How to make money with an app. App monetisation strategies
Building a great app is only half the battle for startup founders. The other half is turning that app into a revenue-generating business. In mobile economy, with global app spend exceeding $150B annually, nearly all apps are free to download, yet the app market generates enormous revenue. How is this possible? The answer lies in smart monetization strategies. In this article, we’ll explore how to make money with an app on both iOS and Android, covering models for free apps and paid apps alike. From in-app purchases and ads to subscriptions and sponsorships, we’ll dive into real-world examples and case studies of app monetization done right. Learn how to turn downloads into dollars.
The Free vs. Paid Apps
Free Apps Dominate. The vast majority of mobile apps today are free to download: about 97% of Google Play apps and 94% of iOS apps. This “free-to-download” era means founders must plan monetization beyond the upfront price. In fact, only around 5% of apps follow a paid-upfront model on the app stores. The paid-app market has shrunk dramatically from nearly 90% of apps in 2011 to under 5% today. Users now expect to try apps free, putting the onus on developers to earn money through in-app mechanisms.
The Revenue is Real. Don’t mistake “free to download” for “no revenue.” In-app purchases (IAP) and other models have made the app economy extremely lucrative. IAPs alone account for about 48% of mobile app earnings. Consumer spending on iPhone apps is nearly double that on Android. iOS users drive ~69% of app revenue vs ~31% on Android, but both platforms support thriving monetization for those who choose the right strategy. The key for founders is selecting a model that fits your app and audience, whether that means leveraging volume with a free app or charging a premium for a unique offering. Below, we break down monetization strategies for free apps and for paid apps, with examples of each in action.
Monetization Strategies for Free Apps
Free apps generate revenue by monetizing user engagement and content instead of an upfront fee. Here are the top strategies for free (aka freemium) apps:
1. In-App Purchases (Microtransactions)
One of the most lucrative models for free apps is selling virtual goods, features, or content within the app itself. In-app purchases (IAP) let users spend money inside a free app to unlock extra value – and they are the single largest source of mobile app revenue. In gaming especially, this model reigns supreme: roughly 79% of mobile games and even 50% of non-gaming apps use in-app purchases to make money. The beauty of IAP is that your app remains free to download, while power users or enthusiasts can spend on enhancements.
Real-world success stories abound. Roblox, a free-to-play gaming platform, has mastered IAP: the game is free, but players buy a virtual currency “Robux” to purchase in-game items and experiences. In just one quarter of 2024, Roblox pulled in over $276M from in-app purchases. Another juggernaut is Candy Crush Saga, which pioneered the freemium + microtransaction model. Candy Crush is free but entices users to pay for extra lives, moves, or boosters. The strategy so effective that the game has raked in $20B in lifetime revenue since its 2012 launch. The maker of Candy Crush proved that letting users buy small advantages or content can create a massive revenue stream, all while keeping the core game accessible. The key is to offer purchases that enhance enjoyment without breaking the experience for non-payers. Done right, IAP can turn a free app into a revenue powerhouse while keeping the majority of features free.
Types of IAP: In-app purchases come in a few flavors. Consumables (e.g. a pack of coins or an extra life in a game) are used up and can be bought repeatedly, whereas non-consumables are one-time unlocks (like a pro feature or level pack) that the user keeps. Many apps also offer subscriptions as an IAP category. Apple and Google enforce standards for IAP (and take a revenue cut of 15-30%), but they handle payment processing, making it easier for developers to implement. The major advantage of IAP is ongoing revenue potential: as long as users find value in purchasing, the app keeps earning. Pro Tip: Analyze your app’s usage to identify what extra features or content users crave, and package those as IAP offerings. Just avoid being too aggressive or “pay-to-win” in games; users tolerate IAP best when purchases feel optional and fun.
2. Freemium Model (Free App with Paid Upgrade)
The freemium model is closely related to IAP and is one of the most popular strategies for non-game apps. With freemium, you give away basic functionality for free and charge for advanced features or content. It’s essentially a “try before you buy” approach: users get a taste of the app’s value at no cost, and the most engaged users convert into paying customers for the full experience. This model can use one-time purchases or subscriptions to unlock the premium tier.
Many productivity and SaaS-like apps for consumers follow freemium. A classic example is Slack, the business communication platform. Slack’s app is free for small teams with limited message history and integrations, but companies that need more (e.g. unlimited message retention, advanced features) must upgrade to paid plans. This approach helped Slack amass a huge user base quickly, then monetize a fraction of users at high subscription rates. Dropbox similarly offers a free tier (2 GB of storage) and charges $9.99/month for expanded storage. Even though “2 GB is never enough”, the free offering hooks users and integrates into their life until upgrading becomes a no-brainer. The success of Dropbox’s freemium conversion helped it grow into a multi-billion dollar company.
Founders love freemium because it maximizes onboarding – a large free user base can drive network effects, word-of-mouth, and market penetration. Users love it because there’s no initial cost or commitment. The challenge is conversion: typically only a small percentage of free users will convert to paid. For example, a fitness startup might let everyone access basic workouts free, but reserve personalized plans or advanced analytics for paid subscribers. Claudia Dean’s fitness app did exactly this: offering lots of free workout content while keeping exclusive, tailored programs behind a paywall. The strategy is paying off with 20,000 users joining every month and healthy conversion rates. Their tactic? Hook users with genuine value in the free tier, then invoke a bit of FOMO for the premium features (positioned as exclusive perks). As a founder, ensure your free version delivers enough value to engage people, so they stick around, but holds back “power” features that your most devoted users will happily pay for. It’s a delicate balance, but when done right, freemium can drive large scale and reliable recurring revenue.
3. Subscription Model (Recurring Revenue)
Subscriptions deserve special attention as a subset of the freemium approach. In a subscription model, users pay recurring fees (monthly, yearly, etc.) to access premium content or services in your app. Subscriptions have exploded in popularity because they provide predictable, ongoing income for developers, and many users have shown willingness to pay continuously for apps they use often. In fact, a whopping 82% of revenue for non-gaming apps on the app stores comes from subscription payments. This includes streaming services, news apps, dating apps, productivity tools, and more.
For content-driven apps, subscriptions make a lot of sense. For example, major publishers like The Washington Post have an app that offers a limited number of free articles, then requires a subscription for unlimited access. Media, news, and entertainment apps often use this “metered paywall” approach. Streaming apps (Netflix, Spotify, etc.) likewise live on subscriptions: users subscribe for ad-free, unlimited content consumption. Even utility apps and B2C services have hopped on the subscription bandwagon: think of premium weather apps, language learning apps, or meditation apps like Calm and Headspace offering annual plans.
The subscription model can also work in tandem with a free trial or freemium structure. Typically, free users get a trial period or basic-tier content, and then must subscribe to continue full use. The benefit for founders is the reliability of recurring revenue and higher customer lifetime value if you retain subscribers over time. However, note that subscriptions require continuously delivering value: you have to keep adding content or utility so users feel it’s worth paying every period. If your app lends itself to regular content updates or ongoing service (news updates, new fitness classes, cloud sync, etc.), subscriptions could be your monetization goldmine. Just be mindful of pricing and churn: it’s wise to experiment with price points and offer various plans (weekly/monthly/yearly) to find the sweet spot that maximizes paying users without scaring away your free user base.
4. In-App Advertising
If you’ve got a free app and a growing user base but don’t want to charge users directly, in-app advertising is a no-brainer model to generate revenue. This strategy means displaying ads within your app: banners, pop-ups, video ads, native ads, and getting paid by advertisers for impressions or clicks. Users pay nothing, the app stays free, and you earn money by essentially renting out screen space to advertisers. It’s a classic model that has sustained many free products (think Facebook or Google). For mobile apps, in-app ads are one of the leading monetization methods, with global in-app ad spend projected to hit $226B in 2025.
Successful implementation, however, requires finesse. Users generally accept some ads in a free app, but too many ads or disruptive formats can annoy users and drive them away. The goal is to integrate ads in a way that doesn’t ruin the user experience. For instance, native ads (ads designed to look and feel like normal content) on social platforms blend seamlessly – you might scroll right past a sponsored TikTok or Instagram post thinking it’s regular content. A great example is how TikTok showed Ralph Lauren’s #PoloBear campaign videos: they were entertaining and well-targeted enough that users watched them like any other content, enjoying an ad without even realizing it. When ads align with user interests, they feel less like an interruption and more like part of the experience.
Mobile games often use interstitial ads or rewarded video ads at natural breaks (e.g. between levels) so as not to interrupt gameplay. An illustrative case study is the indie game Freaking Math. This simple free game needed a monetization boost, so the developer integrated periodic interstitial ads via Google AdMob – but carefully, ensuring ads were placed at logical pauses and formatted for different devices. The results were astounding: downloads of the app skyrocketed 2,400% and income jumped 2,000% after adopting in-app ads (without upsetting users). It even propelled the app into top charts internationally. This shows the power of advertising when balanced with user experience.
For founders, the ad model is appealing because it doesn’t limit your user base with paywalls – anyone can use the app, which is great for growth and virality. The trade-off: you need a large and engaged audience to earn serious money from ads. Revenue is typically proportional to usage, more sessions and views = more ad impressions. Also, remember that platforms have guidelines: Google and Apple will penalize overly aggressive ads that hijack the interface or trick users. Stick to standard formats (banner, interstitial, rewarded video, native) and test your ad frequency. If done right, advertising can monetize even millions of non-paying users effectively – just ask the creator of Flappy Bird, the viral game that was reportedly earning $50k per day in ad revenue at its peak popularity. The game was free and famously simple, but thanks to sheer volume of users seeing banner ads, it became a cash machine for its indie developer. In short: ads can fuel free-app profits, as long as you keep users happy and coming back for more.
5. Affiliate Marketing & Referrals
Another monetization angle for free apps is affiliate marketing – essentially earning commissions by recommending products or services to your users. In this model, your app acts as a marketing channel for other businesses. You incorporate links or offers for external products, and if your users make a purchase or sign up via that link, you get a cut of the revenue. It’s a bit like advertising, but often more integrated and content-driven. This strategy works best if your app’s content or function naturally aligns with purchasable products.
For example, imagine a recipe app that links to grocery delivery for ingredients, or a travel app that refers users to hotel bookings. A real-world case is Skin Bliss, a skincare advice app that analyzes cosmetic products. Skin Bliss monetizes by linking users to skincare product listings – likely through programs like Amazon Associates or brand affiliate programs – and earns a commission on each sale made through the app. Users get value (product recommendations and easy purchasing), and the app developer earns passive revenue. Many shopping guide apps, deal-finder apps, or content apps (health, fashion, finance, etc.) leverage affiliate links in this way.
Even if your app isn’t directly about shopping, you can be creative. Some finance apps earn referral bounties by directing users to credit card sign-ups or brokerage accounts. Some free productivity apps might promote premium software or courses with affiliate arrangements.
The affiliate model usually won’t be your app’s primary revenue driver unless your app’s core purpose is shopping or content curation. But it can be a nice supplemental income stream alongside other methods. The advantage is that it’s relatively invisible to the user, it doesn’t ask them to pay or view ads, it simply offers them helpful links that might earn you money if clicked. To succeed, choose affiliate partnerships that truly match your audience’s interests: relevance matters for conversion.
6. Sponsorships and Brand Partnerships
Think of sponsorships as the bigger sibling of affiliate marketing. With a sponsorship (or partnership deal), you collaborate with another company or brand that wants exposure to your user base, typically for a flat fee or revenue share. This could involve co-branding, special content, or in-app promotions that feature the sponsor. It’s a strategy often seen in games and event apps, but creative founders can apply it broadly.
A classic example comes from the mobile gaming world: Angry Birds’ partnership with the NBA’s Chicago Bulls. Rovio (Angry Birds’ developer) teamed up with the Bulls to create a special in-game event where the iconic Angry Birds characters donned Chicago Bulls jerseys and themes. This cross-promotion was essentially a sponsorship: the Bulls got exposure to millions of players, and Angry Birds got a licensing fee plus an influx of new users (basketball fans) drawn in by the promotion. It turned out to be a win-win masterclass in branding: Angry Birds not only earned extra revenue, they also spiked their downloads and engagement by tapping into the Bulls’ fanbase. In other words, a smart partnership can both monetize and grow your app’s audience at the same time.
Sponsorship deals aren’t just for big brands; a startup app with a niche audience can also find sponsors. For instance, a mindfulness app could partner with a yoga mat company to sponsor a “30-day meditation challenge” in the app, with the company’s branding subtly integrated and maybe offering discounts to users. The key is alignment: the sponsor’s offering should resonate with your users so it feels like added value, not ju1st an intrusive ad. When done right, sponsored content actually enhances the user experience: users might discover a useful new product or get an exclusive deal.
7. Transaction Fees (Marketplace Model)
Does your app facilitate transactions between users, or between users and service providers? If so, you might monetize by taking a cut of each transaction. This model is the foundation of many marketplace and gig-economy apps. Essentially, your app is free and provides a platform or service (like ride-hailing, food delivery, freelance jobs, ticket resales, etc.), and whenever a payment flows through the platform, you charge a commission or service fee.
Some of the biggest names in tech leverage this strategy. Uber and Lyft don’t charge passengers to download their app – instead, they take a percentage of each ride fare as their revenue. Similarly, Airbnb is free to join, but takes a commission from each booking made between hosts and guests. Apps like eBay, Booking.com, and Amazon likewise operate on transaction fees. In each case, the app’s job is to bring together buyers and sellers, add value through the platform’s functionality, and then skim a portion of the economic activity happening on the app.
For an early-stage startup, this model can be extremely powerful if you’re building any kind of platform business. The advantages: revenue scales as usage scales, and it feels organic – users only pay when they’re getting value (e.g. completing a purchase or booking). It’s clear and transparent for users that a fee is involved for the service. However, two big challenges come with transaction monetization. First, you need to reach critical mass – enough transactions flowing to sustain the business, which can take time (the chicken and egg problem of building a marketplace). Second, trust and security are paramount since real money is changing hands; you may need to invest in payment systems, dispute resolution, and compliance.
If you can crack those, transaction fees can be the holy grail of app monetization. You’re essentially taxing a new economy that your app created. Many fintech apps use a variant of this (e.g., stock trading apps taking tiny fees or spreads on trades). As a founder, consider if your app enables commerce or exchange in some form – if so, designing a transaction-based revenue stream could align making money directly with providing value to users.
8. Data Monetization
We live in the age of data, and some apps choose to monetize the data they collect. Data monetization means using user-generated data as a product in itself. For instance, selling insights, trends, or anonymized datasets to third parties. This strategy is more behind-the-scenes and must be handled carefully, given rising privacy concerns and regulations. But it can be lucrative for apps that accumulate unique data.
An example: large-scale ride sharing or navigation apps gather tons of location data. Uber, for instance, has so much real-time location and traffic information that, with user permission, it can sell or license data to city planners or other companies (one reported example is Uber selling location-based insights to other services like food delivery companies). Another example might be fitness or health apps aggregating user activity data and selling trends to healthcare researchers or wellness brands (again, in aggregate, not personal info). Even an app that tracks shopping habits could license market trend data to retail analytics firms.
If you consider this route, transparency and opt-in are crucial. Both App Store and Google Play now require clear disclosures of what data you collect and how it’s used. Users have grown wary of apps that feel “creepy” in harvesting data, so you should explicitly ask for consent and even explain how sharing data can benefit users or society. For example, a weather app might tell users that sharing their location data helps improve weather prediction accuracy. Keep in mind that data monetization typically requires scale; you need a significant user base to have valuable datasets. There’s also the engineering challenge of storing and processing big data securely.
For many early-stage startups, data monetization won’t be the first monetization lever to pull, but it can become a secondary revenue stream down the line. Some companies have even pivoted entirely to data-centric business models once they realized the insight value of what they were collecting. Just proceed ethically: prioritize user trust, anonymize data, and comply with privacy laws. When handled right, data monetization can yield new revenue, better services, and even partnerships with larger organizations interested in your data.
9. Other Approaches: Donations & Crowdfunding
Not every app monetization strategy has to be commercial in the traditional sense. Especially for mission-driven apps or those serving a passionate community, donations or crowdfunding can be viable ways to sustain the app.
Donations (Tip Jar Model): Some apps simply ask their user base for voluntary contributions. If your app provides a lot of value to a niche group or operates in a non-profit space, devoted users might chip in to keep it running. For example, an open-source mental wellness app with tens of thousands of downloads might rely on donations from its community – essentially treating users as “patrons” supporting a cause. This strategy requires that your users really care about your app’s mission. It can work well for apps related to religion, education, open-source utilities, or community causes, where users feel a sense of ownership and goodwill. Implementing donation-based monetization might be as simple as integrating a “Donate” button: using in-app purchase for tips, or external services like Patreon/PayPal.
Crowdfunding: If you’re in the pre-launch or early development phase, crowdfunding can actually jumpstart your app’s funding and validate demand. Platforms like Kickstarter or Indiegogo allow you to pre-sell the concept of your idea or offer perks for backers. There have been instances of mobile apps raising significant capital this way. For example, Seedtime, a gardening planning app, raised over $340,000 via crowdfunding to finance its development. By appealing directly to future users (and giving them a say in the app’s direction), crowdfunding can create an early community and the funds to build the product. On the flip side, once the app is live, you could crowdfund new features or expansions (much like how video game developers use Kickstarter for DLC or sequels).
Just remember: these models rely on genuine user enthusiasm. You have to deeply connect with your audience for them to open their wallets out of generosity rather than obligation.
Monetization Strategies for Paid Apps
Not all apps need to be free, some can charge an upfront price and still thrive. A paid app means users pay once to download your app, after which they typically get full access without ads or further payments required. This premium model was the norm in the early days of app stores and is still very viable in certain categories.
1. Paid Downloads (One-Time Purchase)
With the paid model, monetization is straightforward: every download is direct revenue. You set a price (from $0.99 to $500), and users must pay before they even try your product. The obvious benefit is immediate income and the fact that you don’t have to engineer complex in-app purchase systems or manage free vs paid user segments – everyone who has the app has paid you. It also tends to create a different relationship with users: because they’ve put money down, they often value the app more and have higher expectations for quality and updates. Paid apps also have the perk of no ads needed, since revenue is coming from the purchase itself.
However, getting people to commit upfront is a challenge in the era of free alternatives. If you choose this model, your app must offer something clearly worth the price – either a unique utility, exceptional content, or a premium experience users can’t get elsewhere. The paid model works best for categories like professional productivity tools, specialized utilities, premium games, and certain photo/video apps. For instance, high-quality mobile games like Minecraft or Monument Valley have charged upfront (~$10) and still sold millions of copies. Minecraft’s mobile edition alone grossed about $115M in 2025, demonstrating that a beloved paid app can generate huge revenue even today. In the productivity section, apps like GoodNotes, Notability, or fine PDF scanners have historically done well as paid downloads, especially on iOS, because they target users who seek professional-grade features and are willing to pay for a polished, ad-free experience.
One strategy to succeed with a paid app is to leverage app store featuring and reviews – since you don’t have a free version, things like ASO (App Store Optimization) and positive ratings are crucial to convince users to buy sight unseen. Some developers release a separate free version with limited features. A notable approach is taken by ABBYY, a productivity software company: they offer a free PDF scanner app with optional subscriptions, but also a fully separate paid pro app. The free version’s paywall actively prompts users to upgrade to the paid app for the complete feature set. This way, ABBYY captures users who prefer testing first, while still ultimately monetizing through a premium app sale. As a founder, consider whether a dual-version strategy makes sense: free to build audience, paid to generate revenue from your most serious users.
2. Hybrid Paid Models (Paid + In-App Purchases or Upgrades)
A twist on the pure paid model is to combine strategies. Some apps charge upfront and offer in-app purchases for additional content. This is common in some games (pay $4.99 for the game, but optional expansions via IAP) and in apps that have multiple tiers (a base app for $1.99 + a premium feature set via extra purchase). While this approach can work to increase revenue per user, founders should be cautious – users who paid to download might feel nickel-and-dimed if immediately faced with more purchases. The safest approach is to use IAP for genuinely new content delivered later (e.g., as new game levels released as DLC), not for core functionality that arguably should have been included in the paid app.
Another hybrid strategy is paid apps with subscriptions. A few high-end apps, especially in professional domains, do this: for example, an editing software might cost $9.99 to download, including basic tools, but require a subscription for cloud features or extensive content library updates. This is essentially combining all models – which only works if your app targets a professional or business user who is used to paying (think of mobile apps for design, engineering, or enterprise).
A more common and palatable hybrid model is the free-and-paid dual app strategy as mentioned with ABBYY. You leverage a free version to drive awareness and trials, while reserving the fully unlocked product as a separate paid product. This way, you cater to both types of users and maximize reach. Many early mobile games used to have Lite (free) and Full (paid) versions; today, that’s less common due to freemium prevalence, but in tools and utilities it can still make sense.
The takeaway for founders is: don’t feel constrained to one approach. You can get creative and mix monetization models to suit your app. Just keep user experience in focus – any payment, whether upfront or later, should feel justified by the value provided. The ultimate goal is a sustainable revenue stream that grows as your user base grows or as your product grows in offerings.
TL;DR (Key Takeaways)
Monetizing an app is as much an art as a science, and the best approach depends on your app’s nature and audience. As you plan your revenue strategy, keep these key insights in mind:
Plan Early, Iterate Often: Decide on a monetization strategy during design stage. Whether it’s freemium, ads, or paid, your strategy might influence your app’s features and UX. That said, be ready to iterate. Monitor your metrics (conversion rates, ARPU, retention) and don’t hesitate to tweak pricing, offer trials, or test different models to find the optimal mix.
Know Your Users’ Willingness to Pay: Research your target audience and competitors. Are your users teenagers with little disposable income (lean towards ad-based or freemium models), or professionals who pay for productivity (premium or subscription could work)? Understand what similar apps are charging and how. Solve a real problem or deliver joy – users pay when they clearly perceive value.
User Experience is King: A common thread through all the strategies is preserving a great UX. Too many ads can tank your engagement, and a paywall that’s too harsh can drive users away. Strive for monetization that complements the user experience, not disrupts it. For example, incorporate native ads that match your app’s content, or design your freemium limits such that free users still love the app. Happy users are the ones who convert and stick around.
Leverage Hybrid Models: Don’t be afraid to combine monetization methods. Many of the most successful apps mix methods: a free game might have both ads and in-app purchases; a content app might have a free ad-supported tier and a paid ad-free tier; a marketplace might eventually add promoted listings (ads) on top of transaction fees. Multiple revenue streams can make your business more resilient. Just introduce each thoughtfully, and ensure it aligns with user expectations.
Platform Considerations: Both iOS and Android offer monetization features, but note the differences. iOS users historically spend more on in-app purchases, while Android’s larger user base can yield big ad impressions. Ideally, launch on both platforms to maximize reach, but watch your analytics – you might focus more marketing on the platform where revenue per user is higher for your app.
Case Study Inspiration: Learn from those who’ve done it. Roblox and Candy Crush taught us the scale of in-app purchases; Slack and Dropbox exemplify freemium conversion; Flappy Bird and TikTok show that user engagement at scale can monetize via ads; Angry Birds x Chicago Bulls demonstrated creative sponsorship; Uber and Airbnb built empires on transaction fees. Each of these success stories started small and iterated. Use them as inspiration, but craft a strategy that fits your own app’s story.
Build Value, Then Monetize: Finally, never lose sight of delivering value. The most robust monetization strategy will collapse if the app itself doesn’t delight users. Focus on product-market fit and user engagement first – a loyal user base gives you the freedom to experiment with monetization without killing your app. Get users to love your app, and then figure out how to get them to pay; or how others will pay for their attention.
Making money requires creativity and a deep understanding of your users. Early-stage founders should treat monetization as a core part of their startup strategy, not an afterthought. By choosing the right model and executing it with finesse, you can turn your app into a thriving business engine. The path to app monetization success is not one-size-fits-all, but armed with the strategies and examples above, you’re well on your way to finding the formula that works for your app. If you need any help with this process, feel free to drop us a message. Now go forth, experiment, and may your downloads turn into dollars!