By 2026, it is anticipated that the mobile app market will be worth $407.31 billion. By any measure, it is profitable, so it only makes sense that you would want to enter the market. However, The question is how do apps make money. But 9 out of 10 apps download for free, so the question arises as to how free apps make money.
Free Apps Vs. Paid Apps Market
The majority of “free” apps available on Google Play and the App Store follow the freemium business model. 96.1 percent of the apps that can be downloaded from Google Play and 91.9 percent from the Apple App Store are free, according to Statista. It’s also important to note that the Apple AppStore is the more lucrative of the two markets.
The statistics clearly show that users prefer free apps and are put off by paid apps. Only one in two people, according to Google, have ever paid for an app. The graph explains why freemium apps are taking the place of paid apps among developers.
Freemium Apps Vs. Free Trial Apps Market
Additionally divided into freemium and free trial apps, the free app market. While freemium apps give users access to some basic features for no charge, free trial apps typically give users full access to all of the features for a set amount of time.
Before users start paying to access premium features or continue using the service after the trial, neither of these types of apps make money. Free trial apps have a higher conversion rate of 30% to 50% than freemium apps, which have a conversion rate between 1% and 30%, though most stay close to the lower limit.
App Monetization Strategies
The beauty of app monetization is the variety of available methods. Some tactics are more successful than others depending on the type of apps. Given that it has a rating of 75%, rewarded video advertising has proven to be the best option. To receive gameplay items or energies, users must watch a video ad in this form of advertising that is common in video games.
Following different types of advertisements, the second most successful method of monetization is in-app purchases on the freemium model, which have a success rate of 63 percent. With only 14 percent each, paid subscriptions and downloads are significantly lower than the ranking.
1. Advertising
It’s not surprising that the majority of responses to the question of how free apps make money mention advertising. Due to their effectiveness, advertisements have taken over many forms of media in our daily lives. Ads are presented and monetized in a mobile app in a variety of ways.
CPM, in which app developers are compensated for a certain number of ad impressions.
Revenue is based on the number of clicks delivered through the advertisements (CPP).
The amount of views by app users determines how much CPV is earned.
CPA: User actions, such as downloading the promoted app or making a purchase using the link, result in a developer’s commission.
If you are not charging any fees to the users, use advertising. Please be aware that frequent interruptions from ads may drive users away.
Instagram and Duolingo both use advertising as part of their business models.
2. Freemium Model
The freemium business model is getting more and more acceptance and has taken over the Apple App Store and Google Play. Freemium apps give users access to fundamental features without charging them right away. However, users must pay a fee to access premium features.
The freemium model includes a variety of monetization techniques. Users of mobile games can make in-app purchases to purchase game items. Many productivity apps offer a premium subscription that removes the app’s feature restrictions.
If you want to lower the cost of user acquisition while remaining confident that the users will stick with the app and occasionally make purchases, use the freemium model.
In addition to selling credits that permit users to use specific features, Skype also offers a subscription for its Skype To Go service. The photo and video creation tool VCSO offers a premium subscription in addition to its free app.
3. Subscription Model
One of the few ways free apps make money is through the subscription model. It operates by billing customers on a monthly or annual basis for a recurring sum. With this business model, developers are guaranteed a set amount of income so long as users continue to pay for the app.
Media, news, and entertainment all frequently use subscriptions. Only 5% of successful apps have used subscriptions as a form of monetization, demonstrating the unpopularity of this strategy.
The subscription model is the most lucrative revenue stream if you provide VPN, streaming video, or streaming audio services. You can provide a money-back guarantee period for new users to entice them to sign up.
4. Sponsorship Model
The sponsorship model, one of the less popular tactics, entails locating a sponsor with a connection to your niche and negotiating a compensation plan. The app could feature the sponsor’s brand, promote its goods, or direct users to its website in exchange for a monetary payment.
For instance, if you developed a diet planning app, you could approach food companies about a sponsorship opportunity.
Because it can be difficult to negotiate a sponsorship agreement, most apps prefer other, simpler monetization methods.
I hope through this article you understand the difference between a free app and a premium app. you also learn about how apps make money.
