Monetization in Mobile Development: What It Is, What Models and How It Works

Monetization Models: Freemium, Subscription, Paid and Others

The monetization model determines how the app will generate revenue. Freemium remains the most popular model — users get basic functionality for free, while advanced features are unlocked through payment. This approach is used by Spotify, Dropbox, and most modern applications.

Freemium vs Premium

The Freemium model offers free entry with limited functionality, while the Premium model requires immediate payment. Freemium provides a huge audience but low conversion (2–5%) into paying users. Premium, on the other hand, generates revenue from every install but significantly reduces the number of installs. The choice depends on the niche: Freemium is better for games, Premium is better for professional tools.

Hybrid schemes are gaining popularity. An app can be free with ads and offer a Premium subscription to remove them — YouTube Music works this way. Another option is a free trial period followed by payment, like in Adobe Creative Cloud.

Subscription Types

Subscriptions are divided into monthly, yearly, and lifetime. Yearly subscriptions are more profitable for developers — they reduce churn rate and provide predictable revenue. App Store and Google Play support automatic subscription renewal with user-side management capabilities.

Introductory Pricing — temporary discounts for attracting new subscribers. A free trial period lasts from 7 to 30 days and is one of the most effective conversion tools. After the trial period, the user is automatically moved to a paid plan if they haven't canceled the subscription.

The Free model does not involve direct payments — revenue comes from ads or data sales. The Paid model (paid install) is becoming a thing of the past: according to Sensor Tower, only 6% of new apps on the App Store were paid in 2024. Users are not willing to pay without trying the product first.

Paywall: Soft and Hard

A paywall is a screen or dialog that asks the user to pay for access to content. A Soft Paywall appears after consuming a certain amount of content — for example, 3 free articles, then payment (like The New York Times). A Hard Paywall blocks all content without payment — this is how Netflix works.

The choice of paywall type depends on the value of the content. Hard Paywall is justified for unique exclusive content, while Soft Paywall with gradual user engagement is more effective for news and media projects.

In-App Purchase and Subscriptions

In-App Purchase (IAP) — purchases inside the app as a way to monetize mobile applications: digital goods, virtual currency, premium access. App store commission is 15–30% depending on the small business program. Apple and Google require the use of their payment systems for digital goods.

IAP comes in three types: consumable (spendable items: coins, lives), non-consumable (permanent items: ad removal) and subscription. Consumable purchases bring in regular revenue in games, non-consumables are good for one-time premium upgrades, and subscriptions provide long-term revenue.

When designing IAP, pricing psychology matters. Prices like $0.99, $4.99 and $9.99 convert better than round numbers. A set of multiple options (3 subscription tiers) increases conversion by 20–30% due to the anchoring effect.

The IT Sectr team recommends A/B testing paywall screen placement: showing it on the 3rd session yields 40% more conversion than on the first launch. It's important not to show the paywall too early — the user should first understand the app's value.

Advertising Models: Banner, Interstitial, Rewarded Video

Advertising monetization models are the main source of revenue for free apps. Banner Ads are the simplest but least profitable format. They occupy a fixed screen area and generate minimal eCPM (revenue per 1000 impressions) — typically $0.1–1.

Rewarded Video — a Revolution in Mobile Advertising

Rewarded Video is an ad video that rewards the user for watching. Rewarded video eCPM reaches $10–30, which is tens of times higher than banners. The user chooses whether to watch the ad or not, ensuring high engagement and positive perception.

Rewarded Video is especially effective in games: watch a video — get an extra life, bonus coins, or progress acceleration. The share of users who voluntarily watch rewarded video reaches 60–70%. This is a key format for f2p games.

Interstitial Ad — Full-Screen Advertising

Interstitial — full-screen advertising that appears between app screens — for example, between game levels. Interstitial eCPM is $5–15, higher than banners but lower than rewarded video. The main drawback is the negative impact on user experience when shown too frequently.

Native Ads — advertising embedded into the app's content and styled to match its design. Native advertising blends organically into the interface and has the highest CTR (click-through rate) among all formats — up to 0.5–1%.

IT Sectr's recommended strategy is a format mix: banners for stable income, rewarded video for active users, interstitials for transitions between screens. Avoid showing multiple ad blocks simultaneously — this reduces retention by 15–20%.

Monetization Platforms: AdMob, Unity Ads, AppLovin and Others

The choice of platform directly affects revenue from mobile app monetization. Each platform has its own specifics regarding geography and formats. Let's look at the main ones:

For maximum revenue, mediation is used — an intermediary platform that selects the most profitable ad block among several networks. Google AdMob Mediation and AppLovin MAX are the most popular solutions. IT Sectr recommends connecting at least 3–4 platforms through mediation for maximum fill rate and eCPM.

User geography matters. eCPM in the US can be 5–10 times higher than in India or Indonesia. If your audience is primarily from developing countries, focusing on Tapjoy and IronSource may be more profitable than AdMob.

Paywall and Trial Periods: Conversion Strategies

Proper paywall and trial period setup is a key success factor for monetization. A free trial period increases subscription conversion by 30–50% compared to a direct payment offer.

Trial period duration depends on the product's complexity. 7 days is optimal for simple apps, 14–30 days for complex products with a long onboarding (e.g., video editors, cloud services). After the trial period, the user is automatically moved to a paid plan.

Introductory Pricing — temporary discounts (e.g., first 3 months at $1.99 instead of $9.99). This strategy works better than a free trial in apps with high content value — streaming services, online courses, fitness apps.

The paywall should be visually appealing and clearly communicate value. Three key elements of a successful paywall: a benefit headline, three subscription options, and a call-to-action button. Avoid aggressive wording — it increases post-purchase churn.

In practice, the IT Sectr team uses personalized paywalls: active users are offered a Premium subscription, less active users are offered an ad-supported model. Personalization increases paywall conversion by 25–40% and reduces ad complaints.