Users can download numerous apps free of charge. But how do these free apps finance themselves? Find out about various options and business models here!
Having an app developed, marketing it and regularly updating it is time-consuming and, above all, costly. There are different business models to compensate for the investment costs of app development. Two basic types can be distinguished from one another. Firstly, the apps that the user has to pay for to download and install. Here the app provider earns money either through the download or regularly through a subscription that the user pays. However, a study shows that the majority of smartphone users do not spend any money on downloading apps. The second option is to download the mobile application for free to offer. Other types of business models are used here, but app developers still make money with them.
Business models of the free apps
Many app developers offer their applications free of charge in the Apple App Store or the Google Play Store. The business models on which these apps are based can be roughly divided into five categories:
Increase customer loyalty
The app improves or simplifies the service offered and increases the company’s reputation. Existing customers develop stronger ties and the company can acquire new customers. In this way, the mobile application contributes to higher sales.
Financing through advertising
Some providers make their money by selling advertising space. Above all, apps with many users, such as YouTube, benefit from this business model. All functions are accessible to users free of charge. As an app provider, it is important to ensure that app users do not find the advertising too annoying. This can lead to rejection and a decrease in user numbers. In this case, the app is paid for by third parties who place their advertising there.
Download for free but pay later
In many applications it is possible to make so-called in-app purchases, i.e. to buy certain features. In-app purchases are voluntary and users can turn them off in advance to avoid accidentally spending money. It is different when app developers only provide a basic version of the app free of charge. With this so-called freemium model, the user can test the app for free. But he has to pay at the latest when he wants to use the full functionality of the app.
User data as a means of payment
Many apps request access to data such as the location or the contacts from the phone book. Often it is also data that is not relevant for the actual use of the app. App providers collect these user data and sell it on to other companies. With the increasing use of data as a means of payment, the relevance of data protection in online markets also increases. As a provider, it is important to create transparency for its users. It must be clear to the app users which access rights they are granting the application when using it.
App developers can also make money on mobile applications that they don’t publish. Software service providers digitize and simplify the procedures and processes within the company. This then benefits from the investment in the long term.
Which business model is the right one?
A study by the app analysis platform “App Annie” shows that in-app purchases and advertisements are a popular method, especially in the area of games.
This great article is written and published by the marketing team of Digital Gravity app development company Dubai