This is a guest post by Drew Johnson, Co-Founder and Co-CEO of App Partner, a Brooklyn-based mobile agency.
Giving away your app for free may seem like an intimidating proposition, but there are many ways to make money from a free app.
As the old adage goes, “nothing in life is free,” and this certainly applies to free apps.
Here are four of the best ways to monetize your free app and start making money.
1. In-App Purchases.
Some of the most successful and profitable apps owe their success to the in-app purchase model.
Clash of Clans, the highly regarded free-to-play mobile game, makes a staggering amount of revenue from in-app purchases every year. Supercell, the developer of the huge mobile hit, brought in $2.3 billion in 2015. Simply put, in-app purchases are an extremely effective way to make money.
With revenues like these, it may come as no surprise that in-app purchases are projected to become the #1 source of mobile app revenue by 2017.
A free app combined with in-app purchases is a compelling mobile strategy, since more users will download an app that requires no upfront investment. Once the users are “addicted”, the enticement of in-app purchases will take care of the rest.
2. In-App Ads.
Ads are a great source of revenue, with one caveat: To produce consistent revenue from in-app advertising, your app will need to generate sizable and steady amounts of traffic.
As a rule of thumb, expect to make somewhere around $2 for every 100 downloads your app receives.
Your mileage may vary, but you need to have a focused marketing plan to reap the rewards of advertising. In-app ads are best used with other monetization methods in order to maximize the benefits from your free app.
A subscription model provides users with a free app that offers access to products or services for a regular fee. Ordinarily, the fees are structured on a monthly or annual basis.
While the subscription model is not typically as lucrative as in-app purchases, it works to great effect for certain niches and industries.
Take Birchbox for example, for only $10 a month, each app user receives a “BirchBox” with filled with products like shampoo, lotions, makeup palettes, etc. This subscription fee covers the shipping cost and other expenses like their social media marketing – but still generates enough revenue to grow as a stand alone business.
Subscriptions are increasingly becoming more popular among consumers, so if this monetization method is relevant to your business, now may be time to create a compelling free app that generates revenue through this model.
Lastly, consider sponsors as an additional avenue to make money.
It’s similar to in-app ads but instead of implementing an ad platform that displays randomly generated ads and pays based on the # of clicks, you instead get specific brands to pay you a fee to become a sponsor with a prominent presence inside the app plus other perks (access to user data, etc.).
You’ll be able to charge whatever flat fee you can get that sponsor to agree to so it’s potentially easier to monetize than in-app ads.
This works particularly well for apps targeting niche customer bases.
For example, an app that teaches you the guitar could be sponsored by The Guitar Center. The sponsor may even help you market and promote the app.