Monetizing Free Mobile Apps: 4 Strategies to Consider

3 June 2021

There are more free apps than paid apps on the leading app stores. Free apps also get more downloads. But, how do you revoke your investment? How do you make money from a free app?

People are spending more time on mobile applications than ever before. According to E-Marketer, 55% of the global population aged 13+ spend more time on digital media  – 5 hours and 50 minutes as compared to TV – 4 hours and 4 minutes, radio – 1 hour and 26 minutes, print, and other media outlets every day. Internet users spend 3 hours 14 minutes on apps compared to 2 hours 8 minutes on desktop and only 28 minutes on other connected devices. So it gives app developers a massive opportunity to cash in.

The Premium vs. Freemium Tug of War

The good news is that most of this time is spent on free applications, including the major social networks, such as Facebook, Twitter, Instagram, and YouTube. 

Unfortunately, the same report shows two trends that may be worrying for developers and others in the mobile app industry;

  • Low app download rates

Today’s consumers are downloading apps at a low rate. Up to 51% of smartphone users nowadays go up to three months without downloading a single mobile application. Of the other 49%, about 13% download one app every three months, while 11% download two apps every three months.

It shows the increased difficulty in getting your application (free or premium) into the average smartphone user’s phone. It also gives you a clue on how difficult app monetization has become today.

  • Freemium apps make two-thirds of app stores

The situation is worse on the Google App store compared to the Apple App Store. However, in both cases, there are two free apps for every premium application. The exact figures also vary by industry. 

For example, in the gaming sector, 90% of apps are free. Only 2% are premium with in-app purchases. News, music, entertainment, and education apps follow in that order.

It means that freemium app developers must also outperform more apps to stand out in addition to monetizing challenges. For instance, in the gaming sector, you’re competing against 90% of all apps, while premium app developers only compete against 10% of the apps.

How to Overcome the Odds

The above statistics show that it’s an uphill task getting any returns for your investment if you’re a freemium developer. The competition is stiff, and people are no longer downloading many apps. 

So, what can you do? We recommend the following app monetization strategies;

          1. Advertise on your apps 

This is perhaps the most popular way of making money from your free mobile applications. It is because of a huge range of advertising platforms and easy implementation of such a solution. The research shows that 86% of brands would like to place their brand in gaming apps because they consider them very engaging. That influenced even such big players as Google and Facebook. Facebook, for example, engages developers to create games that will let users play right from the Facebook news feed. 

The first step is to drive usage among your fans, the solution is only successful if you a great number of users. Get as many people as possible to download your app and take the initiative to retain them. Once you have a significant user base, you can get revenue from ad clicks, Cost-per-Mile (mile=1,000 users in Latin), and Cost-per-Click (CPC) advertisement strategies. You may also consider Cost-per-Installation, Cost-per-Action, and Cost-per-View strategies.

Fortunately, the list of advertisers ready to partner with well-performing mobile applications is endless. Though the way is very official, if your app is designed to promote your brand or draw traffic to your app, this strategy won’t work for you. 

          2. Offer premium upgrades 

Another excellent way to make money from your app is to offer premium upgrades. This way, users can enjoy your app for free for as long as they want and fully appreciate it. They can also upgrade to premium membership to access more advanced features. It’s the best strategy for apps that bring a user to some kind of progress. Whether it be the next level in a game or a new set of exercises in a fitness app, users are already highly motivated to move on, even if it means paying for the service.

Two reasons make the freemium model an excellent strategy. First, it’s easier to convince existing users to opt into paid membership as they already know and appreciate what the app offers. Secondly, disenchantment (or buyer’s remorse) is lower if someone already interacts with your app. Essentially, individuals who begin with free plans before going premium are less likely to be disappointed. About 2% of your users will upgrade to a premium plan, so think about how many users you need to draw to receive a handsome reward. 

          3. In-app purchases   

The fact that users prefer to download and install apps for free doesn’t mean they deny purchasing items within the app. On the contrary, users may buy your offerings. And, if the experience is enjoyable, they’ll likely buy it again in the future.

Gaming app developers, for instance, can sell items more easily because gamers want to advance to the next step rather than getting stuck at the same level for eternity. You can sell coins that gamers can use to unlock new levels, additional abilities, or new characters. It is also a popular strategy for dating apps as users can buy gifts, send private messages, and other bonus accesses. 

However, think critically about the pricing and user experience. App stores are choke-full of similar apps that may offer an even better experience. Therefore, to get an edge over the competition, your prices must be fair and the experience exemplary.

          4. Consider monthly subscriptions 

If you’re very confident in your app, charging monthly subscriptions could be a good way to earn more revenue. Subscriptions are, by far, the most profitable app monetization strategy.

On average, subscriptions earn 2-3X more revenues than advertisements and app download charges. Subscriptions also guarantee 50% more revenues than in-app purchases.

It’s important to get the difference between subscription apps and premium apps. Subscription apps are downloaded for free. Think about Netflix, for instance. It costs $0.00 to download the app. 

However, you’re required to pay a small fee monthly or yearly–to access certain services within the app. And it’s also different from in-app purchases that involve one-time payments.

Ready to Start?

App monetization is a huge challenge today–we can’t sugarcoat it. It’s the major reason many apps die within the first year of release. But you can still get a good return on your investment if you’re savvy enough. Contact the NIX Solutions team for further advice and app monetization tips.