When you go onto the App Store or Google Play, you might note that most apps are free to download. So how do these free apps make any money? When comparing the download numbers of free application over the paid ones, free applications trump the paid applications. If you think about it, the majority of top grossing apps such as Clash of Clans and Spotify Music cost nothing to download. So, in a market where the majority of users expect their apps to be free, how do app developers gain any profit off of it? Here are the five ways that free apps can make money.
The ‘Freemium’ Upsell
This is having a second version of an app that is paid. The free app will have a link that a user could click that will take them to the iTunes store on their phone. The user will download the free app and get an idea of what the app offers, then they can purchase the full version, which will come with more functionality and game play.
When an app starts getting traffic, it can be a consistent revenue source. However, it does require a sizeable amount of traffic to make it worth your while. The two main network ads are:
- iAds (Apple)
- Admob (Google)
Typically, there is a small cost per thousand impressions and it’s under a dollar, and a cost per click that’s a few bucks. If an app gets 100 downloads, it will make around two dollars. It all depends on how many people click on the ad. It all depends on the ads that get served up and the amount of people that click on it.
In-App purchases is considered to be another component of the freemium model. It allows users to unlock features or purchase more of something, like coins/gold in a game. In fact a lot of the top grossing apps were free but they used in-app purchases so well that they bought in millions of dollars in sales. When building an app, an in-app purchase can be a onetime purchase or an ongoing option. A lot of revenue can be generated with the second option, but the app itself needs to be worthwhile to justify spending continuous money on it.
Getting a sponsor is a great way to make money for a free app. This gives credibility to the app’s brand and gains trust with the users. How it works is that an app will be matched with a company/sponsor and the sponsor will promote that app on their website (that has good traffic, email newsletters and social media). This will guarantee a good source of income for a free app.
Cost Per Install (CPI) Networks
CPI is a new marketing mechanism that is the mobile equivalent of CPA (cost per acquisition). CPI is paying per each app installation. How it works is that a developer wants to promote their app, and will pay money to have a new user install it on their device. If a third party user can provide that installation, they will get paid a portion of what the developer will pay. It’s a good and consistent revenue that is proportional to download numbers, and will grow as the user base (of the app) grows.