How Do Apps Make Money? 10 Proven Strategies

Generally, freemium apps are both simple to use and have a large potential market. This allows app owners to maintain an extremely simple, bare-bones offering that satisfies all users but then offers additional features (and earn additional revenue) for different types of users who may want something more.

User reviews can also help streamline this process by giving insight into user experiences and pain points. For example, a user might have left a one-star review because of overly-intrusive ads or an underwhelming premium experience. Similarly, positive reviews can also inform you of what users will likely respond well to.

Consider Hybrid Strategies

But how much can you expect to make?

Of course, that doesn’t mean apps need to stick to a single mobile app revenue model or pricing strategy. In the next section, we’ll explore some of the best mobile app monetization strategies proven to generate revenue.

Top 10 App Monetization Methods

Why offer free apps when you could just charge users upfront and get revenue immediately?

Free apps may get more downloads but not always more engagement
Free apps may get more downloads but not always more engagement. (Source: CleverTap)

With the number of active email users set to hit 4.37 billion in 2023, building email lists from your app users can be a great way to build multiple revenue streams and support digital marketing strategies. This is especially true since most email users don’t change their email addresses and check their inboxes regularly.

When in doubt, you can always look at similar apps to see what’s currently successful. Doing so also allows you to take a closer look at your competition and trends in the mobile app market, which can further help you fine-tune your app’s value and monetization strategies.

There’s a business model and monetization plan for nearly every app. Check out some of the most popular below.

1. Freemium Apps (Paid Features)

But creative revenue streams are only half the battle when it comes to monetizing free apps. Developers must also deal with the inherent uncertainty around revenue, along with an overall lower rate of user engagement. Plus, with the vast majority of available apps already being free, it might be difficult for new apps to stand out or reach the top tiers in app stores.

But that’s just one of many ways to make money from an app — some apps are already inherently monetized. These apps might include personal shopping apps or those that are mobile extensions of an existing ecommerce presence (such as eBay or Amazon).

In most other cases, however, apps make money through in-app purchases or subscriptions. But even the most standard monetization strategies can take on many forms, especially as mobile apps are expanding beyond mobile devices into televisions, cars, smart appliances, and more.

As a result, a mobile app development company might turn to existing business owners to buy out their app and put it under their own label. This provides the development company with a quick source of revenue while giving existing businesses a new and exciting product.

10. Data Licensing

The actual figure varies widely from app to app, with even the same app monetization model (revenue-per-click, revenue-per-thousand impressions, etc.) varying between app genres, number of users, device(s) used, and country of origin.

Feature-rich apps catering to a diverse range of users often use an app subscription model to deliver a more tailored customer experience. Alternatively, some subscription apps might offer a free trial for a limited period of time before requiring a subscription plan (kind of like a certain number of free articles before having to sign up for a news subscription).

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While freemium can offer the best of both free and premium, it’s not the ideal model for all apps — in fact, premium can sometimes make the most sense.

Alternatively, an advanced graphing calculator app could easily justify an upfront fee if it provided enough premium features and mathematical functions to justify the price.

Analyze Your Users

App monetization strategies often involve some form of advertising.

In-app ads are one effective form of app monetization
In-app ads are one effective form of app monetization (Source: Creatopy)

For example, a simple calculator app probably wouldn’t want to charge users upfront. In that case, it would likely be monetized using minimally intrusive banner ads or through sponsorship from a calculator manufacturer or educational resource.

As a result, successfully adopting a premium model usually requires satisfying a market niche with a loyal customer base. Once a premium app becomes the “go-to” solution for a particular need, the premium price doesn’t become such a big deal.

In fact, a monetization strategy that might seem right for a certain app might be wrong if it doesn’t sit well with active users. For example, smartphone users with smaller screens might not want endless pop-up ads cluttering their view, while Android users probably won’t want to pay more to integrate iPhone app content.

Freemium pricing models (free/premium) are one effective way to overcome some of these drawbacks.

Freemium and premium can both work well, just in different scenarios.
Freemium and premium can both work well, just in different scenarios. (Source: CleverTap)

The in-app advertising model is used by the vast majority of apps on the market in some way or another.

Full-screen pop-ups and other ads are found in most apps
Full-screen pop-ups and other ads are found in most apps. (Source: GermaniaVid)

Ecommerce is a natural revenue stream for many apps.

Ecommerce apps can offer users a more engaging shopping experience.
Ecommerce apps can offer users a more engaging shopping experience. (Source: Dribbble)

To see why this is, put yourself in the shoes of a potential user. With so many different apps already available (and possibly for the same thing), wouldn’t you feel better if you could try a version of the app before committing to a purchase?

Apps might use a number of different methods to make money — and it goes way beyond simply charging an upfront fee. In fact, “free” apps can be some of the most lucrative of them all!

With more users likely to download and use a free app, developers can use the extra traffic to employ multiple revenue streams based on different types of users. Where the app might display ads to free users by default, it might also offer paid tiers of membership to remove ads, unlock different app features, and so on.

Some developers ask themselves, “how do apps make money without ads?” The answer is by charging users to download the app.

In 2020, the average eCPM for banner ads in mobile apps in the United States ranged from $0.37 for Android apps to $0.46 for iPhone apps. That means a US-based iPhone app displaying a banner ad receiving 5,000 impressions per day would receive an average daily revenue of $2.30.

Long story short: It depends.

Since apps are usually on a user’s phone, SMS and text marketing is often a natural avenue for boosting engagement.

SMS marketing offers a quick and easy way to reach mobile users.
SMS marketing offers a quick and easy way to reach mobile users. (Source: Mayple)

Premium is best for apps that are highly specialized and satisfy a market niche with specific needs. In these cases, there usually aren’t many existing apps that satisfy these needs, and prospective users are already willing to pay an upfront premium for the premium features they already know they need.

Many successful apps don’t stick to one monetization method. In fact, many can’t because leveraging only one method usually won’t generate enough revenue to deliver a solid return.

Gathering emails usually just comes down to asking. If your app requires the user to set up an account or subscribe, then you’re already halfway there: all you need to do is find ways to leverage email marketing, whether it’s notifying them of sales or reminding them to engage more with the app.

7. Ecommerce

Offering an app for free can, in fact, come with a lot of benefits. For one, they attract more downloads and are more likely to get positive reviews due to their lack of a cost of entry.

So how does it work? How can a free app wind up making thousands — or even millions — of dollars?

A chart showing that worldwide app revenue is expected to reach over $930 million in 2023.
Worldwide app revenue is expected to reach over $930 million in 2023. (Source: Tekrevol)

App monetization is the process of generating revenue from app users.

While not everyone wants to pay an upfront price for an app download, many users won’t think twice if the app is exactly what they need — or if that app’s reputation precedes itself.

Understanding your users and their wants, needs, and behaviors is another crucial factor.

Different types of users will respond differently to monetization methods
Different users may respond differently to certain monetization strategies. (Source: CleverTap)

Different users have different needs — so why not cater to all of them with different subscription models?

An app offering various paid subscription plans
Spotify paid subscriptions

With millions of apps distributed worldwide (and growing), you have to wonder: how do apps make money?

Users themselves can also be an excellent source of revenue — particularly their data.

A chart showing third party data licensing on apps
Many popular apps sell user data to third parties. (Source: PCMag)

Typically, however, both app owners and advertisers use eCPM (effective cost per mille or effective cost per thousand impressions) as the key metric for determining impression-based revenue.

A chart image showing global average eCPMs by country and device
Global average eCPMs by country and device. (Source: Appodeal / Business of Apps)

Free versions are essentially the “free trial period” of the app world. While most users will be fine with the free trial for as long as they use the app, it’s possible that enough users will purchase the premium version to generate stable revenue. For example, the freemium app Spotify earned over $12 billion in 2022.

2. Premium Apps (Paid)

A new app development idea may be great, but it might have a hard time taking off without the right support and backing.

In any case, app monetization is a big topic. But before we dive even deeper, you’re probably wondering how much you can expect to make.

How Much Money Can Free Apps Make?

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