If you are like me, the thought of giving away that app which you have invested so much time and money to create, will make you cringe.  For me it took months of disappointing sales figures to even consider the idea, but after I took the plunge and made an ad-supported version of my app, the results were very positive.  If you are turned off to the idea of giving your app away for free or putting ads in your app, there are a few things you should consider.

How will I make money if most users do not click on ads?

This is a major hang-up for a lot of app developers.  You only need small fraction of your free users to click on ads, for your free version to pay.  Yes, most of the users who download your app will be getting a ‘free ride’ but consider this; 3 months after making a free version of one of my apps, the ad revenue is now over twice what my paid version was bringing in for sales.  To top it off, the paid version sales have only gone down to about 2/3 of what they were before the free version was released, and the free version is only a likely suspect for this.

How can ads bring in more revenue than direct sales?

There are several factors at play here; the first of which is that free downloads are much more popular than paid versions (in my case 420% more popular.)  If you consider that a single click on an Apple iAd often amounts to more revenue than one sale at $.99, you only need about 1-2% of your free app users to click on a single ad, to make up for lost app sales (assuming they vanish.)  This isn’t one click per use, mind you, but one click for the entire time the app is installed.  If you figure in the fact that some users will click more than one ad, your user base will increase over time (increasing your ad impressions), and that your paid app sales won’t disappear, your free app can make for a very good investment.  Ads also give the hidden benefit of a potential revenue spike when you update your app, as many users who had forgotten about your app will be enticed to open it again to check out the new features.

Why wouldn’t it have a greater impact on paid app sales?

You can look at free app downloads as lost sales, but in most cases they are not.  A large percentage of app store customers do not like spending money on apps for their phone.  Others want to try an app before they buy it.  Even priced at $.99, you would have a hard sale to this audience.  Few customers hesitate to download a free app, even ones they don’t really need, and if your app is good enough, some of these free app customers will turn into paid app customers.

How do I know if my app is right for ads?

There are a lot of factors that determine if your app will benefit from being free, but here are some of the major ones to consider:

App pricing – If your app is legitimately a high-ticket item, you may not be able to recover the loss of sales from ads alone.  A combination of ads and/or in-app purchases, may work.

App usage – The more you can get users to come back to your app, the better.  More usage = more ad impressions & more ad revenue.  If your app is something users would likely only use once, you may be better off getting the money up front.

Real estate for ad placement – Can you sacrifice the screen real estate needed for ads without severely affecting the user experience?  Some apps lend themselves better to ads than others.  Don’t try to cram ads where they do not belong, it will lead to negative reviews and a serious impact on usage.

If your app meets the criteria for successful ad placement, free can be a very profitable way to go.  Not only can it increase your user-base, but your overall revenue as well.  Free does not mean the end of paid app sales, and you may very well find yourself bringing in more revenue from your free app than your paid app.  My only regret is not releasing a free version sooner, but as always, your mileage may vary.