App Monetization Strategy: How Free Apps Make Money
It’s no secret that mobile apps can serve as a solid source of revenue. By the numbers:
- In 2021, Android app and iOS app revenues reached $133 billion globally.
- That same year, iOS app developers in the United States saw 118% growth in earnings.
- By 2026, forecasters project spending on mobile apps to reach $233 billion globally across Apple’s App Store and Google Play.
How do you build a sustainable business that captures this competitive but lucrative source of revenue?
As a mobile app owner, your objective is to grow your app traffic, downloads, and installations and turn that into profits and conversions. To succeed, you need to know the leading app monetization strategies available and determine the best way to make money off your mobile app.
The Market for Free Apps
- Free apps are the vast majority of available apps on both the App Store and Google Play.
- Paid apps represent less than 7% on the Apple App Store and 4% on Google Play Store.
- According to some estimates, only 1 in 2 people have ever paid for a mobile app.
These numbers speak volumes about the market for free apps compared to paid apps. But with so many free apps available through the app stores, many clients wonder, “How can I make money from free apps?”
People love free apps. The good news is that app developers can leverage several app monetization models for mobile applications to tap into this market.
However, you’ll need to carefully consider several factors and choose the monetization method or combination of methods before you begin app development.
Factors in Selecting an App Monetization Strategy
- What’s unique about your mobile app idea?
- What is happening in the industry niche you’re targeting?
- Who would pay for the ability to use your free mobile app?
When it comes to app revenue and price, it’s vital to understand the market, your target audience, and how your mobile app fits in compared to the competition.
For example, in the wake of pandemic recovery, the market has normalized with new consumer habits—like a willingness to spend on non-game apps.
Furthermore, different audiences have different needs, and it’s essential that you cater to them by aligning with what they value. Business users may pay for time savings; gamers may be more willing to pay for features that help them level up.
To tailor your mobile application for a particular app monetization strategy during the app development phase, you should come prepared with the best strategy that considers these factors.
- What is your app development, launch, marketing, and maintenance timetable?
- When do you need to show a profit?
Striking the right balance between the time it takes you to grow revenue and your user base will help ensure your app—and your budget—succeed.
Some app monetization models earn more money initially, while profits come later in others. If you can initially forego revenue, you may be able to gather more users and gain more revenue overall.
Building a successful revenue-generating app takes considerable time and, of course, investment. If you’re new to app development, our free eBook InspiringApps: A Business Perspective on Building Mobile Apps describes key mobile app development considerations in detail—and we encourage you to start here first.
App Store Considerations
- How will you collect payment?
- What is the share fee?
- What are the store’s guidelines for your type of app and monetization model?
App developers have been working with Apple and Google to reduce the percentage of revenue they take for in-app purchases and to provide other ways for users to pay for subscriptions. The percentage has adjusted from 30% to 15% for subscribers in their second year and for small developers applied to the first $1 million in earnings.
There are other ways to reduce or eliminate the share fee. Collecting payments outside of apps may be an approach you’d want to consider if you don’t use your app to direct users to external payment processes.
But there are other restrictions placed by the stores. For example, App Store Review Guideline 3.11 requires apps offering paid online group services to do so via in-app purchases.
Free App Monetization Models
In-app ads are the most popular monetization model as of July 2022. App advertising enables you to make money by selling advertising space within otherwise free apps.
In-app mobile ads come in all shapes and sizes, typically commanding different values. Various placements and formats range from an interstitial ad, video ad, native ad, and banner ad.
App developers monetize ads in a mobile app in multiple ways:
- Cost per thousand (CPM), based on the number of impressions through the ads
- Cost per click (CPC), based on the number of clicks the ads deliver
- Cost per view (CPV), based on the number of views by the app users
- Cost per action (CPA), based on the users’ actions, such as installing the advertised app or purchasing through the link, which lead to the developer’s commission
The benefit to users is that not only the app but also all its features are free. Multiple services connect app publishers to advertisers. It’s a quick way to grow your user base.
However, ads may impact mobile app retention. People can be annoyed enough by the ads to stop using free apps that employ app advertising.
(Interestingly, this has led to another revenue stream—paying for an “ad-free” experience!)
There are so many examples that it’s challenging to carve one out. A few notables include the following:
Businesses can list their ads on Google Maps, even creating profiles that allow their businesses to be found more easily. Google Maps also allows businesses to use their company logos instead of generic icons—for a fee.
Native Ad + Data Monetization
Instagram gathers vast amounts of data, enabling the app to serve highly targeted ads. Brands are willing to pay because they feel confident that the right people will see their ad. Visual ads work well on the platform; they appear seamless next to the visuals people are scrolling through as they use the free app.
Duolingo also uses advertising—in particular, you’ll see a video ad prompting you to download another app, with a reward for watching the ad to entice users.
Freemium & Free Trial Apps
The free app market is also split into freemium and free trial apps with the added options of in-app purchases and subscriptions.
Freemium and free trial apps can be a great way to get users hooked on your product. However, compared to apps that use advertising, freemium and free trial apps do not generate revenue until users start paying to access premium features, pay for in-app goods, or continue using the service through subscription.
The good news is that there are numerous avenues for revenue opportunities providing quite a bit of opportunity for app publishers to create the right model for their business.
Freemium apps allow users access to basic features for free, with or without additional in-app purchases.
Users download the app for free, but certain gated features require them to convert to a paid app or subscription model to use the premium feature. Customers find indefinite free access more appealing than time-delimited trials.
Free Trial Apps
A free trial app usually allows full access to the features but within a limited period.
Because there’s no risk to downloading a freemium app from the app store, users are more likely to try freemium over trial apps. However, conversion rates are usually higher with free trials compared to freemiums.
In App Purchases
Through in-app purchases, users can buy digital goods for a specific price.
Popular in mobile gaming, the in-app purchase experience can feel like a natural part of the app. In-app purchases in most gaming apps are consumable; players buy items or gear, such as a sword that offers special powers or virtual currency, to increase their success.
Subscriptions enable the app developer to target app features to specific user groups or businesses or for a specified time period.
Subscription revenues have increased rapidly over the past few years. That’s likely because subscription-based apps offer a steady source of reliable income, which makes planning and investing in upgrades much less risky.
Software-as-a-service models provide different pricing levels, for example, free, premium, and enterprise, as is common practice with productivity and business apps. Many subscription models also offer discounts for longer subscriptions, which is a win-win for both parties.
Freemium + Free Trial
The popular app Calm is built on a freemium model with a free trial option. Users can access either a 7-day free trial or the free version of the app without paying for premium content. After the free trial ends, users can choose from various subscription options, from a monthly membership to a lifetime one.
Software as a Service
Asana offers a basic version for free. Some features are only available through higher tier pricing, enticing users to consider paying for an app subscription for an enterprise experience.
In App Expendables
In the gaming app Plants vs. Zombies 2, users need to purchase upgraded, premium plants to advance to a higher level.
In App Unlockables
In-app purchases are not limited to gaming. For example, you can still buy individual songs from Apple iTunes. And cooking apps like The Photo Cookbook allow you to unlock individual sets of recipes via in-app purchases.
Certain app subscriptions may be considered free because they gate specific content—in other words, they offer content subscriptions.
With this type of app subscription, the focus is to allow brands to earn revenue on a recurring basis for providing content. Paywalls allow app users to view a predetermined amount of content for free and then ask users to opt into a paid subscription to get more.
While many freemium models have subscription options that offer flexible payment, the gated content model is increasingly limited to news, learning, and academic sites. Most streaming services utilize advertising or require upfront payment with a trial period (no free lunch).
Costs to operate this model can be high because it requires substantial investment in content. To encourage user signups, the app publisher limits articles read. App publishers often combine the model with advertising to keep the price point attractive to the app user.
Harvard Business Review, the LA Times, and the New York Times are all examples of a free subscription model. Users have access to a limited number of free articles they can read monthly without a fee.
App sponsorship involves partnering with brands that are a good fit for your niche; it’s more exclusive than advertising generally.
In this model, brands pay to be a part of free apps. This type of advertising strategy is likely to be better received by app users because it’s relevant and connected to your app’s purpose.
Sponsorship can earn revenue by dividing revenue from the mobile app with the sponsor, having an app sponsor for launch, or setting a monthly sponsorship fee. Brands use free apps to reach their target audiences and vice versa, creating a win-win for the sponsor and your business.
To succeed with sponsors, you need strong networking skills and a narrow focus. Sponsors can be notoriously difficult to find and pitch.
Sponsorship is usually incorporated with those applications that already have regular users and lots of data on those users—in other words, apps that are already mature in their market niche.
So if you have significantly grown your user base over time, have significant data on those users, and have created a well-established business, brands may be interested in establishing a sponsorship deal with you.
An Alternative: Affiliate Marketing
Affiliate links are another variation of sponsorship, but instead of granting sponsorship rights exclusively to one organization, you’ll negotiate with a few interested partners and agree to place their reference links in your free app.
App affiliate marketing can be a great way to increase income from apps if you lack a market sponsor who is ready to cover your costs. App affiliates act as marketers and are rewarded for doing so.
Mobile event apps like EventMobi enable event planners to offer exclusive sponsorship on the app or offer several tiers of visibility for sponsor listings.
Apple’s affiliate program allows app publishers to promote products that people purchase through the App Store through their free apps.
Concluding Thoughts on App Monetization
Free apps and paid apps have costs associated with using them—whether behind the scenes, in the available features or content, upfront, or somewhere in between.
That being said, money shouldn’t be on your user’s minds but rather how much value and joy your app brings them. While there’s no silver bullet, the most successful monetization strategy for your app will be the one that integrates well enough that it feels like a normal part of the app experience.
We’re always happy to talk with our clients about which model—or combination of models—could be most effective for you. If you need help to decide, please reach out for a free consultation.
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We’re celebrating 15 years of InspiringApps—and we have a lot to be thankful for. Our company history is rich in milestones, steeped in the Boulder foothills, our passion for developing code, and our commitment to inspiring our clients and our team. This blog post highlights just a few of the milestones that helped us get where we are today. The Early Years: InspiringApps Is Born Our journey began in Boulder, Colorado, in September 2007, where developer and entrepreneur Brad Weber founded InspiringApps. Having spent over 12 years developing custom web and desktop apps as a one-person shop, Weber wanted to grow a team that could tackle larger-scale apps that drive change. InspiringApps is the result of that vision. While InspiringApps focused first on custom desktop and web applications, Weber recognized an opportunity with the launch of the iPhone, and the company quickly expanded to mobile app development. This timely pivot became the launchpad for InspiringApps’ many years of success. Working with clients like Nurses for Newborns Foundation and Church Publishing, building apps like ePCR for iPad and Upbeat Workouts, we inspired new generations of business and consumer app users alongside the dawn of an increasingly mobile-first era. With the novelty of the mobile app market, most of our clients were entering the app world for the first time, so we had a lot to give back and share. In 2012, we wrote the first edition of our book. After helping many business leaders get up to speed quickly, we wrote a second edition—available for free here: InspiringApps: A Business Perspective on Building Mobile Apps. We dedicated ourselves to building apps that functioned exceptionally well in those early years. Fifteen years in, we’re proud that “Finish line every time” is our InspiringApps guarantee. Better Together: Award-Winning Partnerships The next several years (2013-2018) marked another period of expansion through incredible client and team collaboration. For everyone at InspiringApps, enterprise app development became a matter of good stewardship. We built a culture where we could design and develop amazing digital products together, adding design as a core element of our services that makes our development stand out. And in the years that followed, we were honored to be considered an award-winning app development agency on an international scale. In 2015, the retail merchandising app we created for SmartWool was named the winner of the Tabby Award/Business in the iPad App: Data Access & Collection category. That same year, a sales presentation app that InspiringApps developed in conjunction with Gulfstream Aerospace took second place to Adobe in the iPad App: Marketing & Presentation category. The Tabby Award/Business is the only global competition that recognizes the best enterprise and business apps in the industry. In 2018, we won two Davey Awards honoring creative work from the best small companies worldwide: a Gold Award for the design and development of the Empath app and a Silver Award for our work on the Artifact Uprising app. InspiringApps was one of 13 companies out of 3,000 nominations that received a Gold Award in the mobile category in the Daveys that year. By the end of 2018, our team had grown to encompass highly experienced, tenured software developers, designers, and creatives. We’d served over 75 clients, from startups to some of the world’s largest companies like Google and Toyota. We’d delivered over 150 apps for all kinds of smart devices, continuing to inspire how people live, work, and play. The Pandemic Years: A Rebrand for a New Chapter It can be hard to think about the pandemic years in a positive light, but embracing challenges is part of what we do every day as developers. As digital transformation accelerated, so did we. InspringApps had a number of successes beyond 2019. In 2020, while many large enterprises lost personnel, our team grew stronger and larger. We took many steps to create a remote-first culture that served our clients and our team, including forming a leadership team to provide support and hosting open feedback sessions. We were honored to continue building apps with impact—like the Cancer Excercise app, which was the first mobile exercise app for iOS designed specifically for cancer survivors. The app was nominated for a Best Mobile App Platinum Award in 2020 and won an AVA Digital Gold Award in 2021. In early 2021, our newly expanded design and marketing teams set out to capture the message and aesthetics of InspiringApps with a purposeful company rebranding. Visualizing the mountains of Boulder, our code, and our core values, we created a new identity and style. Our new logo, website, and messaging reflect not only InspiringApps’ foundation but also our continued focus on a values-based culture. By the time InspiringApps was celebrating our 14th birthday in September of 2021, we had also achieved another milestone: becoming Great Place To Work Certified™ for the first time in the company’s history. 2022 & Beyond: Deeper Roots Into the Future InspiringApps has made a concentrated effort to set ourselves up for a bright future. We’ve already experienced major growth, especially in fintech app development. We’ve invested time and talent to prepare our people and processes to support this growth. And as a result, we’re designing and building better-quality products more quickly than ever before. This year marked the launch of another first for InspiringApps: Explore Orion is designed for uses beyond the confines of planet Earth. In the free app developed by InspiringApps with Lockheed Martin, users can interact with Callisto, the exciting new technology that delivers messages into outer space. Explore Orion encapsulates what we do here at InspiringApps: we work with leading companies to bring their mission to life. Closer to home, one of the core projects we launched this year was an initiative driven by our employees’ feedback and desire to give back. The new program, IA Commits, provides an affordable option for local organizations, limited-budget, and not-for-profit clients to bring their web and mobile app dreams to life. But in a deeper way, it also aims to change the tech industry’s future by providing transformative career and training opportunities to underrepresented aspiring developers and coders. In 2022, we also implemented Innovation Day, which allows our team to grow and gain new skills that will serve InspiringApps and our clients well into the future. Concluding Thoughts InspiringApps designs and develops custom mobile and web solutions that help people. We’ve helped millions of users with apps that are as easy to use as they are aesthetically pleasing. We help entrepreneurs start businesses around the products we create. We help organizations bring their mission to life. Growth occurs when we seek to solve problems, make mistakes, and improve along the way. Empathy leads our team to design and build thoughtful products. We’re proud to share all of our unique achievements, especially with our communities, partners, friends, and family—all of whom we want to thank for an incredible history and a continued path to success. Together, we make InspiringApps.
3 days ago
Apps have the ability to revolutionize the nonprofit sector. With a well-developed app, a nonprofit can streamline its processes and improve its donor base. From charity apps to donation apps and fundraising apps, apps can make a world of difference for a nonprofit or charity organization. In this post, we’ll share how to develop a nonprofit app that will make a difference. 1. Keep the mission front and center. One of the most important things to consider when developing an app for a nonprofit organization is whether or not the app’s purpose aligns with the organization’s mission. There are many reasons nonprofit professionals seek a software solution through a custom app: Bring awareness to your nonprofit’s cause. Interact with your community. Augment the experience of interacting with your nonprofit. Make operations more efficient. Manage volunteers or coordinate board member activity. Keep supporters informed. Attract donors through fundraising for your charity. Help others. But regardless of these reasons, the most successful nonprofit apps are those that keep the nonprofit organization’s mission at the forefront. If the app is not directly related to the organization’s mission, it’s likely that it will not be used by the organization’s target audience. For this reason, it’s important to make sure that the app’s purpose is in line with the organization’s goals. Throughout the mobile app development process, keep the mission in mind and make it a priority. Apps on a Mission: Examples Volunteer & Donor Apps To Mobilize a Charity The American Red Cross has a stated mission of “mobilizing the power of volunteers and the generosity of donors” to respond to disasters, alleviate suffering, and support human rights. In line with this mission, their volunteer app, Volunteer Connection, enables existing volunteers to manage their activity and stay more engaged with the charity through a mobile app. The Blood Donor app is another charity app offered by the American Red Cross. Through the donation app, they can send push notifications alerting the public of blood shortages. It streamlines and enhances the charity’s donation process and user experience, enabling donors to locate nearby blood drives, get notified when their blood is on its way to a patient, earn achievements, and more. 2. Make your app easy to use through thoughtful design. A key benefit of your nonprofit app is user participation. You can use your app to engage with users who are passionate about your nonprofit organization’s cause. But even for the most important cause or well-known charity, you may lose users if your mobile app is confusing to use or otherwise poorly designed. For nonprofits, user interface and user experience are essential tools to keep your users engaged and motivated to continue interacting with your cause or charity. Here are a few app design tips to help ensure your mobile app is easy to use. Put the User First Is your user a volunteer, supporter, community member, charity champion, or donor? For that user, your app should make complex tasks simpler. During mobile app development, make the user interface and experience as streamlined and straightforward as possible. Prioritize Accessibility Accessible to everyone means ensuring that the app is available in multiple languages, as well as taking into consideration users with different abilities. By making the app accessible to all, you’ll ensure that it can be used by the widest possible audience. Avoid Clutter Creativity is encouraged, but clarity reigns. Instead of cluttering your mobile application with too many design elements, try to keep it simple and readable. Use Your Brand Choose bright, inviting colors and design elements that align with your brand’s message. Use a Dashboard A central dashboard helps the user stay oriented and motivated. It’s essential to keep it clean and effective. Include critical information here. Visualize Data Visually display fundraising or other cause-related metrics that donors, supporters, and volunteers care about, like the money raised, hours donated, or meals packed. Follow the Leaders Google and Apple both have interface design resources. Following these best practices ensures you’ve put the proper thought and care into your mobile app development and design. 3. Collect and respond to feedback. One key to success for any app lies in collecting and responding to user feedback. The benefits and use cases for feedback include: Determining How To Update Your Nonprofit App: Reviews are a great way to stay in touch with the ongoing desires of your user community. This is especially important for a nonprofit app, as it can help the organization fine-tune its offerings and make improvements. Marketing Your App: The value of positive reviews is high in influencing how your mobile app ranks in search results on the app stores and in compelling others to take the risk to download your app. Protecting Your Reputation: Collecting in-app feedback about bugs and usability problems can often help avert negative public posts by allowing you to quickly fix any issues. Here are some best practices for managing feedback. Prompt for Reviews While some users will choose to leave feedback on their own, others benefit from being prompted. To increase the quality of the feedback, request reviews when users have already used and are familiar with your mobile app. Respond to All Reviews Remember that users want to be heard. We recommend that you respond to all reviews, no matter how positive or negative they may be. Represent Your Brand Responding to reviews is no different than interacting with users through social media, email, and discussion forums. Take care that you are thoughtful in your approach. Encourage Direct Outreach Nonprofits can provide a contact number or email address to encourage users to contact them directly and address unique concerns. 4. Keep your app updated. You’ve developed your nonprofit app and released it to the world. Things are going great, and your charity is seeing the rewards of investing in nonprofit app development. But an outdated app usually isn’t a highly used one. How do you keep a user coming back? App updates are an integral part of the business plan for nonprofit organizations seeking to develop an app. Here are some factors that may inspire (or require) you to update your nonprofit app. Features & Improvements Even after you release your app, the user experience will continue to be the most important place to focus your time. Straightforward apps may hit the nail on the head at launch, but most apps go through a few iterations before they offer the desired experience. Keep track of your app store rankings, download growth trends, and social signals in online mentions and reviews. In-app analytics can provide insights into how users progress through different locations and features within your app. Monitoring performance also helps to bring to light any issues that could be causing users to abandon your app. Great app ratings and reviews come from a great user experience. Learn from your users’ feedback, and put that into regular updates with new features and improvements. Operating System Releases Many of our clients rightly ask whether an operating system (OS) update will impact the functionality of a native app they built on a previous OS. The answer is, generally, “It might!” With a new OS release, it’s always wise for mobile app developers to review existing code. This way, you’ll ensure your app will work as well on the user’s mobile device as it did when it was first written. For more information on the implications of an OS update, check out our article: How do OS updates impact apps? 5. Promote your nonprofit app. Before your mobile app is launched, you’ll want to be ready to promote it through traditional and digital channels on the Apple App Store, Google Play, and beyond. While the methods for promoting your mobile app may vary, here are a few tried-and-true marketing strategies to connect people to your cause. Advertising & Content Marketing Getting the word out there is essential for nonprofits to ensure that people are aware of and using the app. Applying a tandem advertising and content marketing strategy is an excellent way to succeed here. Go beyond making a great first impression by marketing your nonprofit app to attract, engage, and exceed your users’ expectations. A Google Ad Grant can equip your nonprofit with up to $10,000 in free search advertising per month. With content marketing, you can make helpful and valuable content for potential users, drawing them to your website through articles, infographics, or videos that help your audience achieve their goals. You can develop content that will attract users to download your app and then use Google Analytics to optimize it for search rankings. For example, the Charity Miles app is a fundraising app that enables users to earn money for charity whenever they walk, run, or bike. The blog covers topics on employee engagement and success stories to attract potential user groups and sponsors. Website Landing Page There are many free tools you can use for your nonprofit’s website. A website with a landing page specific to your app will help promote your app, its features, and its launch date. Provide a contact form to collect potential users’ email addresses. Invite people to sign up for launch notifications and provide social media sharing tools so fans can begin recommending your app to others. The goal is to build excitement and collect data that will power other elements of your marketing campaign. App Store Listings A compelling app store listing is a vital component of marketing your app. App store listings feature your icon, screenshots, and video previews. They appeal to potential users by providing an attractive and informative visual summary of the app’s design and key features. While there are many components to your app store listings, here are the top three items to focus on to create a great one: Keywords Knowing and using relevant keywords is imperative—we can’t emphasize it enough. In today’s digital world, all content is filtered before it’s delivered to you. From the Instagram posts you see first to the order of websites a Google search returns, keyword rankings help you find the information and products you want. Promotional Descriptions Just like social media captions and website previews, only so much of your description is visible to your potential user when they first arrive on your listing. This promotional description text is your app’s chance to stand apart in a lineup of similar offerings. It should pack a punch and convey your app’s value. You’ll want to be compelling here and include at least one of the keywords you identified. Multimedia For highly visual apps, preview and promo videos can enable you to overcome the challenge of articulating in words a concept better seen in action. But any app can benefit from a video by offering potential users a refreshing way to experience features before downloading. Social Media Social media is a cornerstone of getting the word out and should be central to your promotional strategy. Here are some best practices to keep in mind: Start well before app launch by establishing a presence on multiple platforms, including Instagram, Facebook, Twitter, and LinkedIn. Consider a variety of media, including video and TikTok reels. Note that your charity or exempt organization may be eligible for the YouTube Nonprofit program. Encourage interest, build excitement, and increase engagement with announcements, screenshots, and previews. Direct traffic to your website and app store listings to attract your target audience and build awareness with potential users. Email Outreach Whether you use the nonprofit cloud or a simpler option, email marketing can be a powerful tool for creating brand awareness and keeping your cause top of mind. You can enable fans to join a waiting list or to opt-in to receive immediate announcements on launch day and stay engaged through email marketing. You can also use marketing emails to send users informational tips or promotional offers. Notably, Salesforce offers 10 user licenses for free to nonprofits, making sophisticated marketing tools available to smaller organizations to do customized email outreach. With the nonprofit success pack, you can use your data to create segmented communications and personalized content for email campaigns. Targeting your message to your audience helps encourage open rates and click-throughs. Press Kit A press kit informs reporters and bloggers about your app. Hit the ground running on launch day by creating a single-file kit that includes everything the press needs to help generate buzz about your app: Press Release App Store Icon & Screenshots Video Demo App Description Reviews About Your Organization Concluding Thoughts Make an Impact With Nonprofit App Development Applying technology in innovative ways can help nonprofits stand out. Working with a mobile app development company can help you make an impact with your nonprofit mission. Many low-code, no-code DIY development platforms can be used as prototypes to test ideas and gather feedback. If your app is simple and requires little customization, this option may be the right place for you to start. If you’re looking for an expert who can help you develop a nonprofit app in Denver and Boulder, Austin, or anywhere else, or if you have an app and you need to scale it, we’re here for you. Check out our IA Commits program for more information and to get in touch.
15 days ago