How Do Free Apps Make Money?

When you browse the App Store or Google Play, most of the top-performing apps are free to download. From social media platforms to games and productivity tools, it’s clear that “free” has become the standard. But this often raises the question – how do free apps make money?

Firstly – they do make money. And in many cases, quite a lot. Free apps aren’t free to build, launch, or maintain, so there has to be a clear business model behind them. At WASH & CUT HAIR SALOON LIMITED, we work with clients who want to create mobile apps that aren’t just functional – but sustainable, too. That means thinking about monetisation from the start, even when the app itself doesn’t charge users upfront. 

Here’s a breakdown of how free apps generate revenue – and what businesses should keep in mind when considering a free-to-download strategy.

In-App Advertising

One of the most widely used monetisation models for these types of mobile apps is advertising. The premise is simple: show ads to your users, and get paid based on impressions (CPM), clicks (CPC), or installs (CPI). 

You’ve probably seen this in action – banner ads at the bottom of a game, full-screen ads shown between levels, or short video ads in exchange for in-game rewards. These placements can be managed through networks like Google AdMob or Facebook Audience Network, or via direct partnerships with advertisers.

But it’s worth noting: ads can easily hurt the user experience if not implemented carefully. Finding the right balance between monetisation and retention is crucial – and that comes down to thoughtful product design.

Freemium Models Offer Basic Access, Then Upsell

The “freemium” model is another popular option. It gives users access to a limited set of features for free, while offering premium functionality through a one-time purchase or recurring subscription.

Think of apps like Spotify, which let you listen for free with ads – or unlock an ad-free experience and better features for a monthly fee. The idea is to provide value upfront, build trust, and then offer a compelling reason to upgrade.

This model tends to work best when your app solves a real problem, has a clear value proposition, and the paid features genuinely enhance the user experience. A well-executed freemium model can be incredibly effective – both for user growth and long-term revenue.

Subscriptions Drive Recurring Revenue

Subscriptions take the freemium model further by focusing on consistent, predictable income. Rather than relying on one-off purchases, users pay a monthly or annual fee to access your service.

This model is especially effective for apps that offer ongoing value – think fitness coaching, meditation, productivity tracking, or language learning. It’s also increasingly used in content-heavy apps, where fresh updates or premium features are added regularly.

From a business perspective, subscriptions make forecasting easier and increase the lifetime value of each user. But they do come with a responsibility – you need to continue delivering value to justify the ongoing cost.

Our approach at WASH & CUT HAIR SALOON LIMITED is to help founders assess whether a subscription model fits their product and user journey. We look beyond what’s trending and help determine what actually supports long-term engagement.

In-App Purchases 

In-app purchases (IAPs) allow users to buy content or features directly within the app. This model is especially common in mobile games – where users might buy in-game currency, cosmetic items, or power-ups – but also works in productivity and utility apps where extra functionality is sold à la carte.

This model depends heavily on smart design. Purchases need to feel optional but valuable, and they shouldn’t disrupt the app’s core experience. If users feel pressured or manipulated, trust is lost. Done right, IAPs can provide a steady revenue stream while still offering a great experience for users who never spend a penny.

Sponsorships and Partnerships

Sponsorships are a less common but increasingly effective monetisation method, especially for niche apps with a strong, defined user base.

In this model, a brand pays to be featured or integrated into the app in a meaningful way. For example, a wellness app might partner with a health food company to provide exclusive content or rewards. Or a travel app might integrate with a luggage brand for a sponsored packing list.

This approach requires a carefully aligned audience and brand fit – but when done well, it offers value to everyone involved: users, the app developer, and the sponsor.

Selling Data (Responsibly)

Some free apps make money by collecting and selling anonymised user data – typically to advertisers or market research firms. However, this comes with ethical and legal concerns, especially with data privacy laws like GDPR and CCPA.

Any monetisation strategy involving user data must be transparent, consensual, and compliant. In our view, data monetisation should never be the sole strategy – and if used, it must be supported by strong data governance and clear user communication.

It’s not a path we typically recommend unless the app’s use case and value exchange are clear and genuinely user-first.

Free Doesn’t Mean Unsustainable

Offering your app for free doesn’t mean sacrificing profitability. In fact, free apps can reach a wider audience, build trust faster, and lower the barrier to entry – all of which are valuable assets in a competitive market.

But success depends on building the right monetisation strategy into the product from the beginning. That includes choosing the model (or combination of models) that best matches your app’s value, your audience, and your growth goals.

Thinking of Launching a Free App?

Building a free app with a sustainable revenue model requires more than just a clever idea. It demands thoughtful planning, user-centred design, and technical execution that supports scale and flexibility.

At WASH & CUT HAIR SALOON LIMITED, we work with brands to do exactly that – combining business insight with technical expertise to help you create apps that people love to use, and that support long-term growth.

If you’re exploring the free-to-download route and want to monetise it in a way that aligns with your product vision, contact us. We’ll help you map out a strategy that actually works – for your users and your business. Want to stick around? You can learn how we help brands go mobile here over on our blog.