How to monetise a mobile app

The freemium model offers the app for free with limited features and charges for access to premium capabilities. It is the most widely used model because it lowers the barrier to entry: users can try the app risk-free and decide whether the added value justifies payment.

The key to freemium is correctly defining the boundary between free and premium. The free tier must deliver enough value for users to get hooked, while making it clear that the full experience requires payment. Spotify is the classic example: free listening with ads and limitations, premium without restrictions.

Subscriptions generate predictable, recurring revenue (MRR/ARR). Apple and Google favour this model: both stores reduce their commission from 30% to 15% after a user’s second year of subscription. Subscriptions work especially well in content, productivity, fitness and ongoing service apps.

For a subscription to work, the app must deliver continuous value that justifies recurring payment. Offering a free trial (7 or 14 days) increases conversions. Key metrics are LTV (lifetime value), monthly churn rate and payback period.

In-app purchases let you sell digital content, features or virtual goods within the app. There are two types: consumables (coins, lives, credits that are used up) and non-consumables (filters, themes, levels bought once). Games dominate this model, but productivity and creative apps also use it.

Apple and Google require that digital content purchases go through their payment systems (with a 15–30% commission). Physical goods and real-world services (Uber, delivery) can use external gateways. Designing the app’s internal economy carefully is essential to avoid predatory patterns.

Advertising is the most accessible monetisation model: it requires no payment from the user. The main formats are banners, interstitials (full-screen between transitions), rewarded video (users watch an ad in exchange for an in-app reward) and native ads (integrated into content).

Rewarded video is the most effective format because it aligns incentives: the user chooses to watch the ad in exchange for a tangible benefit. eCPMs (revenue per thousand impressions) vary enormously by market, format and platform. In premium markets, rewarded video can generate 10–30 USD eCPM, while a banner generates 0.5–2 USD.

Most successful apps combine several monetisation models. A common approach is freemium + advertising for free users + subscription to remove ads and unlock premium features. Another is a base subscription + in-app purchases for extra content.

The key to hybrid models is that every monetisation layer must be coherent with the value the user receives. It’s not about maximising extraction but about offering options that suit different user profiles: the casual user who accepts ads, the regular who prefers a moderate subscription, and the power user who invests in premium purchases.

To evaluate whether your monetisation model works, you need clear financial metrics. LTV (Lifetime Value) represents the total revenue a user generates over their entire relationship with the app. CAC (Customer Acquisition Cost) is what it costs to acquire that user. The basic rule: LTV should be at least 3x CAC for a sustainable business.

Monthly ARPU (Average Revenue Per User) tells you the average revenue per active user. The free-to-paid conversion rate and time-to-first-purchase are key indicators of monetisation funnel health. Review these metrics by cohort, not as global averages.