Over 90% of mobile app revenue comes from free apps. That's right—most successful apps don't charge users a penny upfront. Yet choosing between free and paid isn't straightforward, and getting it wrong can kill your app before it even gets started. The decision affects everything from user acquisition to long-term profitability, making it one of the most critical choices you'll face as an app developer.
This monetisation puzzle has become more complex over the years. Users have developed strong expectations about what should be free versus what's worth paying for. Meanwhile, app stores are flooded with millions of options, making it harder than ever to convince someone to spend money on an unknown app. The business model you choose will shape your entire development strategy, marketing approach, and revenue potential.
The best monetisation strategy isn't about choosing between free or paid—it's about understanding your users and what they value most
Throughout this guide, we'll explore the psychology behind user payment decisions, examine different revenue streams, and help you determine which approach suits your specific app idea. Whether you're building a productivity tool, game, or lifestyle app, the principles remain the same: your monetisation strategy must align with user expectations and deliver genuine value. Let's break down everything you need to know to make this decision with confidence.
Understanding Free vs Paid App Models
When I first started working with app developers, the choice seemed obvious—charge people for your app and make money straight away. But after years of watching apps succeed and fail, I've learned it's not that simple. The decision between free and paid isn't just about money; it's about how people behave and what they expect.
Free apps are everywhere now. People download them without thinking twice because there's no risk. They can try your app, see if they like it, and delete it if they don't. Paid apps face a much tougher battle—users need to be convinced before they even download. They're asking themselves: "Is this worth my money?" before they've experienced what you've built.
The Numbers Game
Free apps typically get downloaded millions of times more than paid ones. That's just the reality. But downloads don't equal success. A free app with 100,000 downloads might make less money than a paid app with 1,000 downloads—it depends on what happens after someone installs your app.
The paid model is straightforward: someone pays, they get your app, you make money. Free apps work differently—they make money through advertising, selling extra features, or asking for subscriptions later. Both approaches can work brilliantly, but they require completely different strategies.
The Psychology Behind User Payment Decisions
People have a funny relationship with money when it comes to mobile apps. They'll happily spend £5 on a coffee that lasts ten minutes but hesitate to pay £2.99 for an app they might use daily for years. This behaviour isn't random—it's deeply rooted in psychology and understanding it can make or break your mobile app monetisation strategy.
The biggest psychological barrier is something called 'payment friction'. When someone sees a price tag upfront, their brain immediately starts calculating whether it's worth the risk. They don't know if your app will actually solve their problem yet, so they're essentially buying a promise. Free apps remove this friction completely—users can try before they commit to anything.
The Mental Accounting Effect
Users treat different types of purchases differently in their minds. A £0.99 in-app purchase feels less significant than a £0.99 app download, even though it's the same amount. This happens because people mentally categorise the in-app purchase as an 'upgrade' to something they already value, rather than a blind purchase.
Users are 3x more likely to make their first purchase after they've already invested time in your app. This is why freemium models often outperform paid apps for user acquisition.
The Commitment Escalation Principle
Once users have invested time learning your app, they become psychologically committed to it. They're more willing to pay to enhance something they already use than to pay for something unknown. This explains why successful business models often start free and gradually introduce paid features as users become more engaged.
| Payment Timing |
User Mindset |
Conversion Rate |
| Upfront Payment |
High risk, unknown value |
2-5% |
| After App Usage |
Known value, lower risk |
15-25% |
| During Key Moments |
High motivation, clear need |
30-50% |
Revenue Streams for Free Mobile Apps
Making money from free apps isn't magic—it's just different from charging upfront. I've worked with clients who've built incredibly successful businesses around free apps, and the secret is understanding that you're not really giving everything away for free. You're just changing when and how you get paid.
The most common way free apps make money is through advertising. Banner ads, video ads, and sponsored content can generate steady income if you have enough users. But here's the thing—advertising only works well if people actually use your app regularly. A fitness app that people open daily? Perfect for ads. A calculator that gets used once a month? Not so much.
Popular Revenue Models for Free Apps
- In-app purchases for extra features or content
- Subscription services for premium functionality
- Advertising revenue from banner or video ads
- Affiliate marketing commissions
- Data monetisation (with proper user consent)
- Freemium upgrades to paid versions
In-app purchases work brilliantly for games and productivity apps. People download your app for free, get hooked, then pay for extra levels, features, or tools. It's like offering a free sample that turns into a sale—except the sample is your entire basic app experience.
The key is building something people genuinely want to use before worrying about monetisation. Get that right, and the money follows naturally.
When Paid Apps Actually Work
I'll be honest with you—paid apps are a tough sell these days. People expect apps to be free, and convincing someone to pay upfront for something they haven't tried is getting harder every year. But here's the thing: paid apps can still work brilliantly in the right circumstances.
The sweet spot for paid mobile apps is when you're offering something truly specialised or professional. Think photo editing tools for photographers, productivity apps for specific industries, or games with premium quality and no adverts. These apps succeed because they solve real problems for people who are willing to pay for quality solutions.
Premium positioning works
Sometimes charging money actually helps your app's reputation. When people pay for something, they value it more—it's just human nature. Professional apps like advanced video editors or business tools often charge upfront because their users expect to pay for quality software.
A paid app immediately signals quality and seriousness to potential users, which can be more valuable than the download numbers you might get from going free
The key is knowing your audience. If you're building for professionals who use apps to make money, they'll happily pay £5-50 for the right tool. But if you're targeting casual users or trying to build a massive user base quickly, free with other monetisation strategies usually works better for your business model.
Hybrid Models and In-App Purchases
After years of building apps, I've noticed that the most successful ones don't stick to just one revenue model—they combine different approaches. This is what we call a hybrid model, and it's becoming the go-to strategy for many developers.
The most popular hybrid approach is the freemium model. You offer your app for free to get people through the door, then charge for premium features or content. Think of it like a free trial that never ends, but with extra goodies available if users want them.
Common Hybrid Approaches
- Free app with premium subscription tiers
- Free basic version with one-time upgrade purchases
- Free app with consumable in-app purchases
- Ad-supported free version with paid ad-removal option
- Limited free content with paid expansions
In-app purchases work brilliantly because they let users try before they buy. You're not asking someone to pay £4.99 upfront for something they've never used. Instead, they can download your app, use it for weeks, and then decide if they want to pay for extra features.
Making Hybrid Models Work
The key is balance. Give away enough value to hook users, but not so much that they never need to pay. I've seen apps fail because they were too generous with free features—and others fail because they were too stingy. Finding that sweet spot takes testing and patience.
Consider looking at app subscriptions as a way to create ongoing revenue while providing continuous value to users through regular updates and new content.
Market Research and Competitor Analysis
Before you settle on your mobile app monetisation strategy, you need to understand what's already out there. I can't tell you how many times I've seen brilliant app ideas fail because the developers never bothered to check what their competitors were doing. It's like walking into a battle blindfolded!
Start by searching app stores for apps similar to yours. Download the top 10-15 competitors and use them properly—don't just look at screenshots. Pay attention to their pricing models, how they handle free trials, and what features they lock behind paywalls. Take notes on their user reviews too; people are brutally honest about what they will and won't pay for.
What to Look For
Check if successful apps in your category are mostly free with ads, paid upfront, or using subscription models. Look at their app store rankings and revenue estimates using tools like App Annie or Sensor Tower. This data will show you what's actually working, not just what sounds good in theory.
Don't forget to analyse their marketing messages. How do they justify their pricing? What value propositions do they use? This research will help you position your own business model more effectively.
Create a simple spreadsheet comparing your top 5 competitors' pricing models, key features, and user ratings. This will become your roadmap for making smarter pricing decisions.
Making the Final Decision for Your Business Model
After working with hundreds of app founders over the years, I can tell you that this decision doesn't have to be permanent. Many successful apps started with one model and switched to another once they understood their users better. WhatsApp began as a paid app, then moved to a subscription model, and now operates completely free under Facebook's ownership.
The best approach is to start with what feels right for your specific situation. If you're building a utility app that solves a clear problem and your target audience is willing to pay upfront, go paid. If you need to build a large user base quickly or you're entering a crowded market, free with monetisation later often works better.
Test and Learn
Don't overthink this decision—you can always change direction. I've seen apps launch as paid, struggle to gain traction, then switch to freemium and take off. The key is being flexible and listening to your users.
What Works for Most Apps
If I'm being honest, most successful apps today use some form of free model. Whether that's completely free with ads, freemium with premium features, or free with in-app purchases. The reason is simple: users want to try before they buy, and the app stores reward apps with high download numbers.
If you're still unsure, consider exploring how to choose the right monetisation model for your specific app type and target audience. Choose the model that matches your goals, your audience, and your resources. Then be prepared to adapt as you learn more about what your users actually want.
Conclusion
After eight years of building mobile apps for everyone from eager startups to massive corporations, I can tell you that choosing between free and paid isn't really the hard part—it's understanding your users and what they actually want that makes or breaks your monetisation strategy. The businesses that succeed are the ones that match their pricing model to their audience's behaviour, not the ones chasing the latest trend.
Free apps dominate the app stores for good reason; they remove barriers and let people try before they commit. But that doesn't mean paid apps are dead—they just need to solve a very specific problem for people who are already looking for that solution. Your business model should feel natural to your users, not like you're trying to squeeze money out of them at every turn.
The real secret? Most successful apps combine elements from different models. They might start free to build an audience, then introduce premium features or subscriptions once users see the value. Or they launch as paid apps but add ongoing content that keeps people engaged long-term.
Your mobile app's monetisation strategy isn't set in stone—you can always test, learn, and adjust as you understand your users better. The key is starting with a solid foundation based on real market research rather than guesswork.
