How Do Free Apps Make Money?

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In the world of mobile app development, user control is key. App developers need creative methods to make money when users aren't paying for the app upfront. So, how do free apps make money?

There are multiple avenues to take to make money with a free mobile app. We will explore the ways free mobile apps can make money - without charging their users a single cent!


  • Paid apps vs free apps

  • How do free apps make money?

  1. In-app advertising

  2. Freemium apps

  3. In-app purchases

  4. Sponsorship

Paid apps vs free apps

Paid apps

Paid apps are mobile apps that the user has to pay for before they can use them. Users must pay to download the app, which is common in productivity apps, fitness apps that are content-heavy and types of apps useful functionality that users open and explore in their day-to-day lives.

Free apps

Free apps, on the other hand, are completely free to download and use on your mobile device from Google Play, or the Apple App Store.

There are pros and cons to both paid and free mobile apps. Paid mobile apps give businesses a guaranteed stream of revenue, but with all paid products, there comes a price. The deliberation on whether or not to pay for something is enough to deter some users, therefore paid apps may get fewer downloads than free apps.

How do free apps make money?

Without instant revenue from downloads, businesses can generate revenue from free mobile applications in a variety of other ways such as in-app advertising, freemium apps, in-app purchases and sponsorships.

1. In-app advertising

In-app advertising is a common way for free mobile apps to make money. Advertisers will pay mobile app developers to display their advertisements within the mobile app and these advertisements can be in the form of text, images or videos.

One of the main mobile ad networks, Google AdMob, currently serves over one million mobile app developers and reaches more than one billion mobile users around the world through its network of mobile websites and applications. As an advertiser, all mobile ad networks provide users with several types of business models to run mobile ad campaigns. There are 5 major types:

  • Cost-per-mille (CPM)

  • Cost-per-click (CPC)

  • Cost-per-install (CPI)

  • Cost-per-action (CPA)

  • Cost-per-view (CPV)

AdMob is the most popular mobile ad network, but there are others including Meta Audience Network (formally known as Facebook Audience Network).

Different ad formats that display in-app include:

Interstitials (full-screen ads) - a classic example of interruption marketing. These appear when you're downloading an app, or when a particular session in the app comes to an end.
Banner ads - typically in rectangular ad unit blocks. Banner ads generally occupy the top or bottom position of a typical app layout. The ad that is displayed will change at regular intervals based on information received from the ad network.
Native ads - these ads present as a native component to the app by using the colours, and look and feel of the app’s branding and functionality. Native ads are a popular choice as they don't interrupt the user experience. You can manage this by uploading templates when you choose to show native ads within the app, and advertisers will use these templates for the ad.
Rewarded ads - these ads reward the user in some way for watching the ad in-app. This is a popular choice for advertising in gaming apps or where a particular currency is used. Rewarded ads are commonly found in gaming apps or gamified educational apps like Duolingo.

2. Freemium apps

Freemium is a great way to monetise free mobile apps by making the app free to download, but users can then choose to pay for additional features or content within the app. The Freemium model may utilise gated features, think Spotify and Tinder. The apps have such great usability that users are inclined to pay for additional features. Spotify Premium subscribers can listen to music offline, access playlists and songs on multiple devices - all for a monthly subscription fee. Tinder premium subscribers are able to undo swipes they regret as well as see who has liked their profile among other additional features. These features are powerful and once users have already downloaded the app and experienced it for themselves, they are more likely to be willing to pay for the extra benefits. By inserting paywalls once users have already engaged with the app and its basic functionalities for free, revenue is unlocked by offering more advanced features.

3. In-app purchases

Another way for free versions of mobile apps to generate revenue is through in-app purchases. In-app purchases generate revenue by offering one-off purchases to users, rather than offering a subscription model. Many mobile games make use of this kind of monetisation as it helps them to stay free and generate revenue through one-off purchases, such as currency or power-ups.

If the price for in-app purchases is perceived as low, it can be an effective way for mobile apps to generate revenue. However, if the price is too high, it could deter users. The key is small and incremental repeat purchases to ensure income using this monetisation method. The high frequency and repetitive low-cost purchases can generate revenue for free apps.

Time-limited offers that create scarcity and urgency can also persuade the user to make in-app purchases. Use the oldest marketing trick in the book and leverage a user’s FOMO (fear of missing out) for a useful revenue stream for free apps.

4. Sponsorship

Sponsorship is a strategy free apps can use to generate revenue once they have a loyal number of users. By partnering with brands, companies or other app developers, free apps can offer in-app advertisements or sponsored content specific to that brand. This is a more targeted way to offer in-app advertisements and a brand can offer payment for product placement in a chosen section of your app that suits the user experience. For example, an app that offers cooking tips and recipes could be sponsored by a food company to advertise their products in the free mobile app’s recipe section. Remember, this has to be a valuable investment for the advertising brand. Attracting sponsorships takes an app of premium quality, with many users. Having metrics about who the users are, including demographic information and usage metrics will help in winning sponsorship opportunities with brands.

If you have a free mobile app, there are many ways to monetise it. You can get creative with the strategies and offer a mixture of monetisation methods to generate revenue. Before deciding on one, or a combination of these methods, extensive research and understanding your end-user is key.

Build your mobile app strategy with PixelForce

We hope this helped you understand how free apps make money and you’ve found insights into the best monetisation strategy for your business. PixelForce is Australia’s leading mobile, website development & web app developer. To discuss the best web or mobile app development approach for your business, book a free consultation to talk to our experts or get in contact with us.


Can you make a free app paid?

No, once an app is published as free on app stores, it is generally not possible to directly change its pricing model from free to paid. However, mobile app developers can explore alternative monetisation strategies such as introducing in-app purchases, or subscriptions to generate revenue without altering the app's initial free status.

How much money do free apps make per download?

Free apps don't directly earn money from app downloads. Instead, their revenue comes from various sources, including advertising, sponsorships, and in-app purchases. The actual act of downloading the app is free for users, and the financial success of the app is tied to these additional strategies.

How long does it take to develop an app?

App development duration varies from 6 to 18 months based on project scope. Post-release, continuous upgrades and monitoring are crucial for success, keeping the product current and aligned with mobile app development trends.

What is the most popular app monetisation strategy for free apps?

The most popular app monetisation strategy is in-app advertising. This is the simplest and most prevalent revenue source for free apps. With this model, developers earn income whenever users view, click, or install programs directly from the ads.

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