How free apps can make more money than paid ones

Original author: JOHN MANOOGIAN III
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Note : John Manujian is the co-founder and CEO of 140 Proof , a venture startup related to social media advertising.

Applications for the Apple Store and Google Play can be very profitable for developers. Nevertheless, one of the main tasks for developers in this case is cost recovery. Consider several monetization strategies . Often, by “monetization strategy” they mean “how to make the application bring money”.

Today, it’s quite difficult for applications to stand out from the rest and become noticed by users, not to mention the desire to buy this application. People increasingly prefer completely free applications or free ones with an advertising banner. But until now, developers are not sure when answering the question "make the application free or paid." When a developer still wants to make a profit from advertising, one of the main questions remains the choice of the right way to monetize.

Four monetization strategies for apps? In fact, there are two of them

Developers have several options for monetizing their applications. And each option has its limitations and pitfalls.

Consider a few points that developers should pay attention to when answering the question "How can I monetize my application?":

  1. Do you think the application will be so useful that users will use it often?
  2. How much will people be willing to pay “forward” for your application?
  3. How have competitors from your niche monetized their apps? How successful were their strategies?

Application markets are in full swing, developers are exchanging experience on the monetization of their creations. Most will say that there are four main ways to monetize:

  1. Paid app. Selling applications in the store.
  2. Free app with paid subscription
  3. Free app with in-app purchases
  4. Free with ads inside

But really, the choice comes down to the following: to receive money from users or from advertisers?

Who pays more for apps: users or advertisers? (aka Which monetization strategy brings more money: “paid” or “free”?)
When it comes to users, the vast majority of Android and iOS users don’t really want to pay - whether it’s a fee for applications, subscriptions or add-ons. Therefore, mobile developers are more likely to experiment with embedding ads in applications. And advertisers are MUCH more willing to pay developers for their work. After all, just like developers, advertisers also want to sell their product.

How much advertising can a developer bring?

Advertising turnover is growing in all types of applications (web, mobile, desktop). Most analysts decided to measure momentum only in the field of mobile applications, since now most of the applications being created are mobile. Mobile app advertising revenue increased one and a half times in 2011 to $ 1.6 billion. Source .

The future of application monetization obviously lies in the advertising model. Recent study University of Kebridge scientists showed that 73% of all applications on Google Play are free and 80% of them rely on monetization through embedding an advertising banner. And in terms of the number of downloads, of course, free ones are much more popular compared to paid ones. Only 20% of paid applications will be downloaded more than 100 times, and only 0.2% of paid applications will be downloaded more than 10,000 times. On the other hand, 20% of free applications are downloaded more than 10,000 or more times.

Using multiple monetization strategies at once

While free applications reach the majority of users for whom the board is a very painful issue and who almost never buy applications, there are many users who simply do not carry ads and are looking for a paid version (sometimes this is the Pro version) of their favorite applications.

Developers can satisfy both types of users with the following approach: create both a paid and a free version of their applications. This approach is extremely popular among major publishers.

Before moving on, it is always necessary to investigate all the options associated with advertising when starting a new application. Now there are many advertisers who specialize in advertising in mobile applications. Developers can choose the conditions for making a profit: the cost of displaying an ad or the cost-per-click of an advertising banner. And what's more, you should always always plan to incorporate this banner into your application.

And most importantly, be sure to consider all design changes associated with the presence of an advertising banner. We all want to organically meet ads in the application, and not annoy everyone with its presence.

List of mobile advertising sites: