When I first entered the world of mobile applications, my biggest question was how these companies can make money from a free app. Where does the revenue come from? I’ve learned a lot since then and decided to help others who were like me at the beginning and couldn’t answer this question. So without further ado, here are 5 Ways to Generate Revenue from your Mobile App.

Offer a Freemium

Often, companies will offer two versions of the same app, free (lite) and premium. The lite version of the app will have just enough to hook the user but will leave out some key features. Essentially, you draw in the user with a free app and then prompt him/her to purchase the premium version in order to take advantage of key functionalities.

In-App Upgrades

This concept is most often embraced by game apps. You can download the game for free but have the option to purchase features within to enhance the gaming experience. Zynga’s popular game Words with Friends has embraced this concept by charging to remove ads or to use features to count the remaining tiles.

Enable eCommerce

Give users a platform to purchase things they want. That’s not to say you have to open up a whole store for this purpose. Take a page from apps like Amazon or Ebay. These are free apps that enable transactions to drive revenue. There is currently a trend for free apps that offer a core utility of driving revenue through eCommerce.

Build a Base

This option takes more time and effort but certainly pays off. Some companies nurture a growing base of loyal app users with free apps with the long term goal of monetizing that base with other paid apps, content, or commerce down the line. This route only works, however, if you have a consistent brand and happy users.

Ad Revenue

This is the most obvious method of generating revenue. You can define revenues based on the click-through rate (CTR) or number of impressions (Cost per Million – CPM). Ad companies such as AdWhirl even claim that you can make between $400 and $5000 per day. Just make sure that the ads are not so obnoxious that they harm the user experience and scare off your users.