How Free Apps Generate Revenue: Strategies for Success

Once the app development process is completed, you’ve got to make a crucial decision before you make it available on the Apple App Store or Google Play Store.

Are you going to charge users to download it? Or will you make a free app?

One of the reasons why so many people decide to charge for downloads is because they don’t know any other way to generate money for the app.

After spending so much money on development, they think the only way to get a return on the large investment is by charging a fee per download.

This is a common misconception.

Free apps can generate real money.

That’s right.

You’ve just got to make sure you take a smart approach to this strategy.

There are lots of big players out there who are making lots of money. You can achieve this similar success as well if you follow a few very important monetization strategies.

• Understand the users
• Understand the competition
• In-app purchases and advertisements
• The art of subtlety

So if you’re up in the air about whether or not offer your app for free, I’d say that free is definitely your best option.

All you need to do is follow these tips, which I’ll outline in greater detail as we continue.

The majority of apps that get downloaded are free.

What does this information tell you?

Mobile users are not used to paying for their apps.

So it’s unlikely they’ll make an exception for yours.

I’m sure there’s something similar that’s available on the market, so they could just get it for free somewhere else.

So your best choice is to offer or it without charging anything. Then try to get as many free app downloads as possible and look to other options for revenue streams.

As an industry expert who has been through this before, I can tell you from personal experience that it works.

This guide will teach you everything you need to know about how free apps make money and how to have success with a free app.

Understand your users

Before you do anything else, you’ve got to take the time to do some research.

Think about the people who are currently using or will be using your app.

This will be easier for some of you compared to others.

For those of you with an existing business, the demographics of your app users will mirror your current customers.

But if you’re planning to launch an app that’s not an extension of an existing company, you’ll have to focus on the potential target market.

You’ve got to understand how these people think and behave.

For example, the operating system that your app is available on even effects the user behavior.

Apple users and Android users behave differently.

If you don’t understand your users, you won’t be able to understand anything.

But take this one step further.

Understanding the user means much more than just knowing what kind of mobile device they’re using.

Ask yourself these three questions to get started in the right direction.

1. Who is using the app?
2. What are they using it for?
3. How are they using it?

Once you can answer these questions, you can start to figure out what your users are doing.

Now compare this behavior to your app.

Does it meet those considerations?

If the answer is yes, then you’re in a good position to proceed to the next steps.

Just make sure you start with the user before you jump ahead.

Understand your competitors

Competitor analysis is a marketing tactic that’s often overlooked by so many businesses.

They are so busy focused on their own company, that they neglect to see how their competitors are doing.

Before you can move forward, the first step in this involves identifying your competitors.

Once you have completed that part of the process, you can start to analyze the components of their operation.

This graphic can help steer you in the right direction in terms of what you should be looking for.

You can learn so much from this.

If your competitors are doing something similar to you, see if they are doing it better.

There’s no shame in learning from someone else who is having success.

You can simply apply their same methods to your own mobile app monetization strategy.

On the flip side, you may also find out what your competitors are doing poorly as you conduct this research.

You can take notes from these mistakes and make sure to avoid them as your implementing certain changes to your own app.

Once you analyze the competition, you’ve got to come up with a differentiation strategy.

Separate yourself from the crowd.

What makes your app unique?

Think about what you can do better than everyone else and make sure that’s the focal point of your marketing strategy.

Properly branding your app will make it much easier for you to generate money, even if it’s available as a free download.

In-app actions

Now that we’ve covered the preliminary components of monetizing your app, it’s time to focus on what will actually generate money.

There are two basic ways that free apps can make money.

1. In-app purchases
2. Advertisements

So you can apply one or even both of these methods to your app.

Each one has plenty of benefits.

I’ll explain how both of these work in greater detail, so you know exactly what to do.

In-app purchases

An in-app purchase offers users extra features and additional options.

These upgrades help increase their engagement and improve the user experience.

Take a look at how much money the average user spends each month on in-app purchases.

As you can see from the data, the majority of mobile users don’t purchase upgrades.

It’s also clear that users on the iOS platform are willing to spend more than Android users.

Platform	Willingness to Spend
iOS	Higher
Android	Lower

So you can’t expect every single person who downloads your app for free to spend money.

That’s not a realistic or attainable goal.

So you’ve got to focus on the group that is willing to buy those upgrades.

These additional features can add a layer of complexity depending on the nature of the app and the depth of its functionality.

You’ve got to find a way to hook the user and keep them coming back for more.

For example, gaming apps do a great job of enticing users to purchase upgrades that improve their gameplay. Very few games are paid apps. So someone can download and play the game for free, but can’t unlock certain maps or game functions without spending money.

Coin or token systems are a great way to achieve this and get users to spend more per purchase.

Rather than saying something costs $1 you can offer it for 100 tokens.

Allow users to purchase tokens for real money and give them a better exchange rate based on the amount they spend.

So for example:

• $5 = 500 tokens
• $10 = 1200 tokens
• $20 = 2500 tokens

Make sense?

According to Apple Support, there are four main types of in-app purchases.

• Consumable
• Non-consumable
• Non-renewing subscriptions
• Auto renew

  Frequently Asked Questions

  How do free apps generate revenue without charging for downloads?

  Free apps can generate revenue through in-app purchases and advertisements. Platforms like Buildfire make this straightforward by offering tools to integrate these monetization strategies seamlessly.

  What are the most effective in-app purchase strategies?

  Effective in-app purchase strategies include offering consumable and non-consumable purchases. Buildfire, for instance, offers features that allow businesses to implement these strategies efficiently.

  How can I analyze my competitors to improve my app’s monetization?

  Competitor analysis involves identifying competitors and analyzing their monetization strategies. Tools like Buildfire allow businesses to learn from competitors and apply successful strategies to their own apps.

  What role does user understanding play in app monetization?

  Understanding user behavior and preferences is crucial for app success. It helps tailor the app experience and monetization strategies to meet user needs effectively.

  Can advertisements be a primary revenue stream for free apps?

  Yes, advertisements can be a significant revenue stream for free apps. By integrating ad networks, apps can earn money based on user interactions with ads.

  
  
  ing subscriptions

So the coin example would fall under the consumable category.

A non-consumable purchase would be upgrading a premium version of an app that has added bonuses such as no advertisements.

Non-renewing subscriptions are a set for a specific period of time.

So if you had a sports app, you may offer a subscription for just the NFL, NBA, or MLB season.

Here’s a good example of this from the Fantasy Football My Playbook app.

An auto renewing subscription is something that’s ongoing and won’t expire after a few months.

A subscription to a newspaper like the impressions or clicks.

The type of ads offered on your platform will affect the pay rate as well.

Ad Type	Potential Revenue
Video Advertisement	Higher
Static Ad or Banner	Lower

Advertising works for some models and apps.

You’ll have to decide if this is a reasonable strategy for you to consider after analyzing your users and competitors.

Here’s an example of some basic app advertisements.

While these can make you money, sometimes they can be intrusive to the user experience.

So you don’t want to go overboard with ads.

With that said, you can combine your advertising strategy with your in-app purchases business model as well.

Let’s say you use both of these techniques to make money.

Do you remember what we discussed earlier?

You can offer a premium upgrade for users who don’t want to see ads while they are using the app.

Here’s another great example of this.

As you can see, using in-app purchases and advertisements in the same app can be done at the same time.

Frequently Asked Questions

What are in-app purchases?

In-app purchases are items or services bought within an app, allowing users to access additional features or content.

How do advertisements work in apps?

Advertisements in apps generate revenue through impressions or clicks, similar to website ads.

What is a non-consumable purchase?

A non-consumable purchase is a one-time purchase that provides permanent access to a feature or content.

Can I combine in-app purchases with ads?

Yes, you can combine in-app purchases with ads to create a hybrid monetization strategy.

What is an auto-renewing subscription?

An auto-renewing subscription is a recurring payment model that continues until the user cancels it.