The freemium business model gives the core product away for free and earns money from the small share of users who upgrade to a paid tier, plus ads or one-off purchases from everyone else.
In apps it works when the free tier builds a habit and the paid tier removes a limit people actually hit.
It beats a paid free trial mainly when growth from word of mouth or network effects matters more than early revenue per download.
That last point matters, because freemium apps convert far fewer downloads into payers.
Below we define the model, show how freemium apps make money, and walk through real tests from our database where apps moved to or away from freemium.
What is a freemium model? A plain definition
Freemium is a pricing model with two parts: a free version anyone can use with no time limit, and a premium version that costs money. The word blends "free" and "premium."
The name dates to March 2006, when investor Fred Wilson asked readers of the AVC blog to name the model and picked a suggestion from Jarid Lukin.
Wilson's post described it as: give the service away for free, "possibly ad supported but maybe not," acquire customers cheaply through word of mouth and search, then offer premium priced services or an enhanced version to that base.
Three features separate freemium from other app models:
- No expiry. The free tier lasts as long as the user wants. A free trial gives full access for a few days, then asks for payment.
- A deliberate limit. Something is held back: features, usage, content, quality or an ad-free experience.
- A soft paywall. Users can close the upgrade screen and keep using the app. A hard paywall blocks the app until the user pays or starts a trial. Our guide to hard vs soft paywalls covers that split in detail.
How freemium apps make money
A business with a freemium model makes money by converting a small share of free users into paying customers, and by monetizing the free users who never upgrade. Most apps combine several of these streams.
1. Subscriptions
The main source for most freemium apps is a recurring premium plan, usually monthly or yearly.
The free tier exists to feed that plan.
Our subscription pricing guide covers how to set plan lengths and prices.
2. Ads for free users
Ads earn revenue from users who will never pay, and removing them becomes a reason to upgrade.
Spotify is the best-known example: its free tier is an ad-supported service, and the Premium page sells ad-free listening, offline downloads, and the ability to play songs in any order and skip as often as you like.
Ryn VPN used ads as a middle step between free and paid.
It added a "Continue with Ads" option that gives 30 free minutes, alongside three paid tiers.
Ryn VPN reported +158% revenue, conversion up from 0.08% to 1.2%, and ARPPU up 98%.
That figure is vendor-reported in a Superwall case study and compares 28 days after launch with the same period a year earlier, so it is not a split test.
3. In-app purchases and credits
Some apps sell one-off unlocks, consumables or AI credit packs to free users.
These sit next to subscriptions rather than replacing them.
More options on one screen are not always better.
Mojo, a video editing app, hid its credit packs from the paywall and showed subscriptions only.
Mojo saw +14% new subscription revenue, with no significant rise in paywall drop-off (vendor-reported via Superwall).
The math behind it
Freemium revenue is roughly: free users × upgrade rate × revenue per payer, plus ad and purchase revenue from everyone else.
Because the upgrade rate is low, freemium needs a large, cheap user base to work.
If you buy most of your installs with paid ads, every free user who never converts is a cost.
Free-tier limits that convert
The free tier is the most important pricing decision in a freemium app.
Too generous and nobody needs to pay. Too tight and users leave before they see the value.
Our freemium limits hub collects every test we have on this.
The common types of limit are:
- Usage caps: a set number of projects, items, scans or minutes per day or month.
- Feature gates: core use is free, advanced tools are paid.
- Content gates: a sample of lessons, meditations or recipes is free, the library is paid.
- Quality or experience gates: ads, lower quality, watermarks or limited playback control on the free tier.
Where you put the limit changes who sees the paywall.
Greg, a plant care app, first showed its paywall only when a user added a sixth plant.
It then showed the paywall to everyone in onboarding and gated reminders behind the subscription.
Greg reported about +400% trial sign-ups, with sign-up-to-trial rising from 3% to 15%.
Two changes shipped together, so the gain can't be split between placement and the new feature gate.
The size of the free allowance can be tested too.
Opal, a screen time and focus app, tried allowances from one free scheduled block up to several before settling on three. More on that result below.
Making the limit visible also helps. Symmetry, a workout app, replaced a feature list with a Free vs Pro comparison table.
The table gave +1% conversion and +5% paid user activation, a small lift where the source doesn't say whether it is relative or absolute.
Unchaind went further and previewed premium features visually on the paywall; Unchaind saw over +50% conversion and +64% estimated ARPU. Both are vendor-reported in Superwall case studies.
A few rules follow from these results:
- Gate the feature that delivers the ongoing value (reminders, history, sync), not the first experience.
- Make sure users hit the limit after they have had a win, not before.
- Show what the paid tier adds, side by side, at the moment the limit appears.
- Test the size of the allowance instead of guessing it.
For paywall layouts and timing, see our paywall design hub.
Freemium model examples
These freemium model examples come from public pages and from tests in our database.
Each shows a different way to draw the line between free and paid.
| App | Free tier | What paying adds | Source |
|---|---|---|---|
| Spotify | Ad-supported listening | No ads, downloads, any-order playback, unlimited skips | Spotify Premium page |
| Ryn VPN | Free use, plus 30 free minutes in exchange for ads | Three paid tiers | Our test entry |
| Opal | Three free scheduled blocks | Full screen time controls | Our test entry |
| Greg | Plant care app with reminders gated | Reminders and other paid features | Our test entry |
| Mojo | Free video editing | Subscription plans (credit packs hidden in a test) | Our test entry |
Notice the range. Spotify uses ads as both a revenue stream and the main reason to upgrade.
Opal uses a usage cap. Greg uses a feature gate.
There is no single freemium pricing strategy; the right one depends on what your users come back for.
What tests show about freemium
Industry data and our own test records point the same way: freemium converts fewer users up front, and it only pays off for certain products.
The benchmark gap
RevenueCat's State of Subscription Apps 2026, built on data from over 115,000 apps, found a median download-to-paid conversion of 10.7% for hard paywall apps versus 2.1% for freemium apps, roughly a 5x gap.
The same report found hard paywall apps earn 8x higher revenue per install at day 60 ($3.09 vs $0.38).
But the gap does not compound. Yearly subscriber retention after one year was 27% for hard paywall apps and 28% for freemium, which RevenueCat calls statistically negligible.
For more context on trial benchmarks, see our app trial conversion rate benchmarks.
Tests where moving away from freemium won
V1 Sports, a golf swing analysis app, dropped its freemium model for paid plans with free trials.
V1 Sports reported +90% revenue within 12 months.
It was a before-and-after change, not a split test, and it brought a wave of negative reviews from users who lost free access.
Headspace ran an A/B test that locked all content behind the subscription, with a free trial to get in, instead of leaving some content free.
Headspace saw a significant rise in paid subscribers and higher content engagement among trial users. The source gives no figures.
Tests where moving to freemium won, or lost
Growth advisor Phil Carter oversaw two switches from a hard paywall to freemium, described on the RevenueCat blog.
In the first, freemium plus a multistep paywall and other packaging changes produced +75% LTV per user.
In the second, a similar switch led to more than 50% lower subscriber conversion, and the app reverted after a couple of weeks.
Opal replaced its hard paywall with a generous free tier.
Pay penetration fell from 20% to 9%, but daily active users passed one million, and students now make up two-thirds of them.
Opal judged it a long-term win despite the lower share of paying users. It was not a split test.
A warning about forcing payment
Going the other way has its own costs.
BoldVoice removed the close button from its onboarding paywall.
Trial starts went up, but refunds rose by more than the gain.
BoldVoice now judges tests on net revenue per exposed user, on matured cohorts.
What to take from these results
- Freemium tends to fit apps with daily habits, network effects, or a large audience that can be monetized with ads.
- A hard paywall or trial tends to fit apps that solve an acute problem, or that rely on paid installs and need revenue early.
- The same switch can win for one app and lose for another, so run it as a test with a way back.
- Judge the result on revenue per user over months, not on first-week conversion alone.
Freemium vs free trial: which should you choose?
A free trial gives full access for a fixed time, then charges.
Freemium gives limited access forever. Trials push users to decide fast and usually convert more downloads; freemium keeps non-payers around, which helps reach, referrals and ad revenue.
Many apps now blend the two: a free tier for everyone, plus a trial of premium offered at the right moment.
Greg's setup works this way. We compare the two models, with more tests, in freemium vs free trial.
If you are deciding today, start from your acquisition channel.
If most installs come from paid ads, a trial or hard paywall is the safer default.
If most come from word of mouth or search and users return daily, freemium is worth testing, ideally against your current model rather than as a one-way switch.