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Paid vs Free Apps: Which mobile app monetization model should you choose

Mobile apps are emerging as an empowering tool for businesses. It is helping businesses in acquiring new leads, retaining high traffic and multiplying the revenue.

In fact, businesses that have both websites and mobile apps, are giving more preference to mCommerce due to the growing usage of mobile devices.

More businesses are willing to convert WordPress to app and tap into the mobile friendly market. However, it is important that a thorough research is carried out before you make any investments.

We try to help new age brands in these research initiatives to enable them to make smart business decisions by sharing new tips, tricks and ideas on a regular basis.

Today, we will tell you how you can subside your dilemma about paid and free apps. Read the blog till the end and find out a detailed analysis of both. Make an informed decision and grow.

Suggested Read: Developing app ideas: How to ensure an app idea is viable?

The significance of mobile app monetization

The ultimate goal of any business initiative is monetary profits and gains. Whether it is a direct initiative or an indirect one, the long-term goals of success are defined by these basic metrics.

How much revenue is your app bringing in, how many conversions does it inspire, how many sales were made, how many subscriptions were purchased – all questions and facts like these play a crucial role in determining the success rate of your mobile app.

Mobile app monetization plays a great role in shaping the results and answers to these aforesaid questions. Brands willing to make money out of apps implement various monetization models that lay the foundation of an organized revenue flow for the business.

Mobile app monetization is important because it has the power to:

  • Enable profit-oriented marketing and sales
  • Bring in revenue and increase monetary gains
  • Add a parallel revenue channel for the business
  • Lay a standard foundation for in-app ad revenue
  • Show how people are interacting with the app
  • Highlight the strengths and weaknesses of the app
  • Help businesses in making data backed-decisions

Clearly, having a mobile app monetization model is very significant to make your mobile app more competent and fruitful. Read the blog suggested below and learn about the various types of mobile app monetization models.

Suggested Read: Mobile app monetization: The ultimate guide to monetizing mobile apps

Free Mobile Apps: The most popular app category

This is one of the most popular mobile app categories on any app store. There is a huge number of both Android and iOS apps that follow this model of monetization.

The free apps are actually FREEMIUM apps that are free to download and customers are only charged for availing premium services within the app at a point later in time.

Most businesses are following this model of mobile app monetization as it has become too popular too soon. In fact, this has been a quite popular way of monetizing digital goods and products since ages.

It is not often reasonable to offer a completely free app as the prospects of earning revenue may become bleak then. However, amidst the rising competition, it is also not easy to convince customers to pay for an app without using it.

As a result, the Freemium model is being used by businesses to keep the windows of gainful opportunities open. It is one of the most promising monetization techniques that is favorable for both, businesses, and consumers.

Pros of the Freemium Model of App Monetization

Now that you are aware what the Freemium model is, let us discover its pros and advantages. Some unparallel benefits of the Freemium model are as follows:

#1: Zero usage barrier

The very first challenge for any app provider is to attract customers to download the app. As the app download is available to users for free, there is no barrier based on the willingness to invest. As a result, more people try out the app, thereby increasing your user bracket and chances of conversions.

#2: High attention rate

As discussed above, the Freemium apps gather the greatest number of eye-balls. Customers install the app and participate in in-app activities more freely. Besides, this attention is not just limited to consumers but also extends to sponsors, advertisers and marketers for whom it is a fertile marketing space.

#3: Cost effective acquisition

The acquisition campaigns and initiatives you take are more likely to get attention from potential users. As most buyers have a tendency of trying free products rather than paid ones, this is ought to earn more profit. There is always scope of seeking payments for premium solutions.

#4: Decongestion of liabilities

Customers who have paid for an app are more likely to demand a premium and frictionless experience. They are less likely to tolerate any flaw or discrepancies, thereby increasing the liabilities. However, free app users are less likely to give poor ratings or make unfeasible and rigid demands.

#5: Multiple revenue channels

This is the one of the biggest advantages of a Freemium model. While most paid apps are limited to the revenue through app downloads, Freemium apps have a plethora of options. As customers “land and expand” and continue to explore new avenues of the app, you can go on to scale and earn revenue through ads, affiliates, premium subscriptions, and more.

Cons of the Freemium Model of App Monetization

The Freemium model of monetization also has some cons. Let us find out some of its drawbacks so that you can be prepared to tackle them beforehand:

#1: Immense competition

One of the drawbacks of the Freemium model is that are millions of such apps and the competition is huge. Eventually, making a mark and grabbing attention of users in this niche will take more effort than the usual.

#2: Lack of certainty

The problem with Freemium model is that there is no certainty about revenue. The process of conversion is quite slow and takes time. It is also quite ambiguous and vague as there is no standard payment and business cycle for regular revenue flow.

#3: Reliability on third party

There is a huge reliability on third party resources when it comes to ensuring revenue and maintaining profit statistics in the Freemium model. One needs to depend on the willingness of customers to upgrade, and also on other marketers for ad revenue, marketing, and more.

Some notable examples of Freemium Apps

Example of Freemium Apps

Although there are a huge number of app providers that work on the Freemium model of monetization, we have curated a list of some apps that can give goals to any business. Let us discover:

#1: Dropbox

It follows the traditional or classical freemium model. The basic app is free with optimal storage capacity and support features. However, as users expand to a more professional and advanced level, they get to choose from a range of pricing options. The packages are labelled and priced differently, thereby offering a different set of benefits for each.

#2: Candy Crush Saga

This gaming app can be called the pioneer in freemium gaming apps. The basic app is free to use and the players can keep crossing levels and acquiring upgrades. However, to get special leverage and aid, they can make premium purchases or watch ads.

#3: YouTube

The favorite video streaming and content publication platform of billions of users is also one of the finest examples of the Freemium pricing model. As per its promise, the platform remains absolutely free to use. However, users willing to invest in an ad free experience can also purchase the premium subscription.

Suggested Read: Discover the key industry secrets and best tips to market your app on YouTube

Premium Mobile Apps: The choice of the finest businesses

The Premium model of mobile app monetization, as depicted by its name, is the more advanced and luxurious model of pricing. Although the number of Premium apps is less than the Freemium apps, it has its own niche and profitable market.

In fact, it is not at all true that paid apps are not received well. However, it is more popular and widely accepted in some niches than others.

For examples, many gaming app, reading app, and education app users do not hesitate in “buying the app form the store”. In fact, such apps are earning quite a profitable share of revenue.

Users pay one time purchase or download fees for accessing the premium apps before installation. The services can thereafter also be divided into tier and then charged as per the user’s choice of packages.

After all, the app stores are called “store” for a reason. It all depends upon your app quality, benefits, features and the targeted audience. If these things are aligned well, you can also sell your app experience and benefit from a paid or premium model of pricing.

Pros of the Premium Model of App Monetization

The Premium model of app monetization has its own set of benefits. The competitive advantages and pros of the Premium model of app monetization are as follows:

#1: Focused user-base

Users who have little or no interest in the niche of your app will not pay a good sum to download your app just for the sake of trial or fun. This reduces your churn rate and rate of abandonments and uninstallations. The actual audience you earn may turn out to be more loyal and dedicated.

#2: Immediate revenue

There is no ambiguity when it comes to payments and revenue in the case of premium mobile apps. Brands start earning revenue as soon as the users download the app and start interacting with it. There is also a low or negligible reliability on third-party revenue sources like ads and affiliates.

#3: Easily trackable metrics

A unified and organized approach in terms of traffic helps in tracking the metrics easily. As the traffic is justified and trackable, it becomes easy to monitor and assess various metrics like impressions, traffic, revenue, purchases, CLV (Customer Lifetime Value), and more.

Suggested Read: Complete Guide on Mobile App Analytics Metrics – Measure your App’s Success

Cons of the Premium Model of App Monetization

Despite the organized and structured approach, the premium model of app monetization has its own set of disadvantages. Some drawbacks of this model are as listed below:

#1: Lesser number of traffic

It is quite evident that convincing people to pay for a product before using it is really tough to achieve. Even in the case of free trials, very few users are likely to pay for a premium app and most of them settle for a free version. Even if consumers agree to pay, competitive and deferential pricing will always be an issue.

#2: Higher expectations & liabilities

People who end up paying and subscribing for such apps have high expectations. They seek absolute value for their money. In some cases, equating the subscription charge with the range of services and justifying the amount becomes quite tough. As a result, the liabilities increase, and users often end up dropping more negative reviews and feedback as compared to the case of free apps.

#3: Limited scope of revenue

Although the revenue is absolute and benefits start pouring in immediately, the scope gets limited. You cannot promise a premium version and then start showing ads to your consumers. As a result, revenue through ad and marketing opportunities becomes limited. Also, if you increase the subscription charges, customers will either demand new features and scalability, or abandon the app.

Some notable examples of Premium Apps

The number of Premium apps is quite less as compared to the apps following the Freemium model. Let us discover some examples and their USPs (Unique Selling Propositions) in order to learn and analyze:

#1: Nine Email

While prime apps like Gmail offer the mailing services for free, your data is more likely to be insecure. In order to prevent such data breach, this paid app for emailing services does not use a cloud based service to store users’ information. The data is saved on user’s phone or personal server and hence is safer.

#2: MediaMonkey

It is a digital media player app that certainly offers complete value for money. It makes handling multiple music albums, podcasts, videos, audio books, etc., a breeze. It enables users to play and manage their collection without much hassle and remains quite favorite of many buyers.

#3: Amazon Kindle

Who is not aware of this trailblazing example of a reading app by Amazon? This app turns any portable device into a kindle tab and offers a luxurious experience and plethora of options to readers. Although there is a free trial period, readers need to purchase the subscription for continuing the services.

Suggested Read: Build an app for your luxury brand and optimize consumer loyalty

Freemium V/S Premium: Tips to choose the best monetization model

Now that you are well aware of the different facets and aspects of Premium and Freemium apps, it is now time to make a call. Assess various factors related to your app, budget and finances, potential market, targeted audience, etc., and make the decision.

Follow the tips listed below and choose your monetization model accordingly.

Pick and implement the Freemium model if you aspire to:

  • Join the league of the most popular app monetization model
  • Target a large number of users looking for free app alternatives
  • Keep your avenues open for ads and in-app purchases
  • Have lesser liabilities and accountability as compared to paid services
  • Scale your app features gradually as per your business scalability

Common niches for Freemium Apps

Shopping and eCommerce apps, Music and Video Streaming apps, File Management Apps, Photo Editing Apps, Apps for On-demand Services, and more.

Build a luxurious app and go for the Premium model if you want to:

  • Create a luxury niche and focused market for your app
  • Reduce entropy and target only paid and loyal traffic
  • Ensure an ad-free and frictionless experience for your users
  • Offer high-end in-app features that ensure value for money
  • Start earning immediate revenue that is fixed and optimized

Common niches for Premium Apps

Apps for Managing Workforce, Business and Employment Apps, News and Magazine Apps, FinTech Apps, Education Apps, Gaming Apps, and more.

Suggested Read: The best mobile ad networks to monetize your app

Build an app and grow your revenue and traffic

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This was all from our end today! Hope you are now more informed and insightful in order to make the smartest choice and empower your business with a high-performing mobile app.

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Hurry! Wait no more! Make it to the league of smart businesses that are future-ready. Enter the app market now and grow your business manifold!


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