5 Ways Free Apps Make Money

Post updated March 25, 2015.

“I make my living by giving away great products.” – Mark Roberts

5 Ways Free Apps Make Money

Give It Away, Give It Away, Give It Away Now

I’ve been getting a fair amount of emails and questions about a widely disregarded topic – how do free apps make money? It deserves attention given that free apps clearly trump paid in terms of download numbers. The trick is to figure out how to capitalize on those new users.

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You need to leverage the free download numbers to create a better revenue stream than a paid app.

I personally do this with almost all my apps. I find that when I have them priced at $0.99 I make a little less money than I do from in-app purchases when it’s free. The other difference is that I get about 10x the download number when it’s free. That opens up a whole new set of tools I can use to make money and leverage myself.

If you are looking for a place to learn about all this stuff, definitely check out my free ebook – it will give you pretty much everything you need to know to get started :)

Without further ado, let’s talk about the ways you can make money when your app is free.

1. The Freemium Upsell

This  requires having a second version of your app that’s paid. Typically you’ll see this as the “Lite” and “Regular” or “HD” versions of an app, paired together. The free app will have a link that a user can click that drives them to the iTunes store on their phone.

It’s kind of a feeder system – users can download your free app and get a sense of what you have to offer, then they can easily purchase the full version (which will have lots more functionality and game play.)

The other piece of the freemium model is….

2. In-App PurchasesIn App Purchases

In-app purchases allow users to unlock features or purchase more of something, maybe coins in a game like Tap Zoo or gold in a game like Infinity Blade. In fact, 6 of the top 10 grossing apps in 2011 were free – they were able to use in-app purchases so well that they drove millions of dollars in sales, even though the app was free.

When you build an app, you can set IAP (in-app purchases) to be a one time purchase (I want to unlock this feature) or an ongoing option (I want to purchase 20 coins for $0.99), meaning you can purchase that over and over again. You can easily start racking up enormous amounts of revenue with the second, but you also need an incredible app that can justify it.

In-app purchases can also be subscriptions if you were in the market of news feeds. The Newsstand functionality within the Apple framework allows you to set up an in-app purchase that will automatically charge every month. One idea for Bluecloud that has become a reality is Bluecloud Select.  A premium membership to top level information for less than a cup of coffee.

Want a more in-depth look at in-app purchases? I wrote about them in my free ebook. Download it here.

3. Ads

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Oh ads. What a love/hate relationship I have with banner ads. The bottom line is they work but require a sizable amount of traffic to make it worth your while. When you start getting traffic, it can be a terrific (and consistent) revenue source.

iAdsThe biggest two ad networks are iAds and Admob – the first being Apple and the second being Google. I’ve talked to a lot of developers and most agree that iAds pay out better. Typically it’s a pretty small CPM (cost per thousand impressions) that’s under a dollar and a CPC (cost per click) that can be a few bucks.

If you’re looking to make money, you can expect to make around $2 if you get 100 downloads. That’s just a ballpark figure based on my own experience and can vary widely based on how many people click on your ad.

I did a quick experiment with a basic open source tic tac toe game to see if it would make any money with ads. I skinned the app with Zombies and other weird stuff to see if I could get some downloads. I installed the iAd framework and let it rip. Since I released it, I’ve had 157 downloads which has translates into $1.88.

You may think those are small numbers, but actually they’re not horrible. For other games I get a few hundred downloads a day and make zero money sometimes. Some make $120 a day. It all depends on the ads you get served up and the amount of people that click.

So – it’s good to have ads in the game and they can make you money. Just be ready to market the hell out of your app.

4. CPI Networks (Cost Per Install)

Cost per install is a relatively new marketing mechanism and is the mobile equivalent to CPA (cost per acquisition) in the web marketing world. CPI is exactly what it sounds like – you pay per install that you get. Examples of this are Playhaven and Chartboost – they are third parties that have software you install into your app.

You’ll often see this as a “pop-up” in games and apps, prompting you to look at another game and “Get It Now.” Those apps are dynamically served based on what app you have yourself.

I’ve talked to a few networks about their pricing and it ranges from $0.80-$3.00. This means that if you want to promote your app, you will pay Playhaven this amount every time someon installs your game. This actually works out to be a better deal than most developers report on advertising networks (often report 0.3% CTR with translates into a $15 CPI). $3 is cheaper than $15. Rocket science. Playhaven Logo

On the other side of that, I get about $1 per install through Playhaven. So – a developer wants to promote their app and will pay $3 to have a new user install it on their device. If I can provide that installation, I get paid $1 of that. It’s actually good money and very consistent (unlike in-app purchases). It’s directly proportional to my download numbers and grows as your user base grows.

There are tons of CPI companies popping up these days and be sure to let your developer know you want to incorporate them. They’re not too difficult to add onto a game or app, but is helpful to discuss early on.

These networks can be extremely lucrative as a developer or publisher – Read this article about my experience.

5. Sponsorship

Landing a sponsor is a great way to make money on your free app. The money is up front and you gain brand credibility with your audience.

The deals typically go like this: you approach a company and say “I have this app idea, I’ve got the plan, etc etc and I will white label it for $XXX.”

OR

“I built this app a few months ago and it has 50,000 downloads. I will update the graphics with your brand for $XXX”

And so on. It can take a little while to get the right match and a company that is forward thinking enough to realize how powerful the mobile platform is, but it can work.

What’s even more compelling than the sponsor’s money is their marketing horsepower. They most likely have a website with good traffic, email newsletters, and social media. If they sponsor your app, chances are they’ll be happy to promote it for you. That’s great value.

I am personally working on a few deals like this and will write more about them when I lock a few things down.

This list covers almost everything you can do to make money on free apps. If you would like to learn more about how apps make money, be sure to download my ebook on making money with apps. Click here to download.

Rock and roll,

Carter

COMMENTS

  • Andrew May 4, 2015

    I have seen some people looking for investors. You can contact me at lambertphilippe91@gmail.com if you are still looking for some investors.

  • olaf May 14, 2015

    If I had an idea for an app, thats original but uses a couple of features that existing apps use, whats the most practical way of developing it.

    I had a look online and saw prices in the 10’s of thousands quoted by developers which is off putting.

    Thanks

  • Ryan91 May 30, 2015

    Hi, i have got a good idea for a app and i have seen many forums saying it should be made and i have great ideas, but that is it, i dont have a clue how to develop or anything that side of it, could you please contact me via email and give me advice, its my turn to make a app and become a millionaire, im very confident my idea will be a big hit possibly world wide, thanks.

  • James May 31, 2015

    I have had the same question for a while. I think it has to do with whether or not the shared features are patented or copyrighted or not.

  • Carter Thomas Carter Thomas May 31, 2015

    Yo Ryan. Good stuff!

    Well, let me start by saying you are already ahead of the pack by reading articles and asking questions.

    It blows my mind how many resources are around now. Keep educating yourself through blogs, books, forums, courses, meetups, and any other resource you can latch to. Bluecloud even has a free ebook you can download that’s perfect for people starting out.

    With your first project, it’s important to go slow and keep costs down. Set your budget. Start doing as much as you can personally – wireframe, maybe you have some Photoshop skills, sign up to developer and ad network accounts, etc.

    You may also benefit from a Starter Project. Don’t jump into your first project head first and guns blazing. You’ll most likely get your ass kicked. But there are tons of sites including Bluecloud, that offer source codes and app templates. These templates save a lot of money, and they usually come with something a little bit extra – for example, a lot of our codes have instructions, image templates, ad libraries, video walkthroughs… The amount you’ll learn from a cheap and easy starter project, will save you tons of time and thousands of dollars later on. Also start reaching out to developers. Get a feel of communication, questions, and what developers are asking of you.

    Confidence is huge. I get fired up when people start their app journey with the attitude of “I will succeed!” Not every app is a successful one, but I strongly believe that those who work hard and don’t give up, see amazing things happen. Do your homework and take the jump!

    Rock n’ roll
    -CT

  • Surbjeet June 15, 2015

    Hey Carter,
    Thanks for the information, its precise and bang on, can’t ask for more..
    cheers
    Surbjeet

  • darryn June 29, 2015

    Hey Carter. I have an idea for an app but the target market will be limited to my country. It will require some funding and a good bit of ground work (gathering of info etc). I will need to get an investor, but I’m not sure how the app will make its money back. I really want to make every aspect of it free in order to get the downloads, but from what u said it looks like I’ll need a truck load of downloads to see a bit of money via ads. Alternatively I was thinking of doing a “first year is free” type of thing. Anyway, let’s say I achieve 50k downloads, what sort of revenue could I make with ads? Thank you in advance. Darryn

  • Allan July 6, 2015

    Hello everybody,I pretty much have same comments as most of you,I have ideas for apps and websites but I have no knowledge about coding etc
    I Am also trying to gather a group of vision-driven individuals to start a very strong entrepreneurial group
    Please get intouch

  • Carter Thomas Carter Thomas July 6, 2015

    @Allan – that’s why I started this: http://www.bluecloudsolutions.com/join-bluecloud-select

  • Enoch July 10, 2015

    need someone to teach me how to create an app plzz

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