- An app is free if users can download, use, and delete it without any additional fees
- Free apps can make money with the help of: advertising, paid subscription, purchase of the digital products in the app, sponsorship and crowdfunding, service fees, and making money from user data
- Common mistakes people make, when choosing a monetization plan: no market research, stopping at in-app referral ads and going in without a monetization strategy.
What is a free app
The app that can be downloaded for free. Users don’t have to pay money to use this app and can delete it at any moment if they don’t like it without losing a cent. Free apps aim at decreasing customer acquisition cost and increasing users’ engagement.
Free apps have higher download rates and there is no surprise — most users want to test the app before opening their wallets for more. No payment upfront means it’s easier to start using the app and gradually warm to the idea of paying money.
However, ‘free’ doesn’t mean you can’t make money from free apps 😉 Let’s talk about all the best app monetization strategies.
Freemium vs. paid apps
Talking about common monetization strategies we should mention the freemium model of monetization. Freemium apps can be downloaded free of charge. However some of the finer premium features are unavailable, locked behind the paywall. So, for an additional charge users can unlock those premium features. Hence the name: free + premium.
Freemium apps have more downloads and attract more users because people don’t like to pay money blindly. Consequently, paid apps with no trial period have fewer downloads.
Also the market is full of free apps. In these circumstances users might think that a paid app must deliver an experience that is self-evidently superior to free apps. That’s a high bar to pass and user’s disappointment might be harmful to otherwise fine products. Showing the essential features of your app freely will clear up the confusion and motivate customers to buy.
How do free apps make money
According to Statista research in 2021, the best monetization strategy is advertising. 38% of digital products worldwide work the same way. But while advertising is the most popular app monetization model, it is by no means the only one. It is not even the best solution sometimes. Let’s consider other free app monetization options except different kinds of advertising, including video ads.
This app monetization strategy is based on paying to use the app. A person is asked to subscribe after installing the app. Often the app offers a trial period — several days of free access to the app so that customers understand what value the app brings to them. The experience of mobile app development in various industries shows that the model is effective.
👍 Paid subscriptions are especially suitable for startups in education and entertainment:
- online education and training courses;
- tools for self-education: one can study foreign languages or improve their knowledge in a particular subject;
- services for listening to music or watching movies, TV shows, and lectures;
- electronic journals: for professionals or hobby-based, like fishing;
- community platforms for people sharing the same interests and dating apps;
The mobile app of Netflix, one of the largest streaming services, works on a paid subscription model. With this model, a customer gets access to all content on the platform. The price depends on the subscription period: if the user pays for a longer period, they receive a discount.
Also, the subscription model is implemented in dating apps like Tinder, Bumble, and Hinge. By subscribing, users can get profile boosts, unlimited likes, advanced filters, and so on. Check out our article if you want to learn more about dating app development and its monetization strategies.
Another example of how do free apps make money with a subscription is EWA. It’s a service for learning foreign languages, which has a free three-day trial. The subscription allows choosing only one language to learn: English or Spanish. Subscribed users get access to movies, books, and other tools to expand their vocabulary. Like Netflix, the subscription model price varies depending on the number of months. This motivates people to use the product longer. Businesses, in their turn, get money upfront, can engage in long-term planning, and don’t spend additional resources on subscriber retention.
In general, the subscription is one of the easiest ways of monetization. However, people pay their money only when they understand the value of the product. Massive advertising or a collaboration with a major brand might help.
Here’s our experience. The Purrweb team was developing a service for selling video content called Contentplace. It is a hybrid of Vimeo and Shutterstock: registered users pay for a subscription and download a limited number of videos for personal and commercial purposes. Initially, the client wanted to offer about 30 different plans, but we proposed 3 to make the choice easier. When the service launched, it turned out that we made the right decision: three subscription plans were exactly what we needed. If you want to read our case study and learn more about how we made a marketplace with private page indexing, you can click on the link below. ⬇️
Purchase of the digital products in the app
Often apps make money by having a paid and a free version. Users have free access to some features but have to pay if they want all of them. Usually, basic features are free, and more advanced tools are open after payment. It can be a one-time in-app purchase like buying a particular movie or lecture in the app. Sometimes, features are available after paying for the subscription. For example, the photo editor may charge an additional fee for individual filters.
👍 One can make money on mobile applications by in-app purchases of digital products in these cases:
- applications for work optimization: project management systems, messengers, professional platforms in various fields;
- projects with useful or entertaining content: users can get some for free, and pay for others.
- dating services;
- sports and healthy lifestyle apps;
- travel guides and navigators;
- cloud storages.
One example of how do free apps make money this way is the corporate messenger Slack, which is actively used around the world. There is a completely free version, which is enough for small projects. You can store 10,000 messages in your correspondence history and 5GB of attachments, as well as make one-on-one voice and video calls for free. If you need to store more information, make video conferences, and integrate other applications, there are several paid plans with advanced features.
Many corporate services work in a similar way: Trello, Asana,and Jira.
Workout Trainer fitness app works in a similar way. The free version has photos, voice instructions, and a workout timer. For an additional fee, you can do video workouts and get a comprehensive program for several weeks.
The biggest risk for mobile app development using this business model is that the free version will be enough for users. Then the paid products will not be in demand. To avoid that, it is important to carefully engage in analytics: find out what exactly the target audience is ready to pay for. If you offer relevant paid services, the app will make money without ads.
Sponsorship and Crowdfunding
Socially important nonprofit projects also have their own digital products. In many cases, these apps make money without ads. In order to make the project profitable, they often have sponsors or engage in crowdfunding.
👍 Here are some company examples that can work with this mobile app monetization methods:
- environment protection movements;
- public associations;
- nonprofit educational institutions;
- charity organizations.
Crowdfunding supports the work of the «Life Gift» fund app. The service helps to coordinate people willing to cooperate with the foundation. You can become a volunteer, a blood donor, or donate any amount of money. The earned money goes to help those in need, as well as to support the resources of the foundation itself, in particular, the app.
One more example is World Wildlife Fund. It is one of the largest independent environmental organizations. It has many mobile applications. One of the most popular is an educational one called WWF Amazing Planet. Informative and entertaining news from the world of wildlife is available in the form of articles, videos, and photos. WWF projects have many major sponsors, both individuals and corporations. The Foundation earns money via donations of any size from anyone as well.
The nonprofit segment is quite limited, so this monetization method is quite rare. But if you have a socially important initiative that needs the development of a mobile app, you can try to earn money from the community or find a big sponsor.️
Using service fees is another answer to the question of how free apps make money without ads. This is relevant to digital products that mediate between people or organizations.
👍 Service fees will be suitable for:
- delivery apps;
- platforms to find customers or freelancers;
- second-hand marketplaces;
- banking applications with transfer and investment services;
- dating, communication, and networking services.
Look at these top grossing apps: Upwork and Revolut.
The professional marketplace Upwork works with service fees. The platform charges a 3% commission on customer payments. Freelancers are charged 5%, 10%, or 20% depending on the project budget.
This business model works very well in such applications. Marketplaces make finding clients and freelancers more convenient, and people are ready to pay a commission fee for it.
Often banking apps make money on service fees. Revolut is a good example. The app charges a transaction fee. For example, for international transfers or cryptocurrency purchases and sales. Since the commission is small and the app is simple and user-friendly, users don’t mind the service fee. The app has been successful for several years.
Want to learn more about mobile banking trends? Follow the link below ⬇️
Mobile app monetization with service fees is becoming increasingly popular. This year, delivery service Delivery Club began charging customers a commission despite the fact that the company charges restaurants too. Having introduced the fee, the company faced discontent of the users. Representatives of the company commented on the situation: according to their words, the fees charged on restaurants go to the marketing needs, and the charges from customers are for product improvements.
A service charge is a good idea if it’s not too big and the app is really user-friendly. People are willing to pay for a digital product to save their time and effort. This means that such apps make money without ads quite easily.
At Purrweb we also once developed an app that makes money on service fees. It was a freelance photographer marketplace. You can read about the development process and how we dealt with the “ready-made” design in our business case.
Making money from user data
According to 2021 stats, 52% of apps share user data with third parties. This is a legitimate practice: the data is encrypted. It is impersonal, and one can only extract general statistics from it. Basically, this information helps marketers choose the audience for their products and show more relevant ads. A lot of entrepreneurs make money from free apps without using extensive advertising — they probably make money from free apps with the help of user data.
👍 Such a model will suit you if you have:
- a messenger or social network;
- an entertainment application with video, audio, or text content;
- an online store, marketplace, or aggregator;
- games for children or adults.
For example, there’s a completely free messenger without advertising WhatsApp. The company can provide unlimited communication services for free because it collects and transmits user data to Facebook. Information about the country of residence, type of device, and time of access to the network can then be used on other platforms.
Many apps make money from user data by combining it with some other business model. The dating service Tinder also makes money from users’ data, in addition to paid premium accounts.
In case an app makes money from users’ data, the product can be made completely free. This is good for app development for the widest possible audience. That said, it’s important to carefully monitor security systems to avoid leaks. You should also write a clear and transparent user agreement to inform people in advance about the use of their data.
Free apps monetization: common mistakes
Free apps have several ways to get monetized. But sometimes product owners don’t know all the pitfalls of monetization strategies. We collected common mistakes that a product owner should avoid to make their app successful.
Mistake 1.No market research.
If you don’t define and research your market niche, then you don’t know your potential audience. And sometimes the market is oversaturated with apps of the same niche. Analyze your potential users to make money from free apps.
Mistake 2. Stopping at in-app referral ads.
Messages, video ad, and pop-ups are just an aspect of digital affiliate marketing. You can find other channels that would be effective at reaching users. Use at least one digital marketing channel to announce updates — it can include social media, push-notifications, or email.
Mistake 3. Going in without a monetization strategy.
While creating free mobile apps, a product owner should think about the free app monetization strategy beforehand to earn revenue. It’s possible to combine different monetization strategies and then to choose the profitable one. Integrate a way to earn money from free app as smoothly as possible.
How to choose monetization strategy
How do free apps make money without ads? This article hopefully gives you plenty of options to choose from. Make your choice based on your startup field, marketing strategy, and target audience. There are no universal solutions, but here are our recommendations:
- If you are confident that people are willing to give money for your product right away, implement a paid subscription.
- If you are not sure exactly what functionality your target audience needs, work on an in-app purchases model. Test it and collect feedback to see what services can be free and what can be paid for.
- If you planned app development for a socially important project, look for sponsors or crowdfunding;
- If you help users find contractors or provide digital services that save people time, introduce a service charge;
- If you want to make the app free for everyone and not force people to see ads, monetize the users’ data. Just warn people about it in the user agreement.
If you’ve already identified the model with which your app makes money, it’s time to move to development. If you haven’t decided on the option model yet, we will advise you and help you find the best one. Don’t worry, there’s always an answer to ‘How do free apps make money without ads?’
Purrweb team has been helping startups to develop MVPs and bring them to market for 7 years already. We will be glad to advise you on mobile app development services! Fill in the form below and we’ll get back to you within 24 hours.