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With so many app monetization models to make money with apps, it is important to note that each method has its own benefits and drawbacks to give while monetization of the app.

Pradeep Makhija, Blogger

January 31, 2020

6 Min Read

There is always a doubt in mind "How do free apps make money?". This article is for entrepreneurs who want to learn – how to create and monetize an app or make money with apps to earn passive income by publishing free apps in the mobile app market.

Even though the percentage of paid app revenues has decreased to 37.8 % from 75.9%, the mobile app market is still worth billions of dollars.

In fact, here’s an interesting graph that shows the difference between a number of paid apps downloads vs. free apps downloads:

According to the google play store, 98% of the revenue comes from free apps. And, you need to think more about app monetization.

So, if you’ve decided to develop mobile apps to make money and wondering how to create an app and how to make money off an app, then in this article, you will learn about the most popular and proved mobile app monetization strategies to make money with apps.

 Free applications make money from one of the following 6 most well-known monetization strategies:

1. Advertising

Advertising is probably the most common and easiest to implement, and it is done via a third-party ad network.

7 out of 10 free apps providers used advertising as their revenue model in 2016.

Using ads to monetize apps and make money is quite simple. An app owner just needs to display commercials inside their mobile app and get paid from the third-party ad networks.

There are mainly 4 types of ads that are displayed by the app providers for monetization.

1) Interstitial ads:

This type of ad is full-screen pop-ups that are displayed at specific time frames. Users can close this ad by a close button at the upper left or right corner.

For example, an ad can be displayed when a user finishes editing a photo and saves it in the gallery.

This method is used by Gaana, which is a great example of app monetization.

2) Banner ads:

They are basically displayed in different sizes and at the top or bottom parts of the app screen. They are often small and less obstructive which helps users to freely use the app.

3) In-app video ads:

These ads are displayed automatically and generally used as a reward video in exchange for some in-app rewards.

4) Native ads:

Native ads are integrated to appear as a natural element in the app. Most of the time, it is manifested to promote a product or a mobile app.

2) Subscriptions

Subscriptions can be a quite useful monetization strategy. App publishers can choose to offer free content in their apps for a limited amount of time and then charge users for a subscription fee that will allow them to access full content without any restrictions.

The popular and common technique used by the majority of free app publishers is to offer a free trial period and then charge the subscription fee to those who wish to continue to access the app content.

This type of monetization strategy is often used for cloud services, audio and video streaming, and online news services.

3) In-App Purchases

In-app purchases are directly made from within the app and are usually quite a simple process. They’re typically used to access special contents or features such as powerups, restrictive levels, or additional features.

In simple words, in-app purchases provide an ability to sell a variety of virtual items directly from the app.

According to Forbesapps with in-app purchases generate the highest revenue for their publishers. This monetization strategy is also expected to dominate in the years to come.

Generally, this model is used by game publishers, mostly because of the digital money. In fact, half of the games provide more than one game currency such as gems, coins, and gold.

4) Referral Marketing

Referral marketing involves promoting a third-party product or service as a way to optimize revenue opportunities.

App publishers can promote or sell affiliates’ products or services based on the number of clicks or installs. For this, you can use pop-up ads to promote someone else’s app or advertise products.

There are different types of referral marketing models that publishers use in their free apps.

Cost per acquisition or cost per action (CPA):

There is a number of affiliate networks from which you can find the one that suits your free app. In this model, you can either promote other apps, advertise products with pop-ups, or promote apps through an in-app store.

Cost per click (CPC):

This type of revenue model is based on a number of clicks on an ad displayed. You can join the popular networks such as Adfonic or Google’s AdMob for this model. They both provide text and display advertisements.

Cost per view (CPV):

This model involves charging based on the number of ad interactions or video views. Smartphone game development company BrightHouse successfully increased its app revenue by 130% through cost per view networks.

They used video as well as interstitial ads in their smartphone game to create natural breaks in between game sessions.

Cost per install (CPI):

Cost per install is a relatively new marketing mechanism and is the mobile equivalent to CPA (cost per acquisition) in the web marketing world.

Cost per install is exactly what it sounds like – you get paid for each install of the advertised app in your free app.

5) Freemium Upsell

Freemium apps are available free of cost to download but contain paid or premium features. These paid and premium features can be accessed through in-app purchases.​

In this type of apps, users download the app without paying any charge, and if they like the content of it, they can get full access to functionality by committing a purchase. Using this tactic, gaining lots of new users is easily possible because premium features are optional.

6) Transaction Fees

The ninth-best way to monetize your apps is transaction fees. It is the best way to make money from your free apps. It is especially possible with those apps that provide a platform, where digital transactions occur on a regular basis.

Let’s take an example if your mobile app has an option for third parties to sell their products and those purchases can be carried out online, then you can charge transaction fees. You can charge a small fee for every single transaction that occurs on your app and makes a lot of money. This way, you can make your mobile apps to earn money without investing much money.

Here you can discover more details on How do free apps make money?

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