that.
Conclusion
There are many effective ways to monetize free applications, but it will require some overall planning and marketing strategies. Advertising still holds the leading position as an application monetization method, with 65% of all applications on the market. (Source: Expensive price report). However, developers use a mixture of application monetization: in-app purchases and advertisements.
Application publishers must conduct market research, determine target users, examine the success stories of other application developers. The main challenges are getting awareness, getting loyal users, and choosing the right income model. Developers must plan more targeted advertising campaigns to promote applications and releases, constantly providing feature updates, using more mixed and unique revenue models to provide value to users. This will generate greater profits and help your customers be satisfied.
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