Is Freemium Model Destroying Mobile Gaming Industry?

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As the popularity of free-to-play games grows, the army of their haters becomes even bigger. At times it seems that an anti-freemium rant is going to push the popularity of the gaming model down. Though, with so many people playing and enjoying all that freemium gaming thing, the industry is almost impossible to stop.

Still, freemium game model critics aren’t going to stop being that fierce about new mechanics of digital fun stuff. But, if they can’t change the situation, probably they better change their attitude?

Even so, the change of attitude is going to be painful. Seasoned gamers will keep blaming the freemium business model for destroying the whole gaming concept. From day one game was designed to entertain but with mobile app trends games turned into a smart mechanism of soaking money out of gamers’ wallets.

Check out stats on the revenue generated by Apple’s App Store during 2016, by app category and pricing model:

READ ALSO: How do apps make money

The majority of wise gamers also claim that the author’s rights on games were violated. There was a moment when game developers created a unique product with outstanding design and concept, whereas now any user can have total control over the process of upgrading it whenever his budget allows for the desired enhancements.

In two words, the scenario looks like that:

    • creating a state of urgency
    • offering various promotions
    • leading free users gradually towards paid updates
    • customizing message for maximum engagement
    • making a shift from free to premium as easy as possible

It proves that the freemium app monetization strategy really works and keeps digging money as it provides entertainment.

Freemium mobile games

Sounds so true, doesn’t it? But, in fact, this isn’t really free to play format itself that is ruining the gaming experience. Games have always been addictive.

Even when gamers didn’t feel or didn’t want to feel game’s negative psychological impact on their’s lives, it still has been extremely powerful.

And just like being an addict, games have always been a money-making machine. All gaming industry is built based on psychological tricks that foster deeper and deeper engagement of participants. All of them encourage more play and thus require more money for a gamer to keep the score. But the most important thing is that these tactics had been used long before a mobile phone got smart or even before touchscreen technology became widely used.

Has something ever changed? With the mobile industry’s rapid development, the gamers community grew enormously bigger. Naturally, this has made mobile gaming a trend with millions of users involved, of all ages indeed.

Freemium games engagament and revenue

Consequently, when the mobile gaming industry became everywhere, it became truly promising to develop a freemium app. Since then all its’ drawbacks, as well as attractions, have become much noticeable.

This coin, however, has two sides. On the one hand, a larger number of game players results in a gaming niche becoming less pricey and more user-friendly.

On the other hand, such massive folks may be a rich source to monetize apps for freemium game developers who are in a search of ways to make money, selling the shoddy product. Unfortunately, there are lots of second-rate freemium mobile games that require spending quite a bunch of money for the game to become more powerful.

Game quality is really another sore point skilled gamers are 100% grumbling at. They are absolutely convinced that mobile games are less exciting than video games used to be. Not necessarily in fact. This is an argument more against the way some particular games work rather than against the industry in general.

It also sounds like video game lovers just can’t get over the changes the mobile gaming market has to offer. There are dozens of innovative approaches that are going to move the mobile game industry to a brand new level of quality. Let’s just have a sneak peek at hybrid games, for instance, that promise superior gaming experience through a combination of digital games and physical toy components.

Is free to play is ruining gaming

Unfortunately, the quality of mobile games is not the only fault freemium haters are picking on. Excessive ads are what drive users crazy. Well, in all fairness, the main reason to develop mobile games is to bring game developers more revenue through freemium advertising.

But as the internet can’t exist without a huge advertising unit, mobile gaming platform as a part of webspace, can’t do without ads either. That means you simply can’t get rid of annoying commercials. But instead, you can expect advertisements to become more entertaining. This is where free-to-play games have plenty of room for improvement.

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As for the rest, the freemium gaming industry appears to have more attractions than drawbacks. Its biggest merit is that independent game developers now have more chances to put their mobile game masterpiece on the public display and successfully market it. Of course, they might have a limited budget but it serves more as an incentive to be creative rather than a discouragement.

From here, the more creativity they put into the game design, the higher the quality product they will eventually come up with. This way freemium gaming may become a safer industry for customers.

All sides considered, freemium is definitely not that very destroying element that may cause troubles to the game industry. Instead, it should be taken as a push that game developers should use to multiply their revenue at the same time giving all gamers a unique, customized, and pleasurable playing experience without much worry about their budgets.

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How Do Free Apps Make Money

Remember those ads that appear when you are watching videos on Youtube or banners that pop-up when visiting an online store? These are examples of how businesses monetize their websites — the same works for, not only paid but free mobile apps. Free apps are dominating the app market, with 96% in Google Play and 90.3% on App Store driving $71.3 billion in revenue. But those applications are free, so how do apps make money? 

If you have or plan to develop a free mobile app and want to learn more about app monetization strategies, this article is right for you. Below, we explain how to make money from an app, and how to choose one that will work for your app. 

Let’s begin. 

How Much Money Do Free Apps Make?

Today, the average owner of a mobile device uses 7-8 applications daily. At the same time, only 5-10% of mobile app users are ready to buy a paid app, and around 98% of profit and downloads come from free mobile apps. The vast majority of mobile app users prefer to use free apps, and this number is continually rising. In the first half of 2019, the number of free app downloads in Google Play increased by 16,4% and raised $41,9 billion in revenue.

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Being more popular among users than paid apps, free apps have the potential to generate a significant profit. But how to choose the monetization model for your particular app? Let’s look at tips and find out. 

How to choose the best free app monetization strategy

To select the most profitable and effective strategy for mobile app monetization, you need to consider:

Business goals. Every mobile app has its business goal, i.e., the way it solves a user’s problem. App business goals impact the monetization model since users interact with them in different ways for different reasons. For instance, in-app purchases would not perform as well as a subscription for a mobile music app or, a subscription mobile is not the best option for educational apps with a lot of custom content. Thus, you can get the most profit if you apply the in-app purchases model, combined with ads. 

Target audience. Knowing and understanding your target users, especially paying users, known as the money spending core, will give you a clear picture of the best monetization model. To achieve this, create a portrait of your app users, think about the functionality they might need, and try to forecast how much time they would spend in the app. 

Competitors. As we said, each app solves a particular problem for the user. Thus, to select a suitable way to make money from free apps, take a closer look at competitors and other apps in your niche. There’s a chance that the monetization strategy, used by other apps from your industry, will suit your business as well.

Wondering how free apps make money? Let’s see what strategies you can apply to earn money from your free app. 


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How do free apps make money: The most popular monetization strategies 

Depending on your business industry and app type, you can apply one monetization model or several at once. The list of app monetization models includes:

  • Advertising and affiliate marketing
  • In-app purchases
  • Paid subscriptions
  • Freemium
  • Sponsorship
  • Crowdfunding
  • Transaction revenue
free mobile app monetization strategies

Now, let’s look at them in more detail. 

Advertising and affiliate marketing

Seven out of ten free apps generate income from running ads and promoting other businesses. If you want to apply this most common way of free app monetization, you can charge:

  • Cost-per-mile (CPM) or cost per impression. You receive the payment for every 1,000 views of the ad
  • Cost-per-click (CPC). You receive payment when the app users click on display ads
  • Cost-per-view (CPV). You charge advertisers for the number of ad views or the number of interactions
  • Cost-per-install (CPI). You are paid each time your app users install the app you promote


As you can see, there are different types of in-app ad fees as well as methods of showing ads to app users. There are five ways you can display ads to your app users:

  • Banner Ads or Display Ads. The banner ad appears at the top or bottom of the mobile device screen so the app users can freely use your app. However, the engagement rate of such ads is quite low (0.1%). 
  • Video Ads. Such ads appear during natural pauses of app usage and last 10-30 seconds. This ad category also includes rewarded video ads when the app user is rewarded for watching a full ad video. 
  • Native Ads. Native ads, including sponsored content or videos, are integrated into the app layout and do not distract app users. Thus, users consider native ads less irritating compared to other types of ads. 
  • Interstitial Ads. This type of ad looks like full-screen pop-ups displayed when the user opens or closes the app. Thus, the user can either close the ad or click on it to learn more about the promotion. 

ads type in mobile apps

Sponsorship and influencer marketing

This type of app monetization is similar to ads, but the difference is deeper integration to the app. Let us explain. Apart from just running ads, you can place a sponsor’s logo or icon on the splash screen, footer, or integrate sponsored content with special offers right to your app. To make this type of monetization model more profitable, find sponsors with the same target audience. For instance, if you have a fitness app, you can find sponsors among fitness centers, personal trainers, or healthy diet websites. 

Influencer marketing is a bit different way of sponsoring since you will deal, not with the business, but with an individual opinion leader, well known within your target audience. In this way, such an opinion leader will promote your app to fans and attract new users to your app. You can also ask an influencer to become an ambassador for your app, which is a prevalent strategy among famous brands. 

In-App Purchases

With this app monetization model, you can sell different types of items, including: 

  • Consumable items that the user can use within the app, such as health points or digital currencies. 
  • Non-consumable items that could be used permanently, such as new games, maps, or as blocking. 

In-app purchases increase user engagement rates and have users glued to the screen. This monetization method includes integrating native app store payment gateways since app stores charge 3% from each in-app purchase



You can try making money on free apps using paid subscriptions. However, this model works for only 5% of apps with high user engagement, such as productivity or educational, music, or video streaming apps. This type of payment requires integrating third-party payment gateways such as Stripe or PayPal. Thus, app stores do not charge any commission. The app subscription works in the following way: 

  • After downloading a free app, the user receives a trial period, usually a month, to try your app. 
  • When the trial period ends, if the user continues using the app, they must buy a subscription. 

There are two types of subscriptions: 

  • Non-renewing subscriptions when the user buys an app subscription for a particular period, as in one, three, or six months. After the end of the subscription period, the user must buy another subscription manually, so there will be no unexpected bills. This type of app monetization works well for seasonal apps such as gardening, sport, or hunting. 
  • Automatically renewing subscriptions means the app automatically charges user fees every month, six months, or once a year. To ensure that app users will buy a subscription after a trial period,  users receive access to the app only after typing in their credit card details. 


You can make money from a free app using the freemium model, which is similar to the subscription model. The main difference is that the app user can use the free app version with basic features without any time restrictions. But, to receive an advanced feature-rich app version, users must pay monthly or annual fees. Statistics show that only 0.5-2% of app users buy a premium app version. On the other hand, a free version of your app will reach a broad audience and make your app viral. 


Crowdfunding is particularly popular among startups and has proven to be an effective way of raising money. In North America alone, crowdfunding generated over $17.2 billion during 2018. If you need to attract additional funding for app development or marketing needs, you can use one of more than 400 crowdfunding platforms where any platform user can donate money. The most popular crowdfunding platforms for raising funds to mobile app projects are:

  • Kickstarter
  • Indiegogo
  • CrowdFunder
  • AppsFunder

To launch your crowdfunding campaign, you need to complete the following steps:

  • Create fundraising goals for your campaign. Consider that your goals should be SMART- specific, measurable, attainable, relevant, and time-based. 
  • Craft your story to tell others what your app is about, how you decided to develop it, and what problem it solves. In this way, you will show your app’s potential. 
  • Create a compelling video, since video content is the most engaging means of storytelling. 
  • Design a campaign page where you provide investors with a detailed description of your project. 
  • Use social media to drive potential investors to your campaign. 

Transaction fees

You can charge transaction fees for making money with free apps if your mobile app belongs to the marketplace segment where users transact money. This niche includes not only e-commerce apps but also:

  • Flight and hotel booking apps
  • Dog walking apps
  • Meal ordering apps

And others where there are buyers and sellers. For charging transaction fees, you need to integrate a third-party payment gateway API to your app. This task requires experience in coding, so we recommend hiring mobile app developers.  

Monetization model

Works best for

Things to consider


Any type of app, except for branded apps (e.g. e-commerce)

  • Pay attention to how many ads you use in your app so it doesn’t drive users off
  • Design an app with ads in mind, so the app is usable
  • Use less intrusive types of ads


  • Apps with a broad audience
  • Apps that are about making progress, e.g. games, educational apps, fitness apps

Maintain a balance between free and premium accounts

In-app purchases

  • Gaming
  • Dating
  • Apps with separate unique features or content
  • Broad audience
  • Be clear about all micro-transactions
  • Prevent accidental IAPs


  • Content-based apps like streaming services
  • The constant development of new features or content
  • Exceptional service and support
  • Clear payments

In a nutshell

Free mobile apps have a more significant market share compared with paid apps. There are many strategies for free mobile app monetization, and each of them has a different user engagement rate and will generate a different amount of income. We recommend selecting the monetization model on the basis of your app niche, its purpose, and your target audience. 

To make your free app even more profitable, you can combine different monetization strategies: 

  • You can run ads and offer users a paid ad-free app version, which is a win-win situation for you and your users. 
  • You can also combine in-app purchases and subscriptions, or advertising and subscriptions.

If you find this article useful, I’ll be glad if you’ll share it with your friends on Facebook and LinkedIn.

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How to Monetize an App

If you spend months designing an app, creating a number of iterations, testing them, there’s no doubt you have a question: How to monetize an app?

After all that hard work you’ll want to get a bit of brand recognition, to heighten consumer awareness or to gain the loyalties of new customers. An app is only as successful as the number of users who download and use the application and just how much money the app generates in terms of overall revenue.

Read also: Crowdfunding apps

Sure, it happens once in a blue moon. Apps like Instagram, Vine, and WhatsApp come along and sell for huge sums of money. But, in the everyday world of app building and development, the average app won’t make billions. It’s just like the industry of publishing, there are thousands of authors, but only a few of them are bestsellers.

You need to be confident in the success of your app, but there is a small possibility that your app will land you in riches. Statistics reveal that around 2% of the app developers claim more than half of the app revenues. You need to be realistic about your vision of success, so let’s see what you can do with app monetization.

Read also: How do free apps make money

Business Model Decisions

There are several app monetization models and below you can see the most effective monetization methods as of March 2017:

App Monetization Methods

[Source: Statista]

First, you need to define what you want to achieve with the app you’ve created. There are some questions to be considered:

  • Can your app solve problems of the user, and if it is so, then how?
  • What features make your app different from all the other apps on the market?
  • Why will users pay for your product? What is its value?
  • Research apps in the same category: What business model they are using to sell and market their apps?

Once you’ve answered the questions above, you can move forward to create your own mobile app monetization model.

Below are some of the major ways to monetize apps you can choose from.

6 App Monetization Strategies

Strategy 1: In-App Ads & Free Mobile Apps

This business model is most attractive for users because they can download your app for free, without paying any penny and you are able to make money by selling data-driven advertising space.

How do in-app ads work in free mobile apps?

  1. you gather information about the users
  2. when you have formed a strong user base, you can sell the collected data to in-app advertising networks
  3. publishers select your application to place their ads

As a result, users see the small banners or popups with ads. Ads typically appear at the top or bottom of an app. If the user taps the ad, all sorts of possibilities open up from watching a video to the redirecting to advertiser’s website. For social media apps like Tik Tok or Instagram in-app ads usually are represented by video placements. 

Also, there is one more interesting type of ad – notification ads.

Some people are calling them “Trojan horse ads” because they can send you push notifications with the ad even when the app is dormant.

Notification ads can be used while thinking about how to monetize the Android app. Because they are only supported on this platform.

Read also: How much does it cost to make an app

However, there are some shortcomings when monetizing free apps. For instance, some users find the advertisements annoying and decide not to use or even not to download the app with ads.

Also, you need to take into account that advertisements may significantly limit the screen space of your app.

Strategy 2: In-App Purchases

You get the revenue in this strategy by selling virtual or physical goods or services within the app.

It doesn’t matter what you’re selling. It can be clothing, gadgets, accessories or something virtual such as extra lives or in-game currency.

The in-app purchases implemented in your app turn it into another sales channel. This way of app monetization applies particularly well for e-commerce apps or games (where you can buy a bonus or a special ability to skip a level that’s driving you up the wall.)

One of the side benefits of in-app purchases is that you can get deeper levels of engagement by providing users with the opportunity to buy virtual goods.

The only drawback in this model has some cons since app stores usually take a cut of the revenue for virtual goods purchased inside an app. For instance, for songs or a game.

Strategy 3: Apps with Gated Features (Freemium)

This model is a bit like the free apps model.

The app is available for free but some of its features are locked (gated). To unlock these features or get an access to premium features users should pay some money.

In other words, users have access to an app’s basic functionality for free, but the premium features have their price.

The Freemium model is most relevant for games.

Angry Birds game is a great example of how a brand managed to get significant revenue using this strategy. Users were able to upgrade the game to the full version for a small fee.

Freemium business model in app monetization

Such an approach allowed the company to get an extremely large number of fans of the game. After having conquered a few levels, users became engaged enough to pay for the full-fledged version for more hours of fun.

Strategy 4: Paid Apps

You can assign a fixed price to every single app download. The price of mobile app development can vary depending on your app and its functionality. You will want to be fair about the pricing of your app, however. You have to persuade users to download the app by stirring a need or desire for the potential user. This means more marketing efforts.

If you set a price for downloading your app, it means you use the paid app business model. The user has to purchase your app from the app store to install it on his device.

The price of paid apps may vary and it usually starts from $0.99. It is the most common price as brands make money upfront with every new user.

The success of a paid app depends on your ability to showcase the value that users get with your app.

It is not an easy task to sell an app because app stores are so overcrowded and users can find a free alternative to your app.

Thus, your paid app should possess undeniable benefits that differentiate it from similar free apps. Provide your app with unique features, be it design or functionality, or brand. 

Strategy 5: Subscriptions (Paywalls)

This model is similar to the freemium model. Instead of the locked features, it makes money on narrowing conThe user. The user is allowed to view a limited amount of content for free. To get more, the user needs to sign up for a paid subscription.

This model allows you to earn revenue on a recurring basis as it most suited for content-focused apps (news, lifestyle, and entertainment). And it is very similar to the “pay later” or “free trial” model.

Apps with updating content can also earn money with ads that other brands place inside of them. Use an app revenue calculator to estimate the approximate revenue of your application.

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Strategy 6: Incentivized Advertising

Incentivized Advertising is a kind of sponsorship. It means you form a partnership with advertisers, who reward your users for completing certain in-app actions. Your app earns money by taking a share of the revenue from redeemed rewards. RunKeeper became one of the first apps that adopted this app business model.

RunKeeper uses incentivized advertising to motivate its users to track their running activity to unlock exclusive rewards and promotions.


As the competition between the apps becomes more complicated, you should use a creative approach while building your monetization strategy. You shouldn’t limit your strategy to one model. You can work with blended models. For instance, start with a “free, but with ads” model and then offer users a paid upgrade to an ad-free version.

The end lesson here is: be creative and courageous as much, as it possible and you will bound to succeed.

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