With the digital era, mobile apps have emerged as a primary source of income for companies, developers, and entrepreneurs. But ever wondered, how do apps generate money? Although certain apps are downloaded for free, they still make substantial amounts of money through various monetization strategies. Starting from in-app purchases to commercials, subscription-based services, and endorsements, there are various means through which developers make their applications successful money-makers.
In this blog, we will discuss the best practices apps monetize, their advantages and disadvantages, and how to do it in order to select the best model for your app.
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Freemium Model: The Power of Free with Premium Upgrades
Freemium model is the most popular monetization practice. It provides free download and usage of the app to users but charges premium ones or special content.
How Does the Freemium Model Work?
Basic features are provided for free to the users.
Other features, ad-free service, or premium content cost a paid upgrade.
Freemium model is suitable for productivity software, fitness software, and game software.
Examples of Successful Freemium Apps
Spotify – Provides free music streaming with advertisements, but users can pay for an ad-free service and offline play.
Grammarly – Offers free grammar-checking with standard suggestions, yet premium users receive extra writing improvements.
Strengths and Weaknesses of the Freemium Model
✔ Advantages: Amasses huge quantities of users, drives engagement, and establishes trust.
❌ Disadvantages: Free-to-paid conversion rates might be low, and thus continuous feature enhancement needs to be done.
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In-App Advertising: Advertising for Revenue
And another extremely popular method through which do apps make money is in-app advertisement. The majority of the free software have advertisements included within to make money without directly charging the user.
Types of In-App Ads
Banner Ads: Small ads that one sees at the top or the bottom of the screen.
Interstitial Ads: Full screen ads that one observes while app switching.
Rewarded Ads: A consumer views an ad to earn application rewards (most frequently employed within gaming apps).
Native Ads: Ads in an app that feel and appear like the app.
Examples of Applications That Employ In-App Advertising
Facebook – Earns billions through targeted advertisements displayed in users’ news feeds.
Candy Crush – Employs rewarded ads for additional lives or game rewards.
Benefits and Drawbacks of In-App Advertising
✔ Advantages: Gives a consistent revenue source without any expense to the users.
❌ Disadvantages: Excessive advertising frustrates users and results in app uninstalls.
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Subscription Model: Recurring Revenue for Long-Term Growth
Subscription model is a suitable method how do apps make money, particularly for apps that are service-based or content-based. The users pay a recurring fee (yearly or monthly) to access premium functionalities.
Why Use the Subscription Model?
Creates a consistent and predictable revenue stream.
Supports long-term user engagement.
Recommended for video streaming, cloud storage, and fitness apps.
Best Subscription-Based Apps
Netflix – Subscribers pay a monthly subscription charge to view unlimited TV programs and films.
Adobe Creative Cloud – Provides software such as Premiere Pro and Photoshop on a subscription model.
Advantages and Disadvantages of the Subscription Model
✔ Advantages: Boosts customer lifetime value and provides a stable revenue.
❌ Disadvantages: Needs constant replenishment of content to retain customers subscribed.
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In-App Purchases: Selling Digital Services and Goods
Most apps monetize by selling virtual goods, premium material, or add-ons within the app. It is common in social, lifestyle, and gaming apps.
Types of In-App Purchases
Consumables: One-time purchase (e.g., additional lives for games).
Non-consumables: Upgrades permanently (e.g., removal of ads).
Subscriptions: Repeating purchases for premium content.
Apps Monetizing Through In-App Purchases
PUBG Mobile – Sells digital goods such as skins and battle passes.
Tinder – Provides premium features such as unlimited swipes and profile boost.
Strengths and Weaknesses of In-App Purchases
✔ Strength: Encourage users’ engagement and improves application experience.
❌ Weakness: Customers might resist paying cash for virtual goods.
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Sponsorships & Partnerships: Brand Collaboration
Sponsorships are an excellent method by which apps generate revenue without asking users directly for money. Companies pay to have their products or services featured in an app for brand exposure.
How Sponsorships Function in Apps
Companies pay for their products or content to be placed within an app.
Sponsored content can be displayed as banners, pop-ups, or unique features.
Most effective for specialized niches such as health, travel, and fitness apps.
Apps Take Advantage of Sponsorships Successfully
Nike Training Club – Delivers fitness promotion through partnerships with fitness brands.
Health Apps – Sponsors health programs by collaborating with health brands.
Strengths and Limitations of Sponsorships
✔ Advantages: Facilitates monetization without disrupting user experience.
❌ Disadvantages: Selecting the right brand collaborations might be tricky.
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Affiliate Marketing: Make Commissions From Referrals
Affiliate marketing is a commission system through which apps are paid commissions to refer other people’s services or products to users.
How Affiliate Marketing Works in Apps
Apps promote third-party products with adverts or links.
Customers buy and the app earns a commission.
Common in finance, travel, and e-commerce apps.
Types of Apps with Affiliate Marketing Implementation
Rakuten (Ebates) – Offers cashback rewards through affiliate links.
Amazon Shopping App – Promotes partner products through referral programs.
Advantages and Disadvantages of Affiliate Marketing
✔ Advantages: Low capital and easily scalable.
❌ Disadvantages: Money isn’t click-based but conversion-based.
Selecting the most appropriate Monetization Strategy for Your App
Selecting the best method how do apps earn money relies on the following factors:
✅ Type of app: Free apps with ad support are most appropriate for mass audiences, and subscription is most appropriate for content apps.
✅ Mass audience: Free apps with ad support are best suited for mass users, while niche applications can use sponsorships.
✅ Engagement: Engaged apps can maximize in-app purchases, while low-engagement apps can maximize advertising.
Final Thoughts
There is no single app monetization strategy. Successful apps often employ several strategies—such as freemium with in-app purchases or ad with affiliate marketing—to generate maximum revenues. Understanding your users, testing different strategies, and iterating on the user experience enable you to monetize your app and create a successful business.