How Free Apps Are Making More Money In 2021 Than Paid Ones

7 min readMay 10, 2021

Developing mobile apps are one of the most effective ways to grow your business in this modern-day and age. This is because the current generation is not only tech-savvy but also prefers convenience over everything.

There are both paid and free applications available in the market but the free apps are more preferred and used by people for obvious reasons. As a result, one question might often pop up in your mind- how do these free apps make money?

Well, the question is quite valid. Considering the average amount of installations over paid apps, free apps definitely beat them by a lot. Also, developing a mobile application is no piece of cake. You need to invest a lot of money and time in building it.

So, it is quite reasonable to wonder where the ROI coming from if it is launched for free.

The Market Of Paid Apps Vs Free Apps

Reports show that the revenue of paid apps has experienced a major downfall from 75.9% to a straight 37.8%. Free applications are taking over the market and they are likely not to fade away soon.

Free apps are no longer lagging behind. They are rich in functionality, smooth, and perhaps more advanced than the paid apps. The competition that the app market is currently facing is hotter than ever and it won’t simmer down anytime soon.

Studies show that the Google Play and Apple App Store users invested a total amount of $39.7 billion on games and apps during the first six months of 2019. Does it look like a market that you want to skip out of? No right? Well, it has grown by leaps and bounds and if you are still thinking that paid apps are the real deal could you be any more wrong?

Just go to your app store or play store right now and check out the highest-grossing apps at the moment. You will be amazed to see how many free apps are there vs how many paid apps are there and these include all of the popular games as well.

How Are Free Apps Monetizing Themselves?

There are a number of ways in which you can monetize your free applications. Most businesses generally prefer using popular monetizing strategies but not all of them would work for you.

It totally depends on the genre and the market that you are targeting and your app is based on. You just need to explore and figure out which strategy is working best for you- more like a hit and trial method.

Here are some ways in which free applications monetize themselves. Before digging into the different strategies, here is a quick infographic for you!

Did you ever download an application and have sudden ads pop up or if you wanted to unlock a paid feature for free, you had to watch an ad for a certain amount of time. This is one of the most common money-making strategies for free applications.

These advertisements are sponsored by third-party groups and all the app owner needs to do is display the ad or choose affiliate marketing. As a result, these third-party groups pay the app owners for promoting them.

Every time an ad is shown on the screen or clicked on or that advertised app is installed directly from the ad, the former app makes money. Also, any free version of an application can choose to run campaigns for a particular time to generate a good amount of revenue.

There are generally four different types of advertisements that the app developers use to get the applications monetized. These are:

Interstitial: Interstitial ads are usually pop-ups that cover the entire screen and are shown at certain time frames. Users generally get a choice to close the ad after a few seconds.

Banners: Banner advertisements are those that appear on the top or bottom parts of the app and they can be of different sizes and shapes. The banner ads are tiny and do not cause any obstructions for the users.

Reward Videos: How many times did you unlock a paid feature or earned some rewards by watching an ad for a few seconds? The reward video ads are exactly what these are. It is a very popular model of ad used by app providers.

Native Advertising: This kind of advertising is gaining more popularity nowadays as it does not cause much interruption while using the apps. It looks natural but the revenue of native ads tends to be pretty low.

Referral Marketing

The next strategy to monetize free apps is referral marketing which is pretty similar to advertising. There is also a different angle of marketing related to that known as affiliate marketing.

What happens in this the app displays some kind of informative content about the affiliated company and they get commissions on the basis of installations, clicks, etc. It usually depends on the Cost-per-action model or share of the revenue.

Similar to that of advertisements, there are several ways to implement the referral marketing technique as well. They are:

promoting a different application or store,
advertising in the application,
promoting services or products,
connecting with companies that specialize in affiliate marketing.

Free Trials Or Subscriptions

A very effective and smart monetizing strategy is subscriptions or free trials. There are many app developers who provide free trials for the first time till a certain period and then switch to subscription plans.

If the user is satisfied with the free trial version then they can subscribe to the app or cancel their subscription permanently. It is up to them. A lot of popular apps use this strategy including streaming services, games, etc.

Certain apps also have a free and paid version both. The free version gives limited access to features while the premium version gives the users unrestricted access and helps them use every feature.

In-App Purchases

The next popular mode of monetization is in-app purchases. Many famous free apps use this strategy where users can download the app for free but they need to pay for certain features, virtual products, etc directly from the app.

Forbes reported that the applications with this strategy supposedly whips up the highest profit for their providers. It is also believed that this model of monetization will dominate the market in the coming years.

The in-app purchase model is mainly used by games as it is synonymous with digital cash. As a matter of fact, the majority of the games have different types of currency like coins, tokens, gems, etc that can be used to redeem products, etc. You might not realize but this plays a crucial part in the downloads of applications.

Also, this is quite a clever method of turning free app users into premium users as leveling up in games is too intriguing. A survey has found out that approximately 77% of brands have pushed their agencies to integrate the in-app purchasing strategy.

There are enough reasons to invest in this revenue model as it not only helps you earn more money but also helps increase engagement. This is one of the best ways to monetize your free app.

Crowdfunding

Crowdfunding is a comparatively new method of monetizing a free app. There are platforms that can be used for fundraising in order to fulfill the marketing and development requirements. Developers can rely on these platforms for the same.

Crowdfunding is almost like an organization selecting candidates for charity. There are numerous applicants and getting chosen can be really a difficult process. The probability is very average, to be honest.

Merchandising

Another quite interesting concept to monetize your free apps is by merchandising. It is like an eCommerce store where you put up different items for sale and the customers buy them but the apps are free to use. These can either be sold via the app directly or through email marketing.

Similar to that of popular games like angry birds or among us, you can come up with merch and sell them directly from the app. People who enjoy using the app love purchasing authorized merchandise.

But the most challenging part about this is only apps that have gained popularity over the world and have a huge amount of audience will be able to make this model work.

Email Marketing

Another old-school technique is email marketing where you collect data of users and send them emails promoting certain features or products that might intrigue them.

There are several ways that you can use to collect the email ids of the users. You can offer them a special reward, discount, etc.

The thing is that email marketing is an old strategy and does not work that much in this day and age but it is still worth giving a try.

Wrapping Up

These are the major methods of monetizing a free app. Other than these there are a couple more methods like transactional charges, collecting and trading user data, etc. These methods are less popular than the mentioned methods.

If you want to build a nice app then take the help of experts. Get in touch with us at Klizo Solutions and explain your idea to us. Our group of experts will get back to you and help you come up with the perfect solution.