Top 5 ideas on how to correctly monetize a free application
By: Frolov Mikhail
Tags: Monetization, Top 5, Application, Freemium, Free

According to studies, in 2019 the global income of mobile app owners reached $ 581.9 billion, and by the end of 2020, analysts predict profit growth of up to $ 693 billion. Now, in the App Store and Google Play stores, there are more than a million different applications. More than 94% of downloads are in free applications, and this figure is only increasing every year.

There is a lot of competition among developers for users willing to pay for applications. However, many companies were able to quickly adapt to the consumer market and get away from paid applications. Instead, they use various models with which the profit from applications only increases. It is these models that we will now consider.

Advertising

Now, this is the most popular way to monetize a free application. Developers should gain as many audiences as possible and constantly attract new users.

It is important to correctly collect the maximum data about your audience. These data are needed to analyze and transmit them to advertisers who are willing to pay for the placement of their advertising. Often, this data is taken from Facebook, which is so actively offered to link an account from the application, encouraging this, for example, the in-game currency.

How exactly the advertisement will be placed depends on the developers. This can be an eternal banner at the bottom of the screen, and advertising inserts for 30 seconds without the possibility of skipping. The opportunity is also practiced, the user, at his will, to watch an advertisement that is rewarded, for example, by replenishing health, increasing coins, etc. Which advertising option to choose is an individual matter for each application, this question deserves a separate article.

Advantages

With the right approach, the income from the application can be raised using built-in advertising;

Because the application will be free, the audience will be very fast to gain.

The mobile app advertising market is already very developed and growing. Advertising in a mobile application, by efficiency, can easily bypass advertising in newspapers, magazines or on the radio.

Disadvantages

If the ad is obsessive or appears frequently, it can easily scare away users. With advertising, you need to be careful.

Advertising is limited by the relatively small screens of smartphones.

This model is not suitable for everyone. If you are a company with a name, then advertising can damage your reputation.

Freemium

This business model, as well as advertising, is in great demand. The whole idea is that the application is divided into two versions: basic (free) and advanced. Both versions must be of high quality.

The principle of operation of this model can be compared to a drug: people download a free version with reduced capabilities and, if they consider it necessary, buy the full version. The main thing is to show people the full functionality of the full version so that as many people as possible want to buy it. According to statistics of applications using this model, approximately every 20th user decides to buy the full version, and this is not as small as it might seem. If the full version costs $ 10 on average, then for every 1000 downloads the income from the application will be $ 500. However, 1000 downloads are not the limit, there are popular applications that use this model, in which the number of downloads is 500,000 or more.

Most products based on the Freemium model limit their users to:

set of functionality;

amount of free space;

scope of application;

The freemium model is universal and is suitable for developers of various applications, ranging from entertainment games, such as Angry Birds, to complex platforms, such as Wistia or SoundCloud.

Advantages

to give users a try for what they are willing to pay money is one of the most effective monetization models, which is gaining popularity like a snow globe;

no obligations for users, the client decides whether he should pay for the application or not;

a great model for startups, which allows you to lure the share of users to yourself;

can be used in conjunction with advertising;

Disadvantages

requires a competent approach, so that users decide to buy the full version;

so that the audience of your application grows, you will have to constantly update and maintain a free version;

In-app purchases

A profitable monetization scheme that is often used in games, for example, buying in-game currency, with which you can already buy things in the game itself. This monetization model is easy to combine with others, so the introduction of an internal currency is not uncommon today.

Advantages

this is a profitable and very simple scheme for developers, which does not require large expenses;

for games, this scheme implies a lot of additional content, in the form of clothes for the character, etc. This is very popular with users;

Disadvantages

developers are required to write transparently about all the conditions that they provide;

if you add content to the game that affects the performance or characteristics of any element, this can greatly alienate most of the audience;

Subscription

This monetization model is very similar to Freemium. The difference is that applications that use the subscription scheme do not restrict the user to the functionality, but temporary.

Usually, to familiarize themselves with the application, developers use trial versions, usually from 7 to 30 days. This is a popular technique that provides access to all the functions of the application to interest and convinces the user to subscribe.

This is a convenient model for both users and developers. The former pay only for the period when they use the application, while the latter has a steady income. Developers usually lure users with discounts on annual or semi-annual subscriptions, which again benefit everyone.

This method is well suited to those applications that can offer a huge amount of content, for example, storage of music, movies or e-books.

Advantages

the main plus is constant income;

subscribing a large number of people is very motivating to update and add new content;

Disadvantages

this monetization model fits a narrow category of applications;

it is important to correctly determine the optimal cost of a subscription;

compared to other models, a subscription scheme provides payback over a longer distance. Because of this, a certain margin of funds is required to maintain the health of the application;

Sponsorship

This is the newest application monetization model of all that is in this article. The bottom line is that the developer should get the support of the sponsor, usually with a similar theme. The sponsor, in turn, rewards users for achieving certain goals. This is beneficial to three parties at once: developers receive money, the sponsor provides information about their product and receives great advertising, users receive bonuses and awards from sponsors.

The reward is most likely a discount, but there are real prizes, as in the ZealStep running app. Users get Z-money coins for certain actions that they can spend on getting discounts from sponsors, and the most advanced users will receive cool prizes for various achievements and records.

Developers act as intermediaries between sponsors and users and receive rewards for this.

Advantages

attracts a large number of users thanks to bonuses from sponsors;

this model is beneficial for both developers and sponsors, and users;

Disadvantages

it’s hard to find a serious sponsor with a similar theme;

How to choose?

It is not necessary to choose one model. Now it is most popular to combine various schemes, for example, an application with advertising: if you do not want to watch advertising, buy the Pro version.

I have identified 4 factors that you should pay attention to when choosing models and monetization schemes for the application:

Application . It is important to understand the essence of the application and choose a model that is more suitable for it. Models that successfully use some applications may fail for the second. If you are creating an entertaining game, then choosing a sponsored scheme or subscription would be bad ideas. You need to find the right balance between the desire to make money and the desire to increase the number of users.

. It is important to understand the essence of the application and choose a model that is more suitable for it. Models that successfully use some applications may fail for the second. If you are creating an entertaining game, then choosing a sponsored scheme or subscription would be bad ideas. You need to find the right balance between the desire to make money and the desire to increase the number of users. Audience . It is worth immediately understanding what audience the application will be aimed at and in which countries it will be promoted. So users from the USA are much more solvent than users from India or Romania. If the application is created to earn money, it is better to initially do it in English, and connect the rest as needed. It is also worth considering the age and tastes of potential users.

. It is worth immediately understanding what audience the application will be aimed at and in which countries it will be promoted. So users from the USA are much more solvent than users from India or Romania. If the application is created to earn money, it is better to initially do it in English, and connect the rest as needed. It is also worth considering the age and tastes of potential users. Competition. How to make users pay if there are analogs of your application at more affordable prices, or even free? Before starting the development of the application, you should competently study the market and understand in which direction to move. If you are not developing something innovative, then it’s better to set up advertising and take money from users for additional comfort.

Total

Most developers, with the help of various models and monetization schemes, are moving away from the model of paid applications, and are doing it very successfully. It is important to have a monetization plan and a concept of how you will earn on the application before the release. The right choice of monetization scheme or combination of different models plays a major role in the income from the application.

Successful monetization combines several strategies, market analysis and a share of adventurism. You must show the need to spend money on your product, but to do it unobtrusively, it is important to see this line.