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The Ultimate Guide to Making Money from Free iPhone Games and Apps

Free games make up over 90% of total downloaded apps on the Apple App Store. But how can all these free games turn a profit?

Free iPhone games monetize themselves through in-app purchases, advertising, sponsorships, and the freemium model. By optimizing these money-making features within their games, developers are able to sustain their businesses while offering apps at no upfront cost.

Let‘s explore the most successful strategies and techniques used in free games to understand this profitable model. As an avid iPhone gamer myself, I‘ve played and analyzed hundreds of titles across all categories. Here‘s what my experience and research shows about how these addictive free games earn their money.

In-App Purchases

Without a doubt, in-app purchases (IAPs) make up the bulk of revenue for most free games. Over two thirds of total App Store earnings come from IAPs. By letting users make small purchases within the game, developers continue monetizing an app long after the initial download.

Some of the most lucrative IAP implementations include:

  • Virtual currencies – Coins or gems speed progression, like 200 gems for $1.99 in Clash of Clans
  • Power-ups – Consumables that temporarily boost abilities, like extra moves in Candy Crush
  • Bonus content – Additional levels, characters, items, skins for customization
  • Pro subscriptions – Auto-renewing pass for special perks, ad-free experience, etc.

IAP revenue really adds up. According to Apple, mobile puzzle games like Candy Crush Saga are making over $4 million daily just from in-app purchases!

Optimizing IAP Strategy

Developers use clever psychological tactics to encourage IAPs. Here are some of the most effective strategies for monetizing through in-app purchases:

  • Gate progression – Require soft currency or power-ups to advance, fueling IAPs to keep playing
  • Time gates – Have timers slow down gameplay, incentivizing IAPs to speed things up
  • Fun pain – Inflict inconveniences that IAPs can relieve (running out of lives in Candy Crush)
  • Artificial scarcity – Limit resources to promote purchasing (gems in Clash games)
  • FOMO deals – Offer special limited-time IAP bundles so users feel they’ll miss out

These tactics increase urgency for making purchases. And the revenue numbers show they work very effectively!

Advertising

Next to IAPs, advertisements represent the other major money maker in free games. Ads allow monetization from the wider user base, not just the ~5% of players who purchase IAPs.

Some types of ads integrated into games include:

  • Interstitial ads – Full screen ads displayed between levels or when restarting
  • Rewarded video ads – Watch a 30 second video to receive soft currency, power-ups, etc.
  • Banner ads – Displayed on bottom or top when gameplay is paused
  • Native ads – Match visual design of the game for organic look and feel

According to Juniper Research, mobile games will generate $116 billion in ad revenue by 2025, up from $81 billion in 2020.

2020 $81 billion
2025 Forecast $116 billion

Games can earn up to $7.50 for every 1,000 ad views, so these ads quickly add up, especially for popular titles.

Optimizing Ad Placement

Savvy developers meticulously A/B test different ad formats and placements to maximize revenue while minimizing user irritation. Some best practices include:

  • Place ads at natural stopping points to avoid disrupting gameplay flow
  • Gate desirable content behind rewarded ads instead of making them mandatory
  • Use opt-in ads vs autoplay video to increase user engagement
  • Limit ad frequency to avoid overwhelming users
  • Provide a paid ad-free IAP option for loyal players

With strategic integration, ads can significantly boost earnings beyond in-app purchases alone.

Sponsorships & Brand Partnerships

Free-to-play games also make money by aligning with strong brands through sponsorships and partnerships.

Popular examples include:

  • Sponsored virtual goods – Nike shoes for avatars in NBA 2K21
  • Product placement – Integrating real-world cars and fashions into racing games and virtual worlds
  • Brand takeovers – Temporarily re-skinning part of a game with brand art and assets
  • video Ads for new releases – Movie trailers and game teaser ads

These promotional tie-ins are a lucrative way to monetize the game‘s audience and appeal to brands seeking access to engaged users.

According to eMarketer, mobile gaming captures 28% of total U.S. sponsored content spending. And sponsored experiences garner higher engagement than regular display ads.

The Freemium Model

Freemium games limit game progression unless you sign up for a subscription. This technique has been successfully adopted by top grossing titles like Pokémon GO and Candy Crush Saga.

For example, in Mario Kart Tour you can progress through the first few circuits for free. But to unlock higher speed classes, additional tracks, characters, and the best rewards, you need to purchase the $4.99 Gold Pass each month.

The freemium model incentivizes users to keep subscribing to maintain access to the full experience. These recurring payments create reliable revenue.

According to market researcher Data.ai, freemium subscription revenue grew 160% year-over-year in Q1 2022, vastly outpacing other business models.

The freemium model will likely keep gaining traction as developers find it strikes the perfect balance between maintaining a large free user base while maximizing monetization of their most engaged players.

Wrapping Up

And there you have an inside look into the main tricks and tactics free iPhone games use to profit. Each model – IAPs, ads, sponsorships, freemium subscriptions – taps into different user segments to maximize revenue potential.

By blending these money-making features seamlessly into the core gameplay loop, savvy developers have built an incredibly lucrative free-to-play app ecosystem.

Now you can enjoy your favorite free games with deeper insight into the strategic monetization systems powering (and profiting from) these apps. Just beware, because they’ve been carefully designed to keep you coming back for more!