How to make money from a free app

December 2, 2015

You’ve got a great product idea that you want the world to see. Fantastic! However, as we all know taking a leap of faith at the start of any project can be a daunting prospect; will people use your product? Will they like it? Will your investment pay off? Of course, these pre-development jitters are often the same regardless of whether you’re a first time entrepreneur or an experienced pro. Let’s face it, it would be great if you could make a bit of money from your vision.

But let’s now imagine, after all the hard work, emotional investment and money spent, you simply give your product away - for free! Welcome to the world of app development. Where the stakes are high but the rewards can be extraordinary, even when you’re not charging a penny.

Great free apps such as; snapchat, Instagram and Candy Crush, are all worth millions and haven’t once charged for downloads. So how exactly have they done it? And more importantly how can you do the same?

Free apps get far more user downloads than paid apps. All you need to do is leverage these downloads and create a revenue stream that works for you.

How to make money from a free app

      1.  The freemium upsell

The freemuim model involves giving users basic features at no cost, and encouraging them to upgrade to access richer functionality for a subscription or one off fee.

This type of model has become popular in the app world and is appealing for several reasons; Free features are a powerful marketing tool, allowing a new venture to scale up and attract a user base without expending resources on costly ad campaigns or sales efforts. The frequently used subscription fees tend to yield a more sustainable revenue stream than the advertising model. And freemium is more successful than limited offers such as 30-day free trails, because customers find indefinite free access more appealing, especially when trying to avoid annoying cancelation processes.

     2.  In-app purchases

In 2014, 6 out of the top 10 grossing apps were free and using in-app purchases to generate revenue. Good examples of in-app purchasing can be readily observed in app games. Games often charge users to unlock features (such as levels or characters), or let them buy more in-app currency (such as gems or coins) to generate revenue.

When you build an app you can set in-app purchases to be a one off fee (e.g. I want to unlock this feature) or an ongoing option which you can buy over and over again (e.g. I want to purchase 20 coins). Of course this model works best for high quality, addictive apps with a loyal user base.

Monetising a free app

      3.  Adverts

When done correctly adverts can provide a good and stable source of income for your app. A recent study by Cambridge University computer scientists found that 73% of apps in the Android marketplace were free, and of those, 80% relied on advertising as their main business model.

Mobile ads are now more successful than desktop ads and companies will pay good money to be featured in your app.  Payment models vary depending on the type of ad and app and you can use a range to monetise your app. The most frequently used models are; pay-per-click, pay-per-impression and pay-per-purchase.

The downside is when done incorrectly placed ads do have the potential to annoy your users, compromising their experience. But it doesn’t have to be that way. Highly targeted relevant ads provide a win-win situation for you and your users. Your users are exposed to products which add value to their lives and you make money from their clicks. Small, well designed banner ads are subtle and don’t interfere with user experience. Whilst affiliate posts provide a great way to advertise without the user even knowing they are being sold to!

money from free app

     4.  Sponsorship

Sponsorship can be tricky to attain usually involving a dedicated sales process and tough negotiations to strike up the right deal for you and your partner organisation. However, it can also be very lucrative for free apps.

If you have or are planning a specific app that attracts a niche group of users people it is possible that a partner would want to sponsor all of it for a specific time in order to get their message across to your audience. Sponsorship deals often prove much more valuable than in app advertising revenue methods. For the exclusive rights to a voice within your app, any decent sponsor should be willing to pay more than the cost of all the individual advertising slots.

Be prepared to create specific sponsored content for your app that doesn’t alienate your users. Make sure you know how comfortable your users are with having a sponsor on-board. Most are fine to accept sponsored content when it is specifically marked.

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