5 Ways Free Apps Make Money

“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.

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.

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 I’ve had for Bluecloud is to sell a premium membership through an app – members pay $2.99 a month and have access to exclusive blog posts and other information only available to members. Someday :-)

3. Ads

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, sign up for my newsletter and download the free ebook. 

Hear more on my Facebook Page or Follow me on Twitter.

COMMENTS

  • KL April 12, 2012

    Carter,
    i am working with my contractors which i found in the website odesk, one question: does it cost more money to build two versions of the app? one is paid, one is free.

    IN other word, we agreed on 5k, if i want to make a free version as well, does it cost more?

    thank you

  • Kevin April 16, 2012

    Hy Carter! Very nice article u got here, me and my Friend were just thinking about App ideas, I discovered your site at the right Moment ;)

    @KL I don’t Think u will pay more (maybe a little) but they have the App already and just have to lock some features, should not be very expensive!

  • Acuna April 23, 2012

    Hi, carter.

    I send this message though here!

    thanks

  • Andrew June 20, 2012

    Sponsorship! That is brilliant. Get one step ahead of the companies not in on the app game quite yet and strike a deal. It feels like the market is ripe for this!

  • Andranik September 23, 2012

    Nice info Carter…

  • Jamie January 27, 2013

    I will never use in-app purchases. If its just to ‘cheat; and get advantages, it defeats the purpose. If the dev doesnt tell you in advance, I hate it even more..sell it for .99 – not free and then ask me to pay (these are apps that dont disclose up front)…Regarding ads, I cant tell you one ad Ive ever seen…I dont mind them as long as they don’t cover up the screen…and lots of devs make that which annoys even more. If its in between games or something like that, it can get a little annoying but its ok. Ive seen other games, Angry Birds for one, where the ads interfere with game play. I also notice many apps are FREE on Android yet are PAID on Apple. For Android users, Amazon FAOTD is a good program that enables you to get android paid .apps for free.

    Maybe others make a lot of in-app purchases even when those things can be got for free. I was thinkin gof this as I was playing TempleRun2. I now these apps are super popular with multim illino downloads but I wonder how they make money as the app is free and it doesnt even have ads. The only thing it has is these coins and stuff you can buy – but why do that when you can earn them for free. But they must be making millions of dollars so I guess people fall for it.

    For frugal ios users, the Appshopper really is great. You can create a wish list and it will email you when the apps go on sale. Havent found something similar for Android but wish they did it too. Even though I dont have an iphone (I have a Mac and an Android) , Ive used this to download paid ios apps in case I get an iphone in the future (which is possible but for now, I save tons of money using a Google Nexus phone with a GSM prepaid plan for $45 – less than half of what Id pay for a contract iPhone plan)

  • Mikey February 4, 2013

    Get work here! Thank you.

    My question is if I wanted to get a sponsor for my app is there a way to price this? I can see different ways to incorporate companies into my upcoming app but don’t know where to start a pricing strategy.

    Any help would be great :)
    Thx

  • Carter Thomas Carter Thomas February 4, 2013

    Hey Mikey,

    My experience with pricing a sponsorship is to prove ROI. Let’s say Mercedes Benz is going to sponsor your Flashlight app – you show them how many users they reach X avg value per user. Add some other premium costs and there’s your answer.

    Carter

  • Paul February 7, 2013

    Nice information on the different way to cash on apps. Looks like the popularity if apps is increasing every day and income for the app owners as well. Now I am planning to create an app for my website as well.

  • Kashif March 18, 2013

    Does apple allow funds to be collected from outside? (if some investor is interested in making a paid app free for a few days).

  • jason April 17, 2013

    Now do you charge for the sponsorship per month, per year, per hit? What would be your suggestion.

  • Danny Zafrani May 28, 2013

    Hi, I would like to talk to you about my business idea, maybe you can direct me with the right people or would like to participate in it. It is a business to market to taxi companies.
    thank you,

    Danny Zafrani
    +00507-6117-1504 or skype zafrani.danny or facebook

  • Sandi June 5, 2013

    Carter I have what I think is a great idea for an app, but I’m sure where I go with this. It has the potential of being very big and the future is limitless. If you could provide me with some guidance or steps that would be great. I know everyone says they have a great idea but I have talked to a few people and they all think it’s great. Thank you

    Sandi

  • Narendra June 19, 2013

    Thanks Carter that was all the boost I needed to publish my apps for free

  • Jad April 27, 2014

    The fifth way I’d very good for beginners

  • Trey July 5, 2014

    I know this an older post, but thanks for the great insight!

    As far as ads, do you choose who advertises inside your app?

  • Luis July 8, 2014

    My name is Luis I have no idea how to make a game I have been checking some YouTube video how to make one. I know for sure the my idea is going to be a hit because this game was a hit back and the date and now for iPhone or iPad is going to be a hit let me know if u want more info?

  • Angel A. July 30, 2014

    Hi,

    I manage a social influencer with more than 2.3 million impression online. How would I go about getting app companies to pay us per install?

  • Carter Thomas Carter Thomas July 30, 2014

    @Angel – Depends on the kind of traffic, but usually you’d use an Ad network to mediate the traffic so that you can see how valuable it is. Mess with targeting (games, demographics, geolocation, etc) and see which ones produce $$ for you. I’m assuming this is a website? If it’s not then you may have some other options but those will be done directly through advertisers or agencies.

  • Confidence August 20, 2014

    Hi Carter, Am here at the right time. It is 1am but am still thinking of how to get this concept done as an app. Its will bring the past, present and future together. It will appeal to all generations and peoples. However i dont know anything about apps development. Get in touch or get me connected to the right people please! CONFIDENCE, GHANA +233241988260

  • Timothy Cline November 10, 2014

    I recently opend my Own Business, the name is Mobile App IdealsLLC, in Union City Indiana. I have some Ideals for Apps the App Tree, Dr App,and App Deer,s . But Recently i have been Working with the Randolph Cline Commissioner,s in Randolph County, Winchester Indiana. My main Goal for my Company is to Contact each County Commissioners in Every County in Indiana, to help them get a Information/ Tourism App. Beimg from Indiana I want to help as much as i Can.There is 93 Counties in Indiana. Any Advice would be Greatly Appreciated. That is a lot of Apps to be Developed. Randolph County is Interested in the Hamilton County Indiana, its on the Google Play Store. Thank you for your Time. Timothy Cline Mobile And Ideals LLC 765-964-4886 timoyhycline73@gmail.com. Thanks Again. Timothy Cline

  • Joel November 10, 2014

    I’m in the process of creating an great app which I’m planning on generating money just from app downloads from my app. How much will I make per app that someone downloads from in my app?
    Thank you.

  • Carter Thomas Carter Thomas November 24, 2014

    @Joel – that all depends on how good your game is at monetizing the user. Could be $5 revenue per user, could be $0.01. All depends.

  • Amy December 6, 2014

    Hi Carter, Unlike most people who have great app ideas, I’m on the other end. I have the funds to develop/create an app but not an idea (how unfortunate) lol. I was wondering if you could direct me to someone who is looking to have his/her idea developed into an app but is in need of the funds so we could partner up OR i could buy his/her idea.

    Thanks

  • Carter Thomas Carter Thomas December 8, 2014

    @Amy – Good problem to have haha. I would recommend reading the 1st ebook and if you have the funds, you should purchase the premium ebook (links are inside the free one). It shows you exactly how to start when you’re in the position you’re in.

    In a nutshell, you have 3 options:

    1. Try to find an “awesome” idea and roll the dice – hopefully it blows up. High risk, high reward.
    2. Invest in a business model like reskinning, sponsored apps, or providing a service using apps. Scale from there.
    3. Identify a problem and solve it using an app. Not “awesome” but that’s how business works.

    Good luck!

  • Martin December 9, 2014

    Hi there,
    If Amy is still searching I have some education game ideas…
    I have been working as anguage teacher and I am 4-lingue (English, Swedish, Spanish and French, keep on counting because I am still learning…
    some basque and German.
    I have 2 daughters that are multilingues as well… Their mother if French I am Swedish, but I did Highschol in SC class of 1989 Creschent High Andersson County…
    So if ther is someone that is into building a World-wide language education-set of games…???
    Remember, I have the idea how the game is supposed to work , but I am missing programming skills and have no founds to put into this, I have time and…
    I am writing language training books, Take a look at:

    https://leanpub.com/howtolearnanewlanguage

    Write me in any of my languages,
    mail: martinlissjhansson@gmail.com

    Have a nice day!
    /Martin

  • Nishley December 10, 2014

    Great article buddy, very helpful.

    Thanks

Leave a Comment