Making money with free apps is a trending topic in the mobile application development world. The mobile app industry has been active for over a decade and is now generating billions of dollars in the revenue. Research shows from 2021 to 2022 the app and game revenues increased by 19.1% to $133 Billion and most of these Free Apps and games are free to download upfront and then charge for subscription or in-app purchases. Hence, it’s an estimate that the mobile app industry is most likely to hit a whopping $407.31 Billion by 2026. With more than three billion smartphone users, the industry keeps on expanding and bringing more revenue in the upcoming years.

While there is so much growth and spread of apps across the globe, the demand for custom app development is at an all-time high. For App Tech startups, the app is a core product, but even for non-app tech startups the app is an essential tool to engage with their customers and users and to improve the overall business process. Hence this makes startups and entrepreneurs curious for answers to a few questions.

Popular Revenue Models For How Do Free Apps Make Money

1. Revenue through Mobile Advertising
In-app advertisement method, the most common and easiest method to implement when it comes to money-making apps via a third-party ad network like Google AdMob or Tapjoy (iron source) etc. As per the latest report by business standard the global mobile ad spend is going to reach $362 Billion and $412 Billion in 2023 and 2024 respectively. The free app market has always outnumbered the paid ones when it comes to profit and download numbers, however an app should have a large user base in order to convert that into significant revenue through in-app ads.

2. App Monetization through Sponsorships / Sponsored Content
Another interesting and exciting method to earn money from a mobile app is sponsorship. In this method, the app owner needs to figure out the appropriate platform to launch the app. A platform or brand that has its identity before and a great audience base should be preferred.

3. In-app Purchase Freemium Model
Another way to make money with free mobile apps is to offer in-app purchases in a Freemium Model. A Freemium Model means you offer some features of the Apps for free, while charge for some premium features. These are purchases that are made while the app is open. In-app purchases include things like extra lives, bonus levels in a game, or virtual goods in a social media app.

4. App Subscription Model
The App subscription-based model is one of the most popular and finest app monetization strategies over the last few years, however it is also a part of the in-app purchase. In this method, users can subscribe to join, try for a while, and then pay a regular monthly fee for access. Subscription-based apps tend to see higher revenue per user than apps with other business models. This type of monetization is recommended for cloud-based services, audio and video streaming apps or OTT Apps, and Media Services etc. As per the Subscription Trade Association, 75% of distributor-to-consumer businesses will have a subscription-based leg of their business by 2023.

5. Selling Physical goods
As the name suggests, the apps that sell physical goods make money by how? By selling physical goods on e-commerce apps or on food delivery apps or taxi booking apps. These Apps are free, their content is free and all you pay for is to buy a physical good or service out of it.

Please note that such apps accept payments through a payment gateway (like PayPal, stripe) and not via in-app purchase. Hence don’t give commission to Google or Apple but to the respective payment gateway provider. The commission of such payment gateways is usually 2.9 % of the total sales.

6. Affiliate and Referral Marketing Monetization Model
Affiliate is another variation of sponsorship. In place of granting advertising rights solely to one organization, you negotiate with interested parties and place their reference links in your application. Referral Marketing includes promoting a third-party product or service as a way to upgrade revenue opportunities for your app. App publishers sell or promote affiliates based on the number of clicks or installs. For this one can use pop-up ads to endorse someone else’s application or advertise products.

Source: https://www.agicent.com/blog/how-do-free-apps-make-money/