How developers make money from free apps

It may seem unlikely, but the highest grossing apps out there at the moment are free. Pricing an app, however low, is likely to inhibit user uptake. So while it makes sense to want to generate money off that first sale, you’re actually pricing yourself out of a wider market, and lessening chances of growth.

The most successful app models either facilitate sales through easy to use free apps, generate revenue from advertisements within their app, or take advantage of the ‘freemium’ method. This involves allowing users to access the app for free, but having to pay for extras. Here is a quick guide to how people release a free app successfully, along with a few pitfalls.

How developers make money from free apps

The freemium model

It makes sense to talk about the freemium model first, as the other methods of free mobile app development often overlap with this strategy. Currently, all of the top twenty apps in the Apple store make money from In-App purchasing, rather than initial sales. So how are they doing it?

As a brief overview, mobile app developers might do this by either: issuing a trial version of the app, which you can upgrade to a pro version, or which expires after a trial period; unlocking extra features if you pay a small amount; making it possible for users to buy virtual goods (this is obviously relevant to games); featuring adds that you can disable by paying; or finally they might offer a paid subscription, which allows you to keep accessing more content.

A good example of the freemium model in games

Perhaps the best example of rapid success in freemium games is Kim Kardashian: Hollywood. Forbes recently reported this to have generated $200 million last year alone. How has it achieved this? Well, the game is free to play, but to progress more rapidly you can pay a small amount of money. In addition to this, you can buy items in the game. The thing that makes this a viable business model is the sense of progression for users, and its celebrity branding; there’s always something new to achieve, and the fact that it appears to give extra insights into a specific celebrity’s lifestyle makes it additionally compelling. The basic game mechanics have existed for a long time, and are incredibly simple, but targeting a young, celebrity conscious audience with a product that appears to offer them their dream world is marketing gold.

It is worth noting that this method isn’t a guaranteed success. Without exactly the right level of free to play versus paid content, a game can induce a massive backlash from consumers. Bizarre as it may seem, a game that is essentially free, but is very hard to play unless you pay a little money for it, garners more hatred than an expensive game that has the same level of content. Similarly, easy to use or disposable games do much better than complex examples. This is a little counter intuitive for the established games industry, in which products have become increasingly deep and rewarding to match customer demand. It seems like the mobile market is a little more difficult to pin down right now, so it’s not all plain sailing.

Mobile advertising and product delivery

With freemium covered, it’s worth noting the other free earners in mobile app development. Advertising is an obvious example, and is often integrated with freemium products as an option you can buy your way out of. That way if you’re not getting paid by the customers, you’re at least getting paid by advertisers. Product delivery with a free app is even more straightforward. Amazon, for example, have done a great job of providing an app that makes it easier to buy products from a mobile device. It’s a win win for the consumer and the company.

User acquisition

This is perhaps the hardest of all the free app business models to get your head around. There are lots of companies out there that are more than happy to create media sharing and social networking apps with no advertising and no In-App purchasing. How do they make money? The simple answer is that to start with, they don’t. The profits come later, as the company figures out a way to monetise their vast user base, or simply sell their company and the user base it contains to an existing competitor, as Whatsapp did with Facebook.

So there you have it; it really is possible to make money from free mobile app development. In fact, it’s the most successful business model for apps out there at the moment.

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