They say, “If you’re not paying for the product, you are the product.” Such a statement describes the many free apps available online, raising questions on how they monetize despite being ‘free.’
So, how do free apps make money? Let’s answer this question and address the concerns of data leakage.
Do Free Apps Make Money and How? Navigating Data Leakage Concerns and Monetization Strategies
The simple answer is yes, free apps make money, quite lucratively as well. Most free apps operate on the freemium model, where developers offer the basic features freely while the advanced features come at a premium.
Thus, such apps are technically not ‘free.’ This term is simply a marketing strategy to entice people to use the service.
Speaking of marketing: it’s common for most companies to use ‘engineering as marketing.’ This is where they will have free useful tools alongside their core premium product or service. The goal is to immerse the user into the latter.
For instance, Wix, the website builder, has a free business name generator. People looking for a business name will likely need a website, putting Wix in the right place as the solution.
Getting back to free apps, one of the ongoing concerns is privacy and data security. Based on a survey by Appinventiv, 15-30 popular free Android apps secretly leaked sensitive information to remote servers. The rest, roughly two-thirds, mysteriously handled data.
Monetization models used by free apps
Aside from freemium, here are the main strategies, explaining, how do free apps make money:
- Advertising
- In-app purchases
- Subscriptions (or one-time purchases)
- Sponsorship
Sadly, regardless of the model, the risks of data leakages are too common. The first danger is sensitive data sharing and permissions.
Our computing devices collect much personal information which apps can gather. It’s also become routine for apps to ask permission to access your camera, microphone, SMS inbox, and location. This means they can follow your whereabouts, hear your phone calls/recordings and read your messages.
The second risk is that many apps share your personal information with third parties like advertisers and even on the dark web.
Finally, another threat with free apps is malware. This often happens when malicious developers create a replicated version of a legitimate popular app for unsuspecting users to download.
Is In-App Advertising Safeguarding User Data?
Like browsers, apps also contain several types of cookies that allow them to authenticate you, track your activity, and share data with third parties. Apps usually disclose cookies upfront, allowing the user to accept or refuse. Declining cookies often means you can’t use that app or certain parts of it.
With cookies, apps don’t protect user data. The only exception is when advertisers and developers must adhere to specific privacy region laws. For instance, GDPR (in the EU) is one of the strongest regulations which requires companies to show what data they collect and why.
Brands like Apple now have a feature where users can have their app not trace their activity to protect their personal information. If you choose ‘Ask App Not to Track, the app developer can’t access the system advertising identifier (IDFA), often used for tracking. The app is also not permitted to monitor your activity using other information that identifies you or your device, like your email address.
How do freemium apps handle data collection practices?
As previously mentioned, apps use different kinds of cookies for data collection. By law, they must disclose each one, the type, what information is collected (and why), and how to opt out of the cookies.
Additionally, apps are mandated to have a privacy policy that states how they handle the collection of personal data (which also often includes the cookie policy). Developers can communicate these guidelines by presenting the policy each time someone uses the app or by having it in a separate location.
These methods of revealing data usage apply whether an app is free or premium. While paid apps are more secure, most handle data privacy similarly. In simple terms, paying for an app doesn’t mean your personal is free from utilization.
Still, premium apps may offer flexibility in how users control how their data is collected. However, the better solution lies with the app store itself. As mentioned, Apple has the ‘Ask App Not to Track’ option, a necessary feature for people to decide if they want third-parties to use their data.
For now, few apps have in-built privacy features unless they can function without personal data.
Subscriptions: Data Protection and Value Proposition
Subscription-based apps are safer for the consumer as the company is unlikely to engage in ill behavior for fear of ruining its reputation. It also provides a more pleasant user experience with no ads.
These apps can establish trust in users regarding data security in several ways:
- Having apps that are private by design (through data minimization, adhering to the best privacy practices, etc.)
- Clear privacy policies and consent management
- Anonymization techniques (encryption, hashing, data masking, etc.)
- Regular software updates
- Compliance with data protection regulations
Aside from adhering to the best data collection practices, subscription-based apps can also provide:
- Dedicated customer support
- Ad-free experience
- Exclusive deals
- Referral incentives and discounts
- Customer feedback surveys
Still, education is key for users to understand how their data is handled with subscription-based apps. It helps them know what information is necessary for the app to work at its full potential and the regulations in place if an app may be mishandling it.
How to Lower Data Leakage Risks
The first line of defense for lowering data leakage is front-end encryption, where data is encrypted right in your browser. Here are other techniques to consider:
- Use official app stores
- Check out the data permissions
- Limit location
- Don’t sign into apps with your social media account
- Keep apps updated
- Delete apps you don’t use
