If you want to know how free apps make money, then we have brought this comprehensive write-up for you to help you get the perfect answer to the query.
There are various types of apps available on the Google Play Store, Apple App Store, and various other trusted platforms. You may know that the number of paid apps is lesser than free ones. Over 90% of the total apps can be downloaded and used for free of any cost.
While installing or using these free apps, you must have asked yourself how free apps make money at least once or twice. This is a very common question asked by a lot of users online, however, the answer to this question is an uncommon one. We may be able to help you get the perfect and desired answer to this question. Keep reading the article for detailed information.
What is the Difference Between the Free (Freemium), Trail, and Paid Apps on the App Store
Before we get to the answer of how free apps make money, let’s know more about what a free app is. A free or freemium app is an app that is available for download and used on the device without any cost. Over 95% of apps on the Google Play Store and over 90% of apps on the Apple App Store are free to download and use. This data persists, although the Apple App Store is more lucrative than the Google Play Store.
These figures alone are enough to explain that users prefer freemium apps over paid ones. As per the analytics shared by Google Play Store, a maximum of 2% of users only shift from the free version to the paid one. This is the main reason why all the developers on the internet prefer to provide a free app on the app stores. (They may also provide an option to get the paid app with the free one.)
The trial app, just like its name, is an app on the app store that is available on a trial only. You can use all or limited features of the app, as set by the developers. After the trial period is over, you need to purchase the paid version of the app. This version can be named PRO, PREMIUM, PAID, or any other.
The answer to this question is obviously Yes. There would not have been so many free or freemium apps if the developers or creators of such apps could not earn from them. Additionally, you as the user of the apps or games can also use in-app purchases to buy a lot of things. This also works as added revenue for the developers.
Data shows that over $46 billion in revenue was generated from the Apple App Store in 2018 while the Google Play Store generated a total of over $24.4 billion. As most of the apps on both platforms are free, it is safe to assume that the major share of the revenue came from the free apps. So how do free apps make money?
How Do Free Apps Make Money- The Answer
There are multiple ways through which the developers of free apps can make money from their products. For this purpose, the developers of the app need to indulge in one or more app monetization strategies. These will help them provide the app for free to you as well as generate revenue for their brand. One of the major sources of monetizing the app is advertising. However, that is not the only one.
Let’s have a look at the best ways to monetize the apps and find the answer to how do free apps make money:
The best and the most promising source of revenue for free apps is advertising. By running advertisements on the interface of the apps, the developers can easily generate revenue from the ad provider. Just like any social media, gaming, editing, and other forms of apps, you can easily run ads and earn more.
Here are different types of advertisements that you may see while using the app:
CPM (cost per mille)- This form of advertising allows the advertiser to earn based on the impressions generated from the video. Generally, the price cap is fixed at 1,000 impressions but can be changed according to the developers’ and advertisers’ needs. Here impressions are the no. of ad runs on any app.
CPC (Cost Per Click)- Just like its name, under the CPC or Cost Per Click advertising, the revenue is generated based on the number of clicks or taps on the advertisement. This is the most common form of advertising used by the developers.
CPV (Cost-per-view)- Under the CPV or the Cost-per-view advertising, the developer generates revenue from the app based on the views generated from the video/advertisement.
CPA (Cost Per Action)- Lastly, the only form of advertising left is the CPA. Under this form of advertising, the developers generate revenue based on the installations made by the viewers after seeing and clicking on the ad.
You can use any form of advertising on your app as you want to generate revenue.
Freemium is the most common form of app structure used by any app developer for their apps. Wondering how free apps make money under this structure? Well, the answer is quite simple. The developer of a freemium app provides some features of the app only in the free version. To get access to the rest, you need to purchase the paid version.
If you are wondering how WhatsApp makes money, the answer to this question is using the freemium model with different businesses for response and customer support.
This structure also includes in-app purchases. Generally, the game developers provide an option for in-app purchases. So what do productivity app developers do? The productivity app developers ask you to get a premium subscription to the app. This allows you to get uninterrupted access to the advanced features of the app or game with ease. Additionally, the paid version may also remove the advertisements from the interface.
The next way to generate revenue from any free app is by providing a subscription to the premium version of the same. Generally, this structure is used by music, entertainment, productivity, news, virtual private network (VPN) providers, and other apps that provide any form of service to you.
Although this structure is not as successful as the other methods to monetize the apps. Only 4-5% of the total app developers use this structure to generate revenue. Popular apps and platforms like Netflix, Amazon, Spotify, The New York Times, etc. use this structure to generate revenue. Let’s move on to the next answer to how free apps make money.
The sponsorship structure is like a road less taken to monetize the apps. You may ask how free apps make money with the sponsorship structure. Here’s the answer to that. Under this structure, the developers of the app target a potential sponsor for the app whose working niche is related to or similar to that offered under the app.
For example, the developers of an app that records running can find a sponsor that provides advertisements related to smartwatches or coupons for different brands when you complete a certain task or challenge specified in the app. When you tap on this advertisement, the app will redirect you to the website of the brand. This type of sponsorship is not opted for by the developers very commonly. This structure is not as promising as others.
So, we hope that with the help of the common monetization structures provided above. You were able to get the desired answer to how free apps make money. Generally, the app developers use either the advertisement structure, the freemium structure, or a blend of both as per the requirements of the developer and the advertiser.
If you have any other questions related to how free apps make money. Contact us using the comments section below with your queries. We will get back to you with answers as soon as possible. We appreciate your suggestions and comments as well.
Devesh, being a technical writer, likes to research and write technology articles and solutions to help others. Having great knowledge about the tech world and its working, he likes to pour the same into his write-ups. Before starting any write-up, he likes to pen down his thoughts and flaunt a creative edge in the same. Apart from being a writer, his primary interests include reading books and poems, cooking, and playing video games.
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