App Monetization on Paid or Free Apps. Which is Better?
If you’re planning on launching a premium app with a monthly, yearly (or once-off) payment model, well, you already know what your monetization strategy is going to be.
But, here’s the thing. People don’t like paying for apps. Some people downright hate it and will do anything they can to get out of it. In fact, out of Google Plays 2.5 million and the App Stores 1.96 million apps, around 97% (yes, 97%) are free. Taking this a step further, 50% of the world’s app-using population (overall, a $110 Billion market) have never paid for an app in their entire lives and most likely never will.
Is App Monetization for Premium Apps Still Effective?
While Paid Apps are profitable (in well-positioned sectors), their download volumes are a heck of a lot lower. Unless you have something pretty groundbreaking to send to market, most people will opt for a similar free service. Additionally, paid apps are a one-time monetization method, meaning unique downloads always need to happen.
As a (very) general rule, if you’re launching a paid (premium) model, your app should be niche with as little sector competition as possible. You’ll also need some robust, innovative features that justify the paywall. Most importantly? Paid apps carry high customer expectations, and there isn’t much room for error and or/late-stage updates.
Why Are Free Apps Profitable?
It’s not always an overnight leap to higher earnings with Free Apps. They need to be well-positioned and feature-driven to fight through fierce market competition on the App Store and Google Play. The upside is that you can monetize free apps on multiple channels.
Drive Higher Installations 📣
Free apps can generate traction much quicker than paid versions without a paywall and recurring subscription fees. People are more open to taking a chance and downloading a new app if they dont have to commit to buying it.
Easier to Release 🚀
Users have far higher expectations for paid apps. They’re looking for exceptional functionality, multiple features, future releases, and flawless navigation. Releasing a free app doesn’t carry the same pressure, and app developers can get away with releasing a minimum viable product (MVP) and refine core features as they go.
Bring Higher Visibility 👀
New and Free apps have high organic adoption rates. Positive reviews are often left, along with recommendations that developers can use to enhance the app. Also, users are always keen to champion free apps, spread the word, and recommend to their community if, of course, the functionality and services are good.
Multiple Monetization Methods 🌱
As mentioned earlier, where paid apps have a single way to generate revenue, you can effectively monetize free apps through paid advertising, freemium, subscriptions, or in-app purchases.
What are the Best App Monetization Methods
There are other ways to monetize free apps. You can try out influencer marketing, social media campaigns, crowdfunding, or strategic partnerships. But we’ll focus on four easy app monetization methods that you can start with right away without having to hire a small army of digital marketers. Oh, and if you’re still developing and looking for the most profitable vertical to build your free app around, you can find them in the Ultimate Publisher Guide with Head of Sales and all-around in-app champion Emanuele Pezzulla.
In-App Purchases (IAP) is a relatively new app monetization method and are geared to any content, subscriptions, upgraded features, or add-ons bought inside an app after you’ve already downloaded it. The free app comes with unlockable elements designed to generate revenue over a longer time frame. In-App Purchases are a long-term monetization strategy and promote brand loyalty (and consumer spending).
Examples of In-App Purchases
Clash of Clans (a massive mobile game with 500 million+ downloads) is free to play but comes with a bunch of different in-app purchases. Users can enhance their gameplay by buying “Green Gems.” Players can use these gems to buy premium in-game features like cloaking shields, magic powers, or reinforcements. Purchasing gems or other items is quick and easy, and players never need to leave the app. As of 2020, Clash of Clans has generated $483.6 million from in-app purchases alone.
Non-consumable (or permanent) in-app purchases include options to buy upgraded features. I.e., unlockable workouts for fitness apps, enhanced swiping potential for dating apps, or higher word processing capacity for writing apps like Grammarly. Another in-app purchasing example (popular in most sectors) is the act of giving users the option to remove ads from an app when they upgrade to the premium version.
- Profit margins are high for virtual goods.
- Effective monetization model, especially for Gaming, eCommerce, and Dating
- It is easy to upsell committed app users to more significant in-app purchases.
- Apple and Google charge a 30% commission on in-app purchases.
- Higher restrictions are put in place to prevent accidental purchases (especially children)
A standard monetization method for news, finance, trading, social and content-driven services where users are free to download the app (at no cost) with limited functionality and limited features. To unlock additional features and services, the user will need to opt into a subscription plan which goes off either yearly or monthly. Often, the user receives curated examples and previews of full content that can be bought individually or through subscription with auto-renewal. Subscription models are great for new apps. They’re able to generate consumer awareness and organic growth in a contested space and drive home conversions by leaving upgraded features off the table or behind a paywall.
Examples of subscription-based apps
A news outlet like the Economist or Wall Street Journal keeps almost all of its content behind a subscription paywall. Users will only be able to access a few stories a day, or sometimes even half a story, and to use the app to the fullest, they’ll need to opt into a subscription model that gives them full access to the platform at any time.
Furthermore, social portals like LinkedIn gives users the basic functionality to connect with people and organizations in their circle. But the platform caps direct messaging and other analytics behind a subscription-based paywall, with the general message being “get the subscription and your options are endless.”
These subscription-based monetization models have one final trick up their sleeve. They place auto-renewals on subscriptions where they can deduct a fee each month. If the cost is small enough, you may not notice, and apps can generate profits month on month for subscriptions that are not actively being used.
- Users get a taste of the whole experience before spending their hard-earned money.
- Auto-renewals have the longest monetization lifespan.
- An excellent opportunity to analyze content for triggers that will get users to pay.
- Difficult to find a suitable pricing model.
- Subscription-based does not translate to all verticals.
- If the content is multi-platform, it isn’t easy to follow the same pricing logic.
A combination of free and premium app services, the Freemium model is a great way to engage paying and non-paying customers. Similar to subscription-based monetization, users will download the app in its most basic form with Freemium apps. From there, users will need to upgrade their app for better features, more content, certain in-app purchases, and similar. More often than not, users can “test” new features or functionality that enhances their overall app experience. After trialing the service, they’ll give you the option to purchase it outright and add it to the app interface for an additional fee.
By providing a free option, the app developers can bring in users and increase their app’s popularity and downloadability. On the other side, they can monetize effectively by upselling users on certain upgrades, heightened functionality, etc.
- The ability to quickly build a large user base.
- Allows users to “test” features and encourages further engagement.
- The model is super-flexible and profitable across most verticals
- Where too few features are offered, users won’t be engaged.
- If too few features are offered, it will be a challenge to convince users to upgrade.
- And, if the free app experience is poor, users will be unreceptive.
Most users consider in-app advertising a necessary part of keeping an app free in the first place. To avoid paying premium and subscription fees on paid apps, they’ll use the interface as is, which is great news for app marketers and developers. Apps can be adopted, downloaded, and monetized to the fullest without pushing traffic away.
Marketers and developers can grow their userbase and collect unique metrics and data. They can then monetize this data through the right Ad Network.
An app developer (publisher) can sell ad space in their mobile app (across Android, iOS, or both), and they’ll start to generate revenue. The best way to do this is by partnering with a leading Ad Network. The Ad Network goes to work aggregating the ad space that the publisher provides and sells it to advertisers, who will use it for marketing their brand or products. When a user interacts with the ad, i.e., clicks on it or purchases the service, you as the app developer get paid. Find out how to Ace the Adcash Publisher Platform.
- Data-rich, enabling hyper-detailed targeting for advertisers.
- The ability to monetize on in-app ad revenue.
- People love free apps, and your audience will grow quickly.
- Ads can damage the user experience because of intrusiveness or irrelevance.
Free App Monetization Final Thoughts
Successful free app publishers should never rely on one single revenue strategy. Apps that use multiple monetization models in tandem bring higher returns over a shorter time frame. That said, be selective and don’t come on too strong in your app monetization efforts. Make sure you keep the user experience top of mind.
If you’re looking to monetize your free app, chat with our in-app advertising specialist Evgeniy Martynov.
Adcash processes 10 Billion Ad requests per day and uses cutting-edge optimization technology to match your free app traffic with the right offer. Just sign up to the Adcash Publisher Network, copy your website script, and you’ll be earning ad revenue before you know it.
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