The app industry has seen tremendous growth over the past few years. According to Statista, global app downloads reached 35.3 billion in Q3 2022 from 15.9 billion in Q1 2015. The app download has increased by 122.013%. With the growing demand for apps, developers are looking for ways to monetize their apps and generate revenue.

With the increasing popularity of apps, many developers want to monetize their apps and make money. But how do free apps make money?

For developers, making money from their apps can be daunting and overwhelming. But with the right strategies and tactics, apps can be monetized and generate income.

What is a Free App?

A free app is an app that can be downloaded without any cost. Advertising, in-app purchases, or other forms of monetization usually support it.

Most free apps are developed to generate revenue and are often supported by the same company that developed the app. This allows the app developer to generate income from the app without asking users to pay to download it.

Why Are Free Apps So Popular?

Free apps have become increasingly popular over the years for a few reasons.

First, free apps are incredibly convenient. They can be easily downloaded and used without having to pay anything. This makes them appealing to those who may not want to pay for an app or cannot afford it.

Second, free apps are often more accessible than paid ones. Many users are likelier to download and try out a free app than a paid one. This makes them an attractive option for app developers who want to get their product seen by a wide audience.

Finally, free apps are often more likely to be shared with friends and family. This helps spread the word about the app and can lead to more downloads and revenue.

Types of Free Apps

Before diving into the various monetization strategies, it’s important to understand the different types of free apps. 

Generally, free apps are categorized into two main types: 

Ad-supported apps display advertisements within the app and generate revenue when users click on the ad. This type of app is a great option for developers looking to monetize their apps without charging users for downloads.

In-app purchases allow users to purchase additional features or content within the app. This type of app is an excellent option for developers looking to monetize their apps with a more robust model.

Let’s explore the various ways in which free apps generate money. 

I’ll discuss 10 ways free apps make money. Each strategy has advantages and disadvantages, and I’ll discuss those in detail. This lets you decide which monetization strategy works best for your app.

10 How To Make Money From Mobile Apps in 2023

1. Offer In-App Purchases

One of the most popular ways to monetize a free app is by offering in-app purchases. This is when users purchase additional features or content within the app. For example, a user might buy a new level or weapon in a game or an extra filter in a photo editing app. In-app purchases can range from extra lives in a game to a subscription service.

In-app purchases can be divided into two types: one-time purchases and subscriptions. In a one-time purchase model, users make a one-time payment for an item or feature within the app.

In a subscription model, users make a recurring payment for an item or feature within the app. Developers can also opt for both models to maximize their revenue. Developers can also offer discounts and promotions to encourage users to make in-app purchases.

The advantage of in-app purchases is that they are usually one-time purchases. This means that users make a one-time payment for the additional content and don’t need to keep paying. This makes it easy for users to understand the pricing model and makes it easier for developers to track revenue.

The downside of in-app purchases is that they can be difficult for users to make. Users may be reluctant to purchase within the app, so it’s important to ensure the additional content is worth the price. Additionally, getting users to make repeat purchases cannot be easy.

2. Offer Subscriptions

Another way to monetize a free app is by offering subscriptions. This is when users pay a recurring fee to access additional content or features within the app. For example, a user might pay a monthly fee to access a premium version of the app with additional features. Subscriptions can also be used to offer discounts or access to exclusive content.

Subscriptions can be divided into two types: 

a) One-time subscription model — users make a one-time payment for an item or feature within the app. 

b) Recurring subscription model — users make a recurring payment for an item or feature within the app.

The advantage of subscriptions is that they are a great way to generate recurring revenue. This means that users are more likely to keep using the app if they have already paid. Additionally, subscriptions can offer exclusive content or discounts that users wouldn’t be able to get otherwise.

The downside of subscriptions is that they can be difficult for users to commit to. Getting users to make a recurring payment can be hard. So it’s important to ensure the additional content is worth the price. Additionally, getting users to keep using the app cannot be easy if they have canceled their subscriptions.

3. Advertisements

Advertising is one of the most popular methods for monetizing free apps. In this model, developers display advertisements within their apps and generate revenue when users click on them. This model is great for developers looking to monetize their apps without charging users for downloads. 

Advertising models can be divided into cost-per-click (CPC) and cost-per-impression (CPM). 

In a CPC model, developers are paid a certain amount for every user who clicks on the advertisement. But, in a CPM model, developers are paid a certain amount of money every thousand times an ad is displayed. Developers can also choose to combine both models to maximize their revenue. Furthermore, developers can opt for a third-party ad network to help manage their ad campaigns and optimize performance.

The advantage of displaying ads is that it’s a great way to generate revenue with minimal effort. Additionally, ads can be used to target specific users with specific ads. This can be a great way to generate more revenue from the same users.

The downside of displaying ads is that they can be intrusive and annoying for users. Additionally, getting users to click on the ads cannot be easy, so making sure the ads are relevant and interesting is essential. Additionally, some users may be unwilling to view ads, so it’s essential to consider the user experience when displaying ads.

4. Affiliate Marketing

An affiliate marketing is another popular way to make money from a free app. This is when a developer partners with an affiliate network and promotes products or services within the app. When users click on the affiliate links and makes a purchase, the developer receives a commission.

The advantage of affiliate marketing is that it’s a great way to generate passive income. Additionally, the commissions can be quite generous. So it’s a great way to make money from the mobile app with minimal effort. Additionally, affiliate marketing can target specific users with specific products or services.

The downside of affiliate marketing is that getting users to click on the affiliate links can be difficult. Additionally, some users may be reluctant to click on the links, so it’s important to ensure the products or services are relevant and interesting. Additionally, some users may be unwilling to view ads, so it’s essential to consider the user experience when displaying affiliate links.

5. Offer Services

Another way to monetize a free app is by offering services. This could be anything from consulting services to web development and design services. This is a great way to generate revenue from users seeking help with a specific task. You can use the free mobile app to build your audience and then sell your services with the app. 

The advantage of offering services is that it’s a great way to generate recurring income. Additionally, the services can be tailored to specific users, so it’s a great way to generate more revenue from the same users. The conversation rate will be higher if you are targeting a specific audience. 

The downside of offering services is that getting users to purchase the services can be difficult. Additionally, some users may be reluctant to opt for your services, so it’s important to ensure they are relevant and interesting. Additionally, the buying cycle is slow when you are selling a service. 

6. Sponsorship

Sponsorship is another popular way to make money from a free app. This is when a brand sponsors the app in exchange for exposure. For example, a supplement brand might sponsor a fitness app in exchange for displaying its product on its content.

The advantage of sponsorship is that it’s a great way to generate income subtly. Most of the content creators with good audiences opt for sponsorship posts. 

The downside of sponsorship is that it can be difficult to get companies to sponsor the app. You will have to build a strong audience, which is a difficult job in the first place. Additionally, some companies may be reluctant to sponsor the app. So it’s important to ensure the sponsorship is relevant and interesting.

7. Crowdfunding

Crowdfunding is another way to monetize a free app. This is when a developer raises money from a large group of people in exchange for the content they create. For example, a developer might launch a crowdfunding campaign to build a mobile app.

The advantage of crowdfunding is that it’s directly associated with the people you are creating content with.

The downside of crowdfunding is that it can be difficult to get users to donate money. You will have to build trust and loyalty in your niche. People will need to like your content. They should be willing to fund your idea. 

8. Licensing

Licensing is when a developer licenses their app to another company or organization for a fee. For example, a developer might license their app to a company for a one-time payment or a recurring fee. The company might use the entire app as an add-on feature in its existing app. 

The advantage of licensing is that it’s a great way to make money if you solve a bigger problem that users will be willing to pay. 

The downside of licensing is that it can be difficult for companies to license the app. Additionally, it’s hard to build a product that another company buys to use the product as an add-on feature.

9. Freemium Model

The freemium model is another popular way to make money from a mobile app. Freemium apps are a combination of free and premium apps. In this model, developers offer a free basic version of their app and allow users to upgrade to the premium version for an additional cost. This model is great for developers looking to monetize their apps with a more robust model. 

Freemium apps are beneficial for both developers and users. Developers can generate more revenue by offering users a premium app version. On the other hand, users can try out the basic version of the app before deciding to upgrade to the premium version.

The advantage of the freemium model is that its user aquation is easy and cost-effective. You get qualified leads to convert into paying customers. 

The downside of the freemium model is that it can be difficult to get users to upgrade to the premium version. Additionally, some users may be reluctant to upgrade, so it’s important to ensure the additional content is worth the price. 

10. In-App Referrals

In-app referrals are another way to monetize a free app. A developer pays users a commission for referring other users to the app. For example, a user might refer a friend to the app and receive a commission when the friend signs up.

The advantage of in-app referrals is that it’s a great way to generate word-of-mouth referrals. This increases the app download with lower customer acquisition costs. 

The downside of in-app referrals is that getting users to refer their friends can be difficult. Additionally, some users may be reluctant to refer their friends, so ensuring the referral program is relevant and interesting is important. 

How To Measure The Success Of Your Free App

Once you’ve implemented your monetization strategies, it’s essential to measure the success of your app. This will help you determine which strategies are working and which need improvement.

The most important metric to measure is user engagement. This will help you determine how many users download and use your app. You can also measure user retention, which will help determine how long users stay engaged with your app.

You can also measure the revenue generated from your app. This will help you determine which monetization strategies are working and which need improvement.

Finally, you can measure the performance of your app. This will help you determine your app’s speed and user experience performance.

The Benefits Of Free Apps For Businesses

While free apps can be a great way to generate revenue, they can also benefit businesses.

First, free apps can help businesses increase brand awareness. By offering a free app, businesses can reach a wider audience and build a stronger presence in the digital world.

Second, free apps can help businesses increase customer loyalty. By providing users with an app that offers useful features and services, businesses can encourage users to keep coming back and interacting with their brand.

Finally, free apps can help businesses increase sales. Businesses can generate more revenue by offering users the ability to purchase additional features or services within the app.

Conclusion

In conclusion, there are several ways in which free apps make money. Developers can opt for an ad-supported model, an in-app purchase model, a subscription model, or a freemium model to monetize their apps. Developers can also use a combination of these models to maximize their revenue.

By understanding the various monetization strategies and tactics, developers can make their apps more profitable and generate more revenue. If you want to monetize your app, explore the different methods discussed in this article.