By Alpit Patel and the aibrevo team · October 31, 2026 · 5 min read
How Do Free Apps Make Money?
Quick answer
Free apps make money in five main ways: in-app purchases, subscriptions, ads, selling physical goods or services through the app, and supporting a business that earns elsewhere. Apple calls the first two freemium. Digital sales pay the store a 15% to 30% commission, while physical goods and services use your own payment provider.
Key takeaways
- Apple describes four business models: free, freemium, paid and paymium. Most successful free apps are freemium: free to download, with optional in-app purchases or subscriptions.
- Digital features and content bought inside an iPhone app must use Apple's in-app purchase (guideline 3.1.1), which carries a commission: 15% on Apple's Small Business Program, 30% standard.
- Physical goods and services used outside the app must not use in-app purchase (guideline 3.1.3(e)), so a booking, a ride or a ticket to a real event pays no store commission.
- Ads earn revenue each time they are shown, but Apple warns that low-quality or obtrusive ads reduce engagement and retention.
- Worked example: 1,000 subscribers at $4.99 a month is $59,880 a year in sales, of which you keep about $50,898 at a 15% commission, before taxes.
Free apps make money in five main ways: in-app purchases, subscriptions, ads, selling physical goods or services through the app, and supporting a business that earns money elsewhere. Digital purchases and subscriptions go through Apple’s and Google’s billing, which take a 15% to 30% commission. Physical goods and services use your own payment provider and pay no store commission.
Checked on October 31, 2026. We read Apple’s business models page, the App Review Guidelines, Apple’s Small Business Program and subscriptions pages, and Google’s Play Console service fee page. We have left out average ad revenue figures, because published numbers vary too much by country, category and format to be useful.
What are the ways a free app can earn money?
| Model | How it earns | Store commission? | Good fit |
|---|---|---|---|
| In-app purchases | Users buy consumables (gems, credits) or one-time premium features | Yes | Games, creative tools, content |
| Subscriptions | Recurring charge for ongoing access | Yes | Fitness, learning, productivity, media |
| Ads | Advertisers pay when ads are shown or tapped | No | Apps with very large, frequent audiences |
| Physical goods and services | Orders, bookings, rides, tickets for real events | No, your payment provider’s fee applies | Marketplaces, booking, delivery |
| Business support | The app brings in or keeps customers for a business | No | Banks, retailers, clinics, gyms, B2B tools |
Store rules from Apple’s business models page and App Review Guidelines, checked Oct 31, 2026.
Apple’s own vocabulary: free (no payment to download or use), freemium (free to download, with optional in-app purchases), paid (pay once to download) and paymium (paid download plus optional purchases). Apple splits in-app purchases into consumable, non-consumable, auto-renewable subscriptions and non-renewing subscriptions.
How do in-app purchases and subscriptions work?
Apple’s guideline 3.1.1 says that when you sell access to features or content inside the app, such as subscriptions, in-game currencies, levels, premium content or a full version, you must use in-app purchase. License keys, QR codes and other workarounds are not allowed. Google Play’s 5% billing fee applies when a user buys an in-app digital feature through Google Play Billing, and its fee page also lists alternative billing options in South Korea and India.
The commission depends on your size and the product:
| Situation | You keep | Source |
|---|---|---|
| Apple Small Business Program (up to $1M proceeds in the prior year) | 85% | Apple |
| Apple subscription, subscriber’s first year, outside the program | 70% | Apple |
| Apple subscription after one year of paid service | 85% | Apple |
| Google Play, most markets, first $1M a year | 85% | |
| Google Play US, UK, EEA subscriptions (10% + 5% billing fee) | 85% |
All checked Oct 31, 2026. Our page on App Store costs has the full fee table.
What can a subscription app earn? A worked example
Take a fitness or learning app with 1,000 paying subscribers at $4.99 a month, on Apple’s Small Business Program.
| Step | Arithmetic | Result |
|---|---|---|
| Yearly sales | 1,000 × $4.99 × 12 | $59,880 |
| Store commission at 15% | $59,880 × 0.15 | $8,982 |
| You keep, before taxes | $59,880 × 0.85 | $50,898 |
The hard part is the 1,000. That is why retention matters more than price. Our Stridely build, a small-group fitness app, reached 52% retention at 90 days against roughly 8% for solo fitness trackers, by making each workout visible to a group of about six friends.
How do ads in apps work?
The app shows ads from an ad network and earns each time an ad is displayed or tapped. Apple’s business models page lists “free with display advertising” as a model and warns that low-quality, obtrusive or inappropriate ads reduce engagement and retention. Any SDKs used for ad targeting or measurement must follow Apple’s Data Use and Sharing (5.1.2) and Advertising (3.1.7) guidelines.
Ads pay best when an app has a very large audience that opens it many times a day. For a niche app with a few thousand users, ads rarely cover the hosting bill. Many apps use ads for free users and sell a subscription that removes them.
How do marketplace and booking apps make money?
They take a fee on real-world transactions, and because those are physical goods or services, Apple’s guideline 3.1.3(e) says they must use payment methods other than in-app purchase. That means no store commission, only your payment provider’s processing fee.
Two examples from our own builds:
- GoHangars, a hangar marketplace for aircraft owners, runs payments through Stripe Connect with automatic operator payouts and platform fee handling. It reached $2.1M in booking volume in its first year.
- BingoBuddy sells tickets with QR entry for real bingo sessions. It sold 47,000 tickets across 340 venues in its first year.
Both apps are free to download. The money comes from transactions outside the store’s billing.
Why do businesses build free apps that never charge anything?
Because the app earns money for the business, not on its own. A clinic app books appointments, a gym app keeps members coming back, and a field-service app gets jobs done faster. The return shows up as bookings, retention and staff time saved. For example, the Respond Central dispatch app we built cut the time from a transport request to a confirmed crew from 22 minutes to 3.
For these apps the questions are different: what the app costs to build and run, and how it connects to your CRM so every booking or lead lands in one place. See how much it costs to build an app and our mobile app development page.
How do you choose a model before you build?
Pick the model before the first screen is designed, because it changes the build. Subscriptions need paywalls, receipt validation and a backend that knows who has paid. Marketplaces need payouts and refunds. Ads need consent flows and SDKs that follow store privacy rules. Test the model in your MVP with real users before you build the rest.
Sources
- Apple, Choosing a business model, checked Oct 31, 2026.
- Apple, App Review Guidelines, sections 3.1.1, 3.1.3(e), 3.1.7 and 5.1.2, checked Oct 31, 2026.
- Apple, App Store Small Business Program and Auto-renewable subscriptions, checked Oct 31, 2026.
- Google, Play Console Help: service fees, checked Oct 31, 2026.
- Our case studies: GoHangars, BingoBuddy, Stridely, Respond Central.