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What Tactics do Smart Entrepreneurs Use to Make Money from Apps?

making money on free apps

Free apps can earn millions of dollars, but are you doing it right? A common misapprehension that holds the mind of many wannabe entrepreneurs is free apps do not make money Or, make less. Instead of initiating a Google search, “How do free apps make money?” they confine their thoughts and keep believing in the same annotation.

This bugging thought doesn’t allow them to proceed with their excellent app idea. Entrepreneurs having this thought constantly think of selling their app to an investor after prototyping or MVP development. But I will stop you right there. 2021 and beyond is going to be an app-focused year, and trust me, there are multiple ways to make massive money in 2021 with free apps.

Free apps have customer’s hearts. The number of free app downloads outshines the paid apps number. If we believe the last statistics of 2017, free apps cover around 260 billion downloads while paid apps account for only 15 billion downloads. In terms of revenue, free apps generated $37 billion in 2017, while paid apps generated $29 billion. I feel like now we are talking!

Well, paid apps have their own set of customers, but free apps have a larger segment to connect with. Paid apps are suitable for businesses who already have loyal customers whereas, free apps help you build customer loyalty.

Additionally, paid applications are launched in a specific genre, say, for example, Game apps. The craze and addiction of such game apps compel users to pay for the app and unlock new levels. However, things with free apps are pretty different.

More than 90 percent of applications are available for free, quotes Techcrunch. Free apps have to struggle & survive the competition in order to attract customers who willingly pay for the app access.

So coming back to our core topic, how do free applications make money in 2021?

There are multiple ways in which you can make money using your free apps. However, before you start generating revenue, you need to make sure that you already have a large chunk of audience to attract. The alluring can be done with a great application design and intuitive user experience.

Further, to monetize using your free app, you have the following options at your disposal.

In-app advertisement:

In-app advertisement is the most familiar and recurrent way of making money on free apps. Mobile app monetization is expected to cross $280 billion in revenue in the year 2020 (statistics are yet to be out).

While allowing businesses to place their advertisements on your application, you need to think very strategically. You can not let them hold the complete attention, nor can you sideline their presence.

You can get paid every time a user commences an action or moves as directed in the advertisement. You can also make money by running an ad campaign for a business over your platform.

All you need to do is keep track of user engagement and inattention scenarios. This is one of the best app monetization methods followed by millions of free apps in the market.

There are various in-app advertisement models available,

1. Interstitial ads:

These are a full-screen display of videos & images displayed on mobile screens, websites, or game apps. The advertisements appear on screen after a defined period of time or completion of an action. A user can decide whether they wish to view the advertisement or pass it over by pressing the “close (X)” button.

2. Banner ads:

Banner ads usually appear on the top of the application screen. They can be placed at the bottom but should have a motive and conciseness while designing. Banner ads can be simple text, images, static or animated. These banner ads do not distract the user; however, they have fewer click-through rates.

3. Video ads:

Ahh, the most annoying yet the most rewarding in-app advertisement type is video advertising. This is a highly popular in-game app where the users receive rewards after watching the video completely.

4. Rich media ads:

Rich media ads are dynamic ads gaining maximum engagement. Such ads have the highest click-through rates on the app.

5. Native ads:

Native ads are a good way of advertising & money-making apps. The advertisement appears below the main screen without disturbing the audience.

Favorable situation to opt for in-app advertising model are:

When you have a large pool of audience to attract to;

When you wish to generate massive traffic from your application;

When you have contextual advertising to market to your audience;

A popular app using this monetizing model is the Gaana app.

Subscription/Freemium model:

The simplest and the go-to answer to the question, “how to make money from apps?” is by going for a subscription-based strategy. In this monetizing method, you allow customers to view content or access features for a limited period of time. Later, you charge them a fee to access full features and read content without any limitation.

You need to build up trust initially by releasing a free version. Only if you gain user’s trust can you drive them to pay money for using it in the future.

A great example of a Subscription-based monetizing app is Apple. It encourages its users to pay for a model and increases the splitting amount as the user proceeds with the subscription every year.

Favorable situation to opt for subscription/freemium model are:

It is a highly suitable app monetization strategy for cloud services, news services, video streaming applications.

When you have a regular influx of customers eager to use the application.

When you plan to introduce new functionalities & features at a regular interval.

When you have sufficient funding to survive till the subscription and do not require money instantly.


Another interesting answer to “how to get money from an app” is by getting sponsorship. However, this monetizing method is suitable only if you already have a particular niche user base.

You can approach various brands functioning under that particular niche or vice versa and get sponsorship for your application. While approaching a brand (sponsors), you need to make sure that they have the same agenda of targeting the audience.

When you feel like you have established a satisfactory relationship with your audience, you can start thinking about sponsorship. Chart out the names of brands who you think would partner up with you and start approaching them gradually.

A popular example of this monetizing method is, Subway & Marriott. You can either share the profit or opt for a monthly sponsorship fee from the one with whom you collaborate with.

Favorable situation to opt for sponsorship model are:

When you have a strong brand presence and a potential customer base.

When you have fewer features to introduce so that it doesn’t affect the user experience.

In-app purchases:

In-app purchases usually allow customers to buy features, services, or content available over the application. To include this monetizing feature, you need to discuss the feature priorly with your prospective mobile app development company or the hired mobile app developers. They will let you know the placement of the same and help you in organizing the functionality.

In-app purchases are in four-types:


These are purchases that are made once, used once, and then can be purchased again. Consumable in-app purchases are usually made in the game apps to buy virtual coins to move ahead in the game or get an extra life. Users willingly buy consumable services like new outfits or accessories to proceed in the game.

Remember how Clash of Clans and Angry Birds tempt you to make in-app purchases?


In this monetizing way, you attract users to buy a virtual service that never expires. A great example of this monetizing model is the filters available in a photo editing application.


Auto-renewable purchase/subscription means the services can be renewed after a defined period automatically. It is upon the user to decide when to cancel the subscription.


Exactly opposite to auto-renewable in-app purchase is a non-renewable in-app purchase. Here the users pay for a specific duration/service/content. The service doesn’t get renewed itself unless the user decides to.

Favorable situation to opt for in-app purchase model are:

Collect & Sell Data:

There is a very high demand for user-data. The obvious reason is, it helps companies in targeting their audience. Free apps normally collect a pool of user data, including users’ email addresses, personal choices, social media links, birthdays and anniversaries, etc.

You can sell these data to many companies or researchers at a striking amount and make money from free apps. You can use the same collected data for your own marketing purpose and earn a profit.

Favorable situation to opt for collect and sell model are:

Email marketing:

Free apps, as mentioned above, are a hub of user data. You can take advantage of this data and launch an email marketing campaign for your product/services.

You can send across emails to respective email addresses and lure them into making virtual purchases.

Transaction fees:

Little do people know about monetization using free apps. They ignore this highly lucrative way of making money using free apps. You can allow third parties to sell/promote their products on your app, and in return, you charge them with a specific amount of transaction fees.


You can share your application idea on popular platforms such as Kickstarter, Patreon, Crowd Supply, etc. These help you raise donations for the application.

However, your application idea should be unique and promising in order to convince investors to donate a reasonable amount of funds.

While you make money using your free apps, you might make mistakes too. It is therefore advisable to know about the mistakes to avoid in advance before it ruins your plan.

Mistakes to avoid:

Concluding Thoughts:

Hello, entrepreneurs! I hope this blog answers all your questions about how you should make money with a free app, OR, how to make money with iOS & Android app, OR, how free apps make money, OR, how to monetize with a free app. Each of these monetizing methods has its pros and cons, which should be analyzed before you finalize your money-making model.

You should do enough research and chart out your own strategy for moving ahead with the monetizing model. If you still have any doubts, feel free to contact us, and we would be happy to assist.

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