The global mobile app market has been steadily and confidently growing over the past several years. This growth also extends to revenue: in fact, unlike many other sectors, the mobile app market revenue remained strong even with the onset of the 2019 pandemic.
Given this, having a mobile app seems to be a robust and profitable business venture. But how exactly do mobile apps make money?
This guide will walk you through various options to monetize an app successfully leveraged by profitable companies, helping you choose the best one for your business.
Let’s dive in!
How do apps make money? Top app monetization models
Mobile applications use many ways to make money. An app might straightforwardly charge an upfront fee or resort to more subtle and creative strategies that encourage users to pay while offering core functionality for free.
In fact, the definition of mobile app monetization covers various strategies and methods used to generate revenue and maximize the app’s financial return on investment (ROI).
As you will see in the following sections, most applications combine several monetization methods. The most common are:
- In-app advertising;
- Subscriptions;
- In-app purchases;
- Data monetization.
We’ll discuss these and other models in more detail. But first, let’s explore how much money can apps make.
How much money can you make from an app?
Popular mobile apps generate significant revenue. Consider these figures:
- Instagram earned $33.25 billion in annual ad revenue in 2022 in the U.S. alone. Its monetization model includes advertising, shopping checkout charges, and badges for IG Live.
- Subway Surfers generates over $100 million per year. This famous mobile game makes money through in-app purchases, advertising, brand partnerships, and data monetization.
- Temu’s yearly revenue is estimated at around $6 billion. It charges transaction fees for every purchase, commissions on sales, and also earns from advertising.
These are well-known apps backed by corporations, but how do smaller, independent applications make money?
The table below shows the effective cost per thousand ad impressions (eCPM) across iOS and Android.
| Country | iOS | Android | ||||
|---|---|---|---|---|---|---|
| Rewarded ads | Interstitials | Banners | Rewarded ads | Interstitials | Banners | |
| United States | $15.16 | $13.61 | $0.42 | $15.01 | $13.23 | $0.87 |
| Canada | $8.03 | $8.93 | $0.32 | $6.30 | $8.49 | $0.54 |
| Australia | $9.25 | $9.55 | $0.37 | $8.80 | $8.67 | $0.51 |
| United Kingdom | $10.12 | $8.17 | $0.24 | $8.55 | $5.53 | $0.37 |
| France | $7.89 | $4.24 | $0.15 | $3.57 | $2.58 | $0.20 |
| Germany | $8.10 | $6.56 | $0.23 | $4.73 | $4.32 | $0.32 |
| Japan | $10.96 | $7.51 | $0.16 | $7.62 | $6.30 | $0.31 |
| Taiwan | $13.87 | $9.57 | $0.17 | $7.05 | $5.85 | $0.24 |
As you can see, the average eCPM for banner ads in the U.S. ranges from $0.42 on iOS to $0.87 on Android in 2024. This means an app receiving 5,000 impressions per day can generate a daily revenue of approximately $2.10 to $4.35 just from one monetization type.
Not bad, right?
Worldwide, the average revenue per thousand impressions varies between $0.05 and over $20, depending on the ad type:
- Banner ads bring the lowest income, ranging from $0.05 to $0.91;
- Interstitial ads generate revenue between $0.85 and $15.30;
- Rewarded video ads are the most profitable, bringing in between $0.85 and $21.20.
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See servicesHow do free apps make money?
According to Apple.com, an app is considered free if it doesn’t charge a fee for downloading.
As you might have noticed from the previous graph, paid apps constitute only about 3% of all mobile apps worldwide. The rest are technically free and generate revenue through other methods.
So here’s your answer – yes, free apps actually tend to be more profitable than paid apps.
However, when you download an app that is supposed to be free, you might discover that it requires payment to use. So, what’s the difference between free and paid apps in this case?
Let’s look at the monetization models that may seem similar at first glance.
Freemium apps vs. paid apps
The paid app model, also called the premium model, requires users to pay a one-time fee to download and use the app. Once purchased, users can access all features and content without additional charges.
The freemium model, on the other hand, offers a basic version of the app for free, with the option for users to purchase premium features, content, or additional functionalities through in-app purchases or subscriptions.
| Paid (premium) app model | Freemium model | |
|---|---|---|
| Benefits | Immediate revenue Simple structure Cleaner UX thanks to no ads | More downloads Broader audience Upsell opportunities |
| Disadvantages | Low download rates Hard to compete with free apps Revenue is limited to the initial purchase | Low conversion rates Requires constant addition of new features to drive conversions Requires to manage multiple feature tiers |
As of this writing, the top popular paid apps for iOS are:
- Shadowrocket: A proxy tool that allows users to bypass internet censorship;
- HotSchedules: An employee management app for small businesses;
- The Wonder Weeks: An app that helps parents better understand their child’s psychology and reduce anxiety.
Among Android apps, the top paid ones are:
- HotSchedules;
- Simple Gallery Pro: A media file management and editing tool;
- RadarScope: A weather tracking app.
As you can see, successful paid applications tend to be very niche, focusing on solving a specific persistent problem for users.
Freemium apps vs. free trial apps
While the freemium model grants free lifelong access to some of its features, the free trial model offers users full access to all app features for a limited period (e.g., 7 days, 14 days, or 30 days). After the trial period ends, users must pay to continue accessing the app.
It’s worth noting that the conversion rate of freemium apps varies between 1% and 30%, while free trial apps show much higher results of 30-50%.
| Freemium model | Free trial model | |
|---|---|---|
| Benefits | More downloads Broader audience Upsell opportunities | Higher conversion potential |
| Disadvantages | Low conversion rates Requires constant addition of new features to drive conversions Requires to manage multiple feature tiers | Attracts fewer users High churn |
Among the top popular applications offering a free trial are:
- Headspace: A mental health coaching and therapy services app;
- Audible: An audiobook and podcast streaming service;
- Blinkist: A non-fiction book summary service.
What these apps have in common is high-quality, curated content. To fully benefit from it, users need to consistently use the full range of features over time.
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Contact usWhat free app monetization models are there?
Advertising
Advertisements seem to be the easiest and most common way to make money from mobile apps. The model works as follows: you display ads inside your application or choose affiliate marketing. In both cases, you earn money from a third-party ad network.
Here’s how apps can make money with mobile ads:
- Interstitial ads are full-screen pop-ups that users see between activities, such as when they save an edited photo or complete a level in a game;
- Banner ads are typically permanently embedded somewhere on the app’s screen. Their small size makes them less intrusive, allowing users to use the application freely;
- Video ads are generally displayed during natural pauses, such as when a user completes a game level. They typically last 10-30 seconds and cannot be closed by the user before they finish;
- Rewarded ads offer in-app rewards in exchange for viewing. For example, users can watch a video ad to earn coins that they can spend to unlock a new book chapter;
- Native ads are integrated into the app so that they become a natural element. They often include sponsored content and promote a particular brand or product.
Pros and cons of app monetization through advertising
| Pros | Cons |
|---|---|
| Continuous revenue stream Attracts wide audience Can be tailored to users’ behaviors Easy to integrate | May negatively impact UX Revenue may be inconsistent Requires a large user base Can be impacted by ad blockers |
In-app purchases and freemium model
In-app purchases are part of the freemium model, where some features and content are free, but extra functionality comes with an additional price tag. This strategy allows users to purchase virtual or physical items or unlock premium features.
The app marketplace manages these transactions, and the app owner receives a commission from each deal. That’s how apps make money with this model.
There are two major categories of in-app purchases:
- Consumable: These items can be used only once, such as health points.
- Non-consumable: These items provide permanent benefits, such as ad-blocking or extra functionality.
Pros and cons of app monetization through in-app purchases
| Pros | Cons |
|---|---|
| High revenue potential due to a variety of options Enables users to customize their app experience Attracts wide audience | May be complex to implement May negatively impact UX by creating pressure to buy Revenue can be unpredictable Requires handling refunds and disputes |
One-time purchase model
The one-time purchase monetization model in mobile apps enables users to make a single payment to unlock specific features, content, or the full app permanently.
Unlike subscription models or consumable in-app purchases, users pay once and gain lifetime access to the purchased content or functionalities.
This model is straightforward and appeals to users who prefer not to commit to ongoing payments or microtransactions.
Pros and cons of app monetization through one-time purchase
| Pros | Cons |
|---|---|
| Immediate revenue High user satisfaction Attracts loyal audience | No recurring revenue Figuring out prices may be challenging Low user acquisition |
Subscription
This model is another popular way to make money with mobile apps. It involves charging weekly, monthly, or annual fees for access to specific content or services provided by an otherwise free application.
Subscriptions work particularly well for audio and video streaming apps like Spotify and Netflix, cloud services, or digital news portals. The app content or functionality can vary depending on the user’s subscription plan.
The disadvantage of the subscription model is the need to constantly produce fresh, relevant content and maintain excellent subscriber services to keep users engaged.
Pros and cons of app monetization through subscription
| Pros | Cons |
|---|---|
| Predictable income Attracts loyal audience Upselling opportunities | High churn May be complex to implement Requires constant delivery of new content or features |
Affiliate marketing
This strategy involves promoting third-party products or services in your app and receiving financial rewards based on revenue share or cost-per-click models.
With affiliate marketing, you can earn money from a free app through the following methods:
- CPM (cost-per-mille, also known as cost-per-impression): you get paid based on the number of impressions, usually every 1,000 impressions;
- CPC (cost-per-click): you get paid based on the number of clicks on the displayed advertisement;
- CPI (cost-per-install): you receive compensation each time the promoted application is installed via its advertisement in your app;
- CPV (cost-per-view): the bonus is paid based on the number of views of video ads.
How do apps make money with affiliate marketing? Mobile app owners using this model typically choose one of the following options:
- Promote products or services via the in-app store;
- Implement in-app advertisements;
- Advertise another mobile application.
If you want to adopt this model, you can use services from affiliate network companies like Flurry or AdMob to find the most suitable affiliates for your app. Additionally, various software programs and tools can help you implement the affiliate marketing strategy.
Pros and cons of app monetization through affiliate marketing
| Pros | Cons |
|---|---|
| Low initial investment Performance-based earnings No inventory management | Inconsistent earnings Requires ongoing monitoring of affiliates |
Crowdfunding model
Crowdfunding is a relatively new way to earn money from apps. The main idea is to use crowdfunding platforms like Kickstarter, AppFunds, Patreon, or CrowdFunder to make money for your mobile app development project or its promotion.
Reports from Mobile Grows Stack state that this model works best for non-gaming mobile applications. However, with thousands of other apps vying for funding, it can be challenging to get the required support. To stand out, you need to demonstrate the actual value of your solution and prove that your business idea is worth investing in.
Pros and cons of app monetization through crowdfunding
| Pros | Cons |
|---|---|
| Upfront funding Attracts loyal audience Can serve as a marketing tool | No guarantee of reaching the funding goal Time-consuming Requires revealing your app idea publicly |
Sponsorship
The sponsorship model is another effective way to make money with an app. It involves promoting a sponsor’s brand, products, or services by placing their logo on your app or directing users to their website in exchange for financial compensation.
This strategy works best for apps with a solid user base. Additionally, your sponsor should belong to the same market niche.
There are two types of deals to consider: setting a monthly sponsorship fee or equally dividing the revenue received from the app.
Pros and cons of app monetization through crowdfunding
| Pros | Cons |
|---|---|
| Stable revenue stream May enhance reputation through association with a famous brand | Limited control over app design or content Securing and managing the deal may be difficult |
Licensing
App monetization via licensing involves granting permissions to other businesses, developers, or users to use, distribute, or integrate the app or its technology in exchange for a fee. This model is particularly useful for apps with unique functionalities, technologies, or content that other entities find valuable enough to pay for the rights to use.
Here’s how apps make money through licensing:
- Per-user licensing: every user who wants to access the app must pay a fee;
- Enterprise licensing: a flat fee is charged for unlimited or large-scale use within an organization;
- Feature-based licensing: certain features or modules of the app are licensed separately;
- White labeling: upon purchasing, the app can be rebranded and sold by another company under its own name;
- OEM licensing involves having an app pre-installed on hardware devices or bundled with other software by original equipment manufacturers. This method restricts distribution, meaning the app cannot be obtained in any other way;
- API licensing: users must pay to access the app’s API for integration with other services or apps.
Pros and cons of app monetization through licensing
| Pros | Cons |
|---|---|
| Steady revenue stream Broader market reach since licensees market the app in their channels Enables focus on development | Limited control over the app’s marketing and usage Limited revenue Brand dilution |
Data monetization
Data monetization refers to selling user data collected by the application to a third party. This data can include demographic information, user behavior, app usage patterns, preferences, and other valuable insights.
Pros and cons of data monetization
| Pros | Cons |
|---|---|
| Easier to attract users since there’s no direct charging Insights gained from data can help improve the application | Strict regulatory compliance Risk of severe losses in case of data breach Lower user trust |
App merchandise
Selling merchandise is a creative way to earn money from free apps. To adopt this model, you should create and sell branded items within your mobile application.
A perfect example of how apps make money with merchandise is the Angry Birds game, which was extremely popular a few years ago. The game’s owner earned a monthly revenue of $1 million from selling plush bird toys alone, not to mention shirts, stickers, backpacks, and cups. This strategy can indeed be very profitable.
Pros and cons of selling app merchandise
| Pros | Cons |
|---|---|
| Extends brand presence beyond the digital space Fosters user loyalty | Requires inventory and logistics management Requires upfront costs |
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See servicesHow to choose the best app monetization model?
It might be tempting to choose the most popular monetization model for your application. Yet, to monetize your application the most effectively, you should consider its purpose, the preferences of your target audience, and your business goals.
Follow the steps below to determine how to make money with mobile apps in the most efficient way.
1. Analyze your audience
Study market reports and conduct surveys to understand your target audience’s demographics, preferences, and willingness to pay.
Determine if your users value premium features, content, or an enhanced experience to identify how you can best make money from a free app.
2. Analyze your competitors
Examine how your competitors earn money from their apps. Their successful revenue models might suit your business as well.
Look for data on their app downloads, revenue, and user engagement, and compare these metrics with other apps in the same category.
Try accessing their apps to see which features are free and which are behind paywalls. Pay attention to user feedback about the pricing model and the perceived value of paid features.
3. Consider your app’s unique value
Identify how your app addresses users’ pain points to determine how you can make money off an app in the most suitable way.
If your focus is on providing a seamless user experience, advertising might be intrusive and drive users away. However, if your app offers highly personalized quality content, a combination of advertising and in-app purchases might be ideal.
4. Test different app monetization strategies
Successful apps often don’t stick to the same monetization model forever. A hybrid approach is also common.
Creating a prototype or an MVP is an effective method to determine the best way to earn money with an app. It allows you to test different monetization strategies quickly and cost-effectively. The MVP development approach will also help you check the feasibility of your idea and identify the most valued features. For instance, high engagement might support a subscription model, while occasional use might be better suited to one-time purchases or ads.
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Contact usTrends in app monetization
Let’s look at some recent trends that may help to determine how to best make money with an app:
- In-app ads are still very popular. The key to success is displaying the right ad to the right audience at the most suitable moment. Avoid annoying users with obsessive or irrelevant ads.
- Freemium model has gained popularity due to the vast number of free apps. It educates users and allows them to improve their experience by offering extra functionality. Nurtured users are more willing to pay for new opportunities.
- Subscription model has been gaining momentum. While previously common for entertainment, media, and cloud services, it is now used for all kinds of mobile applications.
- Native ad placement is now possible thanks to the development of artificial intelligence and contextual signs, which make advertisements more natural for mobile app users.
- Growth of in-app purchases: Recent data shows that global user spending on in-app purchases has increased by $380 billion.
- Apple App Store is responsible for about 50% of mobile consumer spending globally, whereas apps on Google Play Store account for only 27% of global sales.
- Game apps see the most consumer spending in the mobile app segment, with their revenue constituting over 52% of consumer spending on iOS and over 65% on Android.
- Fastest growing tech sectors are cybersecurity, followed by cloud computing and AI/ML. These sectors encourage the emergence of new monetization models for emerging markets as businesses invent new ways to make money from mobile apps.
Read also: How much does it cost to build an app?
How can Syndicode help make money with mobile apps?
Syndicode is an end-to-end digital transformation services provider and custom mobile app development company. For over a decade, we’ve been helping clients discover and implement new ways to enhance their operational efficiency and delight their customers.
One example of our meticulous approach is LeNewBlack, a powerful fashion resales application that serves as a marketplace, a sales tool, and a marketing tool. This application provides an excellent user experience to its current user base while considering future business growth.
Another example is Kinderlime. It exceeded the business owner’s goal to create an attractive product and was eventually acquired by an industry giant. It was announced as the best app in its sector.
We encourage you to visit our featured cases page to learn more about the projects we work on and their outcomes.
Final thoughts on free app monetization strategy
We hope this detailed guide on revenue models answers your question about how apps make money. With the knowledge of various monetization strategies, you can now choose the model that best suits your business.
If you’re still unsure about which revenue model to choose, feel free to contact us. Our business analysts will explore your business idea, market segment, and main competitors. We will then show you can make money off an app in the most efficient way.
Frequently asked questions
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What is the business model of a mobile app?
The business model for mobile apps outlines how app creators earn money by charging users to access their products. Common revenue strategies for mobile applications include advertising, in-app purchases, freemium (offering basic services for free while charging for premium features), paid applications, subscriptions, and sponsorships.
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How much money can I make from a free mobile app?
The income from a mobile app can differ depending on the chosen revenue model. Thus, banner ads might earn between $0.05 and $1 per thousand views, while video ads can earn up to $21. Interstitial ads, which appear on the screen at specific moments and cover the main content, typically bring in between $0.85 and $15.30 per thousand views. As for earnings per app download, the range is typically between $0.60 and $1.20.
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Which app earns the most money?
In 2021, the highest-earning mobile app worldwide was PUBG Mobile, bringing in $2.01 billion. It was closely followed by TikTok, with $1.71 billion, and Honor of Kings, with $1.64 billion in revenue. A significant portion of PUBG Mobile’s income originates from in-app purchases, whereas TikTok primarily earns through advertising.
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How do free apps make money without ads?
Many users find in-app ads intrusive, so it’s wise to consider other ways you can make money from an app. You can monetize a mobile game app without ads using in-app purchases, and users are willing to pay small amounts to enhance their gaming experience. Alternatively, offering freemium functionality or content is another way app creators make money without ads. This model, commonly used in gaming apps, lets users access basic features for free while charging for additional ones. Finally, subscriptions are an effective way to earn money from apps. For example, Spotify’s free version includes ads, but premium subscribers enjoy an ad-free experience and offline listening.
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How much does it cost to create an app?
According to top software development companies and our own expertise, the cost of building a mobile app typically ranges from $50K to $500K. Key factors influencing the cost include the operating system, app size, functionality, and the complexity of required security features. Developing an app for iOS is generally cheaper than for Android. This is due to lower variability between devices and OS versions. However, this difference may be negligible in complex apps with sophisticated designs or advanced features due to differences in marketplace approval guidelines and user expectations. The influence of app size on cost is straightforward. Simpler apps require fewer people to work on them, making them cheaper to develop. The amount and complexity of features also significantly impact cost. More work is required to implement complex features, increasing the overall cost. Security requirements vary greatly by the type of app and are subject to multiple regulations. These factors can prolong the time needed to implement security features and get the app approved on an app marketplace.
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How do app developers make money from the Play Store?
Mobile app developers use various strategies to make money from apps on the Google Play Store. The most popular are advertising and the freemium model. Other common methods include data monetization, in-app purchases, paid apps, partnerships and sponsorships, affiliate marketing, crowdfunding, and merchandising. Note that Google commissions up to 30% on some of these revenues.