4 app monetization strategies for free apps

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Every developer wants to be the next titan of the industry. Are you using the best strategy to get there? There are many ways to get your app to stand out and you should find out which one works best for you.

The great success of the major apps like Instagram and Snapchat was not just to create amazing apps but being able to immediately monetize. This is not the case of most apps, far from it. Unbelievably, there is a scary statistic to remind us of this fact: 2% of developers account for 54% of all revenue generated by applications.

If you are looking to get a healthy profit margin out of your app, it is of the utmost importance that you choose the best model of monetization.

In-App Advertising

This is the most used and you have certainly used an application that works with this monetization model.

The way it works is that the app is free to download which helps to grow your user base rapidly. Once you have many users, other brands and app publishers will pay you to place targeted ads in your app, given that you will create space for these ads that are relevant to your audience.

A good example of an app that follows this model is Facebook itself. Except in the parallel world of WhatsApp spam messages, Facebook has never been and will never be a paid app. It is not in its best interest to drive away its huge user base, which is the main input to its ads success.

In summary, you monetize your app by selling ad space targeted to your audience. You can do this independently or by joining an Ad-network. The goal is to achieve the largest eCPM (effective CPM) through localization technology to deliver relevant ads, as well as through working with major brands to attract high quality campaigns.

The main advantage of this model is that if you manage to run ads that are relevant to your audience, they can enjoy your app while you monetize it by providing them more content to interact with. After all, who does not like free apps?

Monetizing apps using videos or interstitial ads has become increasingly common and effective. They can be inserted between game levels or used to invite users to watch an advertisement in exchange for points. The implementation can take a little bit more time but they usually result in higher CTR leading to quicker monetization.

Freemium

As in the previous model, the app is offered for free. The difference here is that monetization is not based on ads displayed to your audience, but through purchases made within the app.

An example of this type of monetization model is Dropbox, which offers a free plan for up to 2GB of space for backups and simple file sharing. The Dropbox Plus plan offers 1TB of space in $9.99 per month. This type of monetization may end up backfiring. It is imperative that the app has an audience engaged enough with the brand so that purchases within the app are not seen negatively.

On the other hand, this type of monetization ultimately attracts users who follow the “try before they buy” principle and end up becoming loyal consumers in the future.

Many mobile app developers create two versions of the app, allowing users to view and use features in demo mode. This freemium model gives free access to basic features while premium features are blocked behind paid access, leading to revenue generation through extra features.

The marketing team plays a key role in convincing users, with a strong and valid reason to buy the full version rather than continuing with the free version.

In-App purchases

Monetizing an app through shopping opens a wide range of options for companies to convert the value of the app including some ads, closed assets, and virtual goods that drive users to get more involved and spend in one way or another. A good user base can spark the investment interest of publishers, thus generating a better return through advertising space.

Sponsorships (Incentivized Advertising)

This monetization model has recently appeared in fitness and sports apps. In these, the user fulfills certain objectives and the application rewards him with discounts or gifts previously agreed with other companies that pay the application for appearing in it. An example of this type of applications is RunKeeper26.

Advantages of this strategy include:

  • Advertisers get relevant and powerful advertising space
  • Developers can generate revenue through a small number of agreements
  • Users benefit from promotions

Although these tips will go a long way to help you generate income from your applications, the task of gaining visibility among real consumers is difficult. Targeting users based on factors like their location and needs is the right way to increase the number of clicks, conversions and consequently overall revenue.

Let's monetize and make your free app

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