06Sep, 2016

How Do Free Apps Make Money

How Do Free Apps Make Money

Look at your phone. How many apps did you buy in there? You, like most people, have probably never purchased an app. How come the number of free apps in apps stores increases on a daily basis? How do developers of such apps gain from them? How do apps make money? Today, we let you in on revenue generation sources that free app developers have and how they optimize these options.

SOURCES OF REVENUE

1. IN-APP PURCHASES

Developers are pretty clever. They allow you to get a taste of the app first. Once you get hooked, you are enticed to unlock more exciting features by purchasing them. The purchase is however optional. For instance, a game may require that you purchase a given number of coins in order to use a particular feature. These coins will be valued at a certain number of cents. Many developers require that you unlock several features, so you will make purchases on an ongoing basis. Most of the E-book apps use this technique; you can download them freely, but full access to books is only limited to those who pay.

2. SUBSCRIPTIONS

Many developers allow you to download their app free of charge. However, they require that you pay a monthly subscription in order to access the features within the app. Most magazines and newspaper apps use this method of revenue generation. The app delivers news on a daily basis once you have paid your monthly subscription. Alternatively, they may allow users to access some free features, but subscribe to get other features. This revenue generating strategy works best for apps that are built to provide new content on a regular basis.

3. IN-APP ADVERTISING

This is the most popular monetization strategy used by app developers/publishers. App developers generate revenue by featuring company or brand’s ads on their apps. These ads are placed at vantage point where they are clearly visible to the app user. The visibility and creativity of the ads entices the user to click.

(a) Ways of making money from ads

–Click through
Revenue is generated based on the number of clicks on the ads. Each click is given a particular value, where the more the clicks, the more the app developer earns.

–Impressions
Revenue is made based on the number of app users that see the ad. Focus for the app developer is therefore put on creating a larger user base for the app. The more the number of app downloads, the more the number of people who see the ad and the greater the income.

(b) Types of Ad

–Banner ad
This is the most common type of ad on apps. They are placed at the top or the bottom of the page. Customers have the option of clicking on it and proceeding to view the product or services site or closing it via the close button.

–Interstitial ad
These are pop-up ads that show in full screen when you open certain apps. For instance in a gaming app, when the player reaches a certain level, the ad is displayed. Although they can be a highly effective ad type, interstitial ads can create an enormous amount of irritation for the user, because they take over the entire screen of the app user.

–Video Ads
Some developers cleverly place videos in their apps that reward users when they opt to watch video ads. These rewards entice you to view the videos, and the app developer is paid each time the video is viewed. Video ads typically generate more money than any other type of advertising.

4. AFFILIATE INCOME

Affiliate income is generated from advertising other products or services on their apps. The app developer gets a percentage of the sale that come from affiliate purchases via the mobile app

Types of affiliate marketing

–Marketing other apps
If two apps are similar or share a similar target audience, chances are that a user may want to download both. This is the principle behind marketing other apps on an app. The app developer is paid each time a download of the marketed app is made. For example, an app that gives fashion tips may market another app that offers makeup tips.

–Virtual stores
Some apps, especially those of e-commerce, sell a variety of products and services on their site. Their virtual stores create a platform for those looking to sell their ware to a typically larger and more varied audience. When a user purchases a product, the app owner earns a commission or a percentage of the sale.

5. SPONSORSHIP

This strategy is not common among small app developers, but it can be a great source of income. Companies sponsor the app in exchange for branding. The app name and graphics are changed to fit the company brand. This works best for target audiences.

6. EMAIL MARKETING

Some apps have a slot that requires you to give them your email address. Ads for some products or services are sent directly to you via this address. The company advertising their products pays to get your email address. Essentially, the app earns by collecting email addresses. Email addresses are also obtained when you open the app via your Facebook account or any other social media platform. Developers may incorporate an email collection tool to collect emails instead of asking you for it.

7. SELLING BETTER VERSIONS OF THE APP

Here, you download a free version of the app. Once, you have gotten a taste of it, the developer introduces a better version which you have to pay for. Since you are already interested, you are likely to make the purchase.

8. SELLING APP-RELATED MERCHANDISE

Once the app has garnered a huge following, the company may decide to create physical merchandise for sale. These include t-shirts, caps and even mugs. For this technique to work, a large population must view the app as trendy. For example, the Pokemon Go will make or is already making a fortune from merchandising.

9. APP STORES

Some app stores pay app owners. Some require that the apps waive their in-app purchases and allow users to use them without paying. An app owner is paid, a certain amount, every time the app is downloaded.

FINAL NOTE

Most of the largest grossing apps are those that are free to download. As you can see, developers have numerous avenues of making money by offering free apps as detailed above. There are so many ways to monetize free apps, but it’s important to know that different strategies suit different apps. The structure of the app, as well as its target audience and requisites, should be considered when deciding the monetization strategy to use. To maximize the revenue generated by your free app, you have to find the best combination of these methods for your app. Also, do your research on the apps that make money easily, and concentrate on developing apps along that line.

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