Why Make a Free App

While building apps for Apple and Android app stores can be highly lucrative ventures for developers, one of the hardest decisions an app developer has to make is how to get the app to pay for itself. Often the “monetization strategy”; shorthand for “how will this app make money?”; is left for last. Before moving forward with a strategy though, there are a few of questions an app developer should explore in order to answer the ultimate question, “how can I monetize my app?”

1. Is my app engaging enough for people to use it often?
2. How willing are people to pay an up-front fee for my app?
3. How do competitors in my space monetize their apps, and how successful are their strategies?

As app markets across platforms explode, developers are talking to each other to determine the best type of monetization model to use. Most will tell you it’s a choice among four major options:

1. Selling your app in the app store
2. Offering a free, subscription-supported app
3. Offering a free app, with in-app purchases
4. Offering a free, ad-supported app

But the choice really boils down to two strategies: getting paid by users or getting paid by advertisers. The most simple way to ‘monetize’ a free app is to add in advertising. Indeed, it is an established structure to have a free ‘lite’ version of an app with an upgrade option that removes the ads – we outline that below. Of course makers of free apps may not be best placed to employ teams of advertising salespeople, but they don’t need to. Using mobile ad networks such as InMobi and AdMob or even Google’s own ad-serving service is simple. These networks offer easy integration with apps, helping you to start earning your revenue almost immediately.

Requiring a similar level of tech input, but a more involved sales process, is sponsorship. If you have a specific type of app that attracts a niche group of people it is possible that a partner would want to sponsor all of it for a specific time in order to get their message across to your audience. You need the contacts in order to strike the deal, but a sponsorship is typically much more valuable than is run-of-site advertising. For a unique share of voice any decent sponsor should be willing to pay more than the cost of all the individual advertising slots.
An increasingly popular way of making money from ‘free’ apps is to give the app away and then charge for additional purchases from within the app. You can sell shortcuts or power ups in games, for instance. Or offer additional content to readers of magazine apps.

This is technically more difficult, because you have to create a payment system. Typically this would require some form of payment-holding company such as PayPal, and will entail giving away some of the money you make. And unlike advertising or sponsorship it can be difficult amounts of revenue to predict. But if you have an app that people like to use, it should be possible to persuade them to pay to use it more.

An even more simple way of generating revenue from your app users is to offer a ‘lite’ version of your app for free, but offer users the chance to buy a more expensive version with enhancements. You can combine this with some of our other methods: often a free app carries advertising, but the opportunity to upgrade means that for a small one-off or annual cost your users can enjoy an ad-free app.

Technically this is the most simple of all: you simply need to create two apps, one free and a better one that is pay for. Then you promote the more expensive one from the free one. And best of all is you can generate interest and an audience with the freebie, and then cash in on the popularity without having to aggressively market your paid-for app.