Majority of the apps provide a download facility without charging anything from the user, the process just includes downloading an app from the app store or play store and start using the app.
Hence, it is obvious the app developers or providers who offer mobile apps for free expect payment in some other form. It is very important for the company or app developer focusing on mobile app development to be aware of how free apps manage to make profits.
How Free Mobile Apps Make Profits?
There are many popular mobile applications that manage to make profits off their apps. It is important to know how to plan and select successful application monetization strategies and also know about the software tools to be integrated. Below are some of the well-known monetization strategies used by app developers to gain profit by providing free apps.
Paid Applications Vs Freemium Apps
Nowadays smartphones are used for almost everything including cab booking, education, language learning, chatting, gaming, etc. With mobile apps, one can communicate, make video calls, order food, or find a route in an unknown location. With the increasing use of apps, mobile app developers are focusing on mobile app development with rich features and functionality to compete in the market.
As per some research reports, the number of apps on both the App store and Play store continue to rise and with this, the mobile app revenue is likely to increase, moreover, top-grossing mobile apps will be available for free.
However, these days people have become picky and only have 3 to 4 apps on their smartphones. Users are also looking for mobile apps with high quality, performance, and particular functionality. Hence, most of the downloads and profit come from free apps.
Moreover, research reports also suggest that users are interested in the apps that prove their values and then users are also willing to do in-app purchases to unlock and take advantage of extended functionality and advanced features.
For example, gaming apps usually generate better revenues, meanwhile, M-commerce and advertising channels can also generate better revenues. Hence, while developing mobile apps, selecting the monetization model is important to earn better returns.
In order to make profits from free apps, selecting the best monetization strategy is necessary. App developers during mobile app development can also go through some statistical data to select the best monetization strategy. Some of the popular monetization strategies used by app developers are.
Nowadays, mobile advertisements are the most common and easiest way to earn profit from free apps. Most of the advertisements provide embedded commercials that generate revenue based on per click, per install, or per impression. There are five types of ads that can be used by mobile applications including video advertisements, banner ads, interstitial ads, native advertising, and incentivized ads.
However, there are some disadvantages of the advertisement model such as ads in between the content in the app that can irritate and annoy customers. Moreover, the prolific use of advertisements has become ineffective as very few users click on these ads. This model of monetization strategy can only be effective with the apps that have large numbers of users and this model cannot be profitable for startups.
Referral marketing is in some way connected to the in-app advertisement model of monetization strategy. There is also a separate direction in marketing known as affiliate marketing. In this, informational content about the company is placed in the mobile app and based on the installs and clicks, the app provider receives rewards. The rewards are based on the revenue model or cost-per-action (CPA).
The referral marketing model can be used in various ways in mobile app development such as in-app advertisement, promoting another application, and advertising services and products through in-app stores. Moreover, there are various affiliate network companies that specialize in finding the best affiliate for the application.
There are various tools and software programs that can help in the integration of this model. Some of the campaigns used in affiliate marketing are cost-per-click (CPC), cost-per-impression (CPM), cost-per-install (CPI), and cost-per-view (CPV).
Freemium Model and In-App Purchase
In-app purchase is a popular strategy in the freemium model. With this, it is possible to sell physical and virtual items, offer premium bonuses and functionality, open new application contents, and also block ads. All the transactions are managed by the app store and the owner receives a commission.
In-app purchase strategy is divided into three categories including subscription, non-consumable, and consumable. For example, MX player is a type of freemium app model, it is a video player on Google Play with advertisements for the free version, meanwhile, MX player pro is offered as an ad-free version and charges a small amount from users.
The biggest disadvantage of the freemium model is that it is lucrative and plausible only for top applications with large numbers of users. Moreover, it is hard to implement this model in mobile app development due to its complicated payment system development.
The subscription model is mostly used in apps providing audio and video content, cloud services, and digital news channels. With this model, users get access to the content as per their subscription model.
However, the only drawback of this model is that the app needs to have detailed content strategies and resources to offer up-to-date and fresh content in order to compete in the market and ensure high-level subscriber services.
Mobile app developers can use these various platforms to raise funds for application development and marketing such as CrowdFunder, Kickstarter, AppsFunder, and Indiegogo. This model is one of the new ways to monetize applications for free. However, there are a large number of apps on the app store that can make crowdfunding difficult. Hence, it is important to show the value of the product and idea that is worth investing and taking a risk.
This has always been one of the most profitable strategies to earn revenue with free apps in mobile app development. In this technique, the user’s data is collected, and emails are sent to users with marketing materials to increase the subscription level. Email strategy is very helpful when user retention rate drops.
It is also used to notify users about the latest features, discounts and deals. However, with wide usage of Email marketing, it has become less effective, moreover, email marketing is very useful for top brands and is less powerful for startups.
As of now, in-app advertisements among all other strategies hold a top position as the highest profit and revenue earning model. With pros and cons in all the models, it becomes very important for mobile app development companies to understand the revenue earning model that can work best for your app and select accordingly.
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