Apps also collect information about what users search for, which videos they watch and which adverts they click.
Millions of people use free apps every day for communication, entertainment, shopping, navigation and education. These apps may cost nothing to download, but they are expensive to operate. Companies must pay developers, maintain servers, protect user accounts and promote their services.
The word “free” therefore only describes the price paid when someone downloads or opens the app. It does not mean the company receives nothing in return. Free apps can earn money through advertising, subscriptions, digital purchases, commissions, user data and sales of other products.
Advertising is one of the most common forms of app monetisation. A company allows people to use an app without paying and then sells advertising space to other businesses.
The longer users stay on an app, the more adverts they can be shown. This helps explain why social-media platforms use endless feeds, notifications and personalised recommendations. These features keep people interested, but they also create more opportunities to display advertising.
Advertisers often want to reach specific groups rather than show the same message to everyone. A company may want to advertise to people who live in a certain city, enjoy travelling or recently searched for a new phone.
This is why personal data is valuable. Apps may record what users search for, which videos they watch, how long they look at a post and which adverts they click. Some apps also collect information about location, purchases, devices and activity on other websites.
People often say that free apps “sell your data”. The real system is usually more complicated. Large platforms may not give advertisers a list containing individual names and personal histories. Instead, they use the information to place users into groups and decide who should see each advert.
This allows the platform to keep control of its granular information while still making money from it. Advertisers are often buying access to a particular type of audience rather than purchasing a complete personal record.
However, this creates privacy concerns. Users may know that an app collects information but not understand exactly what is recorded, how long it is stored or who can access it.
This produces an asymmetry between the company and the user. The business may know a great deal about a person’s interests and habits, while the user knows little about how the company’s systems work.
Not every free app depends mainly on advertising. Many use a freemium model. The basic service is free, but users must pay for extra features.
A language-learning app may provide free lessons but charge for advanced exercises. A photo-editing app may offer simple tools while keeping professional features for subscribers. A music app may allow free listening with adverts but charge for an advert-free version.
The free service must be useful enough to attract people, but it must also give them reasons to pay. Storage limits, waiting periods and regular reminders about premium features are often part of this strategy.
Subscriptions are valuable because they provide regular income. A small monthly payment can become a large amount over time. Some people also continue paying after they stop using an app regularly.
Free trials make it easy to begin. However, they often change automatically into paid subscriptions unless the customer cancels. The free period is therefore designed to begin a longer financial relationship.
Mobile games often earn money through in-app purchases. Players may buy extra lives, virtual clothing, special characters or faster progress. Most players may spend nothing, while a smaller number make repeated purchases.
Games sometimes use coins, gems or tokens instead of showing prices directly in pounds. A player first buys virtual currency and then uses it inside the game. This can make the real cost of an item harder to understand.
Limited-time offers, daily rewards and progress systems may also encourage players to return regularly. These features can make games more enjoyable, but they can also create pressure to spend.
Some apps make money through intermediation. They connect customers with businesses or workers and take part of each payment.
A food-delivery app connects restaurants, drivers and customers. It may charge restaurants a commission, add fees to customer orders and keep part of every transaction.
Travel apps may earn money when people book hotels or flights. Online marketplaces may keep a percentage of each sale. The apps appear free because there is no download fee, but the cost is included elsewhere.
Once a platform becomes popular, businesses may feel that they must use it to reach customers. This gives the app company power over prices, commissions and access to the market.
Other free apps support a different part of a company. Banks provide apps because online banking can reduce the need for branch visits. Supermarkets offer apps to encourage shopping, send discounts and collect customer information.
Fitness companies may provide free software because it makes their watches and trackers more useful. In these cases, another part of the business helps cross-subsidise the app.
The app does not need to make money directly if it encourages customers to buy another product, stay with the company or use a cheaper digital service.
Some new apps are supported by investors. A company may offer its service for free while trying to attract a large audience. Once many people depend on it, the company may introduce adverts, subscriptions or higher fees.
This strategy is risky. Some apps disappear because they never become profitable. Others become less attractive after adding more adverts or removing free features.
Free apps do offer important benefits. They allow people with limited incomes to communicate, learn, travel and enjoy entertainment. A free service can reach many more users than an expensive one.
The main problem is that the real cost may be hidden. Users may pay with their attention, information, future purchases or dependence on the platform. They may not realise how strongly the app’s design influences their choices.
The phrase “If you are not paying, you are the product” explains part of the situation, but it is too simple. Users may be an audience for advertisers, a source of information, possible subscribers or participants who make a marketplace valuable.
A free app is therefore not truly without cost. Someone is always paying, whether it is an advertiser, subscriber, business, investor or the user through a later purchase.
The most important question is whether people understand the exchange. A fair app should explain how it earns money, give users clear choices and avoid manipulative design. The word “free” should describe the price, not hide the real cost.
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