TL;DR: Most iOS apps fail financially not because of bad code — but because developers pick a monetization model without validating it first. This guide covers every major revenue model, how to estimate revenue before you build, and a decision framework for matching your strategy to your app's actual user behavior.
The iOS App Store crossed $85 billion in annual revenue. Yet the median app earns close to nothing.
That gap isn't about code quality. It's almost always about monetization strategy — and more specifically, about developers who design revenue as an afterthought instead of a first-class product decision.
Let's fix that.
The Metrics You Need to Know First
Before you choose a model, get fluent in these:
| Metric | What It Is | Why It Matters |
|---|---|---|
| ARPU | Revenue ÷ total users | Best way to compare monetization models |
| LTV | Total revenue per user before churn | Must exceed your acquisition cost |
| DAU/MAU ratio | Daily actives ÷ monthly actives | High ratio = strong engagement = better monetization |
| Conversion rate | % of users who go from free → paid | Even a 1% shift can be a 50%+ revenue change |
Pick a model that doesn't fit your DAU/MAU ratio and you're building on sand.
What Apps Actually Make Money?
Short answer: it's not just games, though gaming dominates by volume.
Here's a rough ARPU breakdown by category:
| Category | Monthly ARPU Range |
|---|---|
| Gaming (mid-core/hardcore) | $5 – $50+ |
| Dating | $5 – $30+ |
| Health & Fitness | $8 – $20 |
| Finance / Fintech | $10 – $25 |
| Productivity | $3 – $10 |
| Casual Games | $0.05 – $2 |
Underrated insight: A niche professional tool with 10,000 highly motivated users can easily outperform a casual game with 1M installs on a per-user basis. Niche users have real pain. They pay more to solve it.
The "winner-take-most" dynamic makes crowded categories brutal at the top. But in underserved niches — categories where demand exists but the top apps have 3-star ratings and haven't been updated since 2021 — a well-executed app can seriously outperform.
The 6 Core Monetization Models
- Freemium Free to download, premium features behind a paywall. Dominant on the App Store for a reason.
Free tier: 3 meditation sessions
Paid tier: 500+ sessions, sleep tools, courses
Works when: Your free tier provides genuine value and premium is a clear, felt upgrade.
Watch out: Typical free-to-paid conversion is 1–5%. You need a real conversion funnel, not just a paywall.
- Subscriptions Recurring billing (weekly/monthly/annual). Apple's preferred model — and the highest LTV strategy available to iOS devs.
Perks you might not know:
After year one, Apple's cut drops from 30% → 15%
Subscription apps get preferential App Store featuring
Works when: Users return multiple times per week and value compounds over time (health tracking, language learning, task management).
Watch out: You have to keep earning the subscription. Churn is brutal if onboarding fails.
- In-App Purchases (IAP) One-time purchases inside the app — consumables (gems, coins), non-consumables (level packs), cosmetics.
Works when: You're building a game, episodic content app, or anything where users pay for discrete moments of value rather than ongoing access.
Watch out: Revenue is less predictable. A small percentage of "whales" often drive most IAP revenue, which creates fragility.
- Paid Upfront Users pay at download. Think: $2.99, $4.99, $9.99.
Obscura Camera and Darkroom make this work well.
Works when: You're serving a professional niche with a clear one-time use case and strong word-of-mouth or press coverage.
Watch out: This model is in long-term decline. The free-app expectation is deeply embedded. Discovery suffers when users can't try before buying.
- In-App Advertising Ad networks pay you for user attention. eCPM benchmarks by format:
| Format | eCPM Range | Notes |
|---|---|---|
| Banner | $0.50 – $2.00 | Lowest disruption, lowest revenue |
| Interstitial | $3 – $8 | Timing is everything |
| Rewarded Video | $10 – $30+ | Gold standard. Users opt in. |
| Native | $2 – $5 | Best for content feeds |
⚠️ Post-iOS 14 reality check: ATT opt-in rates average 25–40%, which hammered targeted ad eCPMs. Focus on contextual ads and mediation platforms like AppLovin MAX or Google AdMob.
Works when: Your app is inherently free/casual and you're building DAU volume.
- Hybrid (The Underrated One) Most successful apps combine models. The most common: freemium + ads.
Free users see ads. Paying subscribers get an ad-free experience.
The killer move here is a $2.99–$4.99/year "remove ads" option. It's the lowest-friction paid upgrade you can build — users have already experienced the pain you're offering to remove. Converts surprisingly well.
How to Estimate Revenue Before You Write a Line of Code
This is the part most devs skip. Don't.
The Simple Formula
Projected Downloads × Conversion Rate × ARPU = Monthly Revenue Estimate
Example:
10,000 monthly downloads
× 3% conversion rate
× $8/month ARPU
= $2,400/month
Run this as three scenarios: conservative, base, optimistic. If even optimistic doesn't justify the build — that's the most valuable information you can have before starting.
Competitor Download Estimation
App Store doesn't publish download counts, but ratings are a proxy:
~1–5% of users leave a rating
Competitor has 10,000 ratings?
→ Estimated downloads: 200,000 – 1,000,000
Combine with category ARPU benchmarks and you can reverse-engineer competitor revenue with reasonable accuracy.
Using Dedicated Tools
Manual estimation works, but it's slow. Niches Hunter tracks 40,000+ apps daily, surfaces market gaps using AI, and gives you monetization potential estimates and competition scores for validated niches. For pre-build validation, having that data at your fingertips removes most of the guesswork.
The Monetization Model Decision Framework
Don't copy what competitors do. Match your model to how users actually behave.
Does my user return daily or weekly?
└─ YES → Strong case for subscriptions
Does my app involve collecting/spending/unlocking discrete items?
└─ YES → Consider IAP (especially if gaming)
Is my acquisition channel organic and volume-driven?
└─ YES → Freemium + ads hybrid
Am I solving a one-time pain point for a niche professional audience?
└─ YES → Consider paid upfront
Most apps find their answer in the first two questions.
Subscription Deep Dive: Key Metrics to Track
If you go the subscription route, these are the numbers that matter:
| Metric | What to Aim For |
|---|---|
| Trial conversion rate | 20–40% avg; top apps hit 60%+ |
| Monthly churn rate | Under 5% is excellent; over 10% = problem |
| Annual vs. monthly mix | Push annual — annual subs churn dramatically less |
| Reactivation rate | Often the highest-ROI retention activity |
Paywall Tips That Actually Move the Needle
Lead with outcomes, not features. "Lose your first 10 pounds" > "Access 200+ workout plans"
Free trial as primary CTA. Cold payment asks convert poorly. Trials don't.
Anchor with annual. Show annual pricing first; monthly is the fallback that makes annual look smart.
Social proof on the paywall. Ratings + user counts reduce friction.
Benchmark: Average iOS subscription conversion (freemium → paid) is 1–5%. High-intent categories (health, productivity, finance) regularly hit 8–12%. If you're under 1%, the problem is almost always onboarding or paywall clarity — not pricing.
Finding Niches Worth Building For
Most devs pick an idea, then figure out monetization. This is backwards.
The monetization-first approach: find niches where users already pay, then build something better.
Signals That a Niche Is Underserved
Top app for a high-volume keyword has < 1,000 ratings and a 3.2-star rating
User reviews across competitors repeatedly request the same missing feature
Category ARPU is solid but top apps haven't shipped meaningful updates in 12+ months
That third signal is underrated. Stale incumbents + real user demand = your opening.
Your Pre-Build Monetization Checklist
[ ] Confirmed users in this category already pay (checked competitor pricing + reviews)
[ ] Chosen a primary monetization model matched to session behavior
[ ] Run the revenue formula across 3 scenarios (conservative / base / optimistic)
[ ] Set a minimum monthly revenue threshold that justifies the build
[ ] Designed the paywall and onboarding before writing feature code
[ ] Planned analytics instrumentation: ARPU, LTV, conversion, churn from day one
[ ] Identified A/B tests to run on paywall copy and pricing at launch
If you can't check all of these before writing code, you're building on hope. Hope is not a monetization strategy.
Tools Worth Knowing
RevenueCat — Subscription management + analytics. Basically the standard at this point.
Mixpanel — Event tracking and funnel analysis.
AppLovin MAX — Ad mediation if you're monetizing with ads.
Niches Hunter — Pre-build niche validation with App Store data, competition scores, and monetization insights.
Adapty — Paywall A/B testing and subscription infrastructure.
The Mindset Shift That Changes Everything
The iOS devs who build sustainable revenue don't treat monetization as something to figure out after shipping. They treat it as the first product decision — because it shapes everything downstream: feature prioritization, onboarding design, acquisition targeting, retention strategy.
The shift:
"I'll build it and figure out money later."
✅ "I'll validate the revenue model before I write a single line of code."
That's not a business school platitude. It's the practical difference between a side project that earns $50/month and one that earns $5,000/month with the same number of users.
Found this useful? Drop a question in the comments — happy to dig into specific monetization scenarios or help sanity-check your revenue estimates.
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