How Free Apps Make Money on the App Store
Until recently, the path to making money as an app developer was fairly straightforward: you created a game or app, and people paid to download and enjoy it. But with the increasing popularity of free apps on the App Store, that model is beginning to change. There can be no denying that in the mobile realm, free apps make money. Here are the primary avenues that free app developers use to make money with apps.
Ads
Ads are perhaps the most obvious answer when considering how free apps make money. The details of how ad revenue pays out is a little more complicated. The first step in getting ad revenue is to choose an ad network. Some of the most popular are iAds, which as the name suggests is through Apple, and Admob, which is Google’s ad network. These ad networks pay out based on different metrics known as CPM (cost per 1,000 views) and CPC (cost per click).
To see significant payout from ads, it is important that your app is marketed excellently and has a strong flow of traffic. If no one is viewing your app you will certainly not be seeing any ad revenue!
Premium App Upgrades
One of the most common phenomenons on the App Store is to see two side-by-side listings for the same app, such as “Best Game Ever,” and “Best Game Ever (Lite).” There is good reason for this: if users download and enjoy the free version, there is a good chance that they would pay 99 cents for enhanced usability, HD graphics, etc.
In-App Purchases
We all have them: the friend who has spent $80 to $100 on Farmville, Candy Crush Saga, or whatever the hottest new App Store game is. This is very good news for developers that want to make money with apps. In-App Purchases can quickly boost revenue from a free app. Small In-App Purchases don’t make users feel like they are spending large amounts of money at once. Less than a dollar for that weapon that will let them plow through their enemies with ease? That’s very appealing for consumers, and although not everyone will mortgage their home to solve colorful candy puzzles, In-App Purchases will quickly add up to sizable revenue for the developer looking to make money with apps.
CPI (Cost Per Install)
Cost per install is a monetization method where a network integrates software into your app and pays you for the number of installs they get as a result. These are the well-known popups that prompt the user to install another app from the app store. Third party developers pay the CPI network to include their software as a recommended download, and for every install you get a certain percentage.
Some of the biggest CPI networks are RevMob, Playhaven, Chartboost and MobPartner, and they are often very easy to integrate into your app. RevMob in particular is known to only require “two lines of code.”
Sponsorship
An app sponsorship may be the best way to guarantee that your free apps make money. With app sponsorships, an established company or brand agrees to finance your app or game. There are two scenarios that often take place with a sponsorship.
In the first, you pitch an idea before the app is completed and they assist you in financing development. In this situation you have the added benefit of being able to integrate their brand imagery from the beginning. This can be powerful advertising for companies that are willing to embrace the potential of the mobile space.
The second is when you already have a successful app or game, and you offer to update it in some way to include advertising for the company. While backtracking must be done to integrate the company’s brand, they can be secure in knowing that your app already has significant traffic flow and consumer interest.
When you are seeking a sponsorship, it is wise to consider if there is a logical connection between the function of the app and the purpose of the company that you are trying to receive a sponsorship from. It may not make a lot of sense from a user perspective to have a music production app that is sponsored by Cheerios – unless of course it matches up in some way with their existing ad campaign.
This covers the main avenues that free app developers can use to make money with apps. The market is going in a drastically different direction from the traditional pay to play platform, and this is valuable information for every developer to become familiar with. This is especially true when you consider that as of May 2014 the 30 highest-grossing App Store apps in the US are all free! With the proper amount of research and a keen understanding of marketing strategy, any developer can learn to make their free apps make money.