Free apps make money in four main ways: selling advertising, selling things inside the app, converting some users to a subscription, and selling or using data about you. Most large ones run two or three at once.
Working out which model an app depends on is the fastest way to understand why it behaves as it does. Almost every design decision follows from it.
The four models
Advertising. You are shown adverts; advertisers pay for that. Revenue scales with time spent, so the app is built to hold you.
In-app purchases. The app is free and things inside it cost money. Common in games, where a very small fraction of players generates most of the revenue.
Freemium subscriptions. A usable free tier, a paid tier without the limits. The free tier is a marketing cost, and the limits are placed exactly where they will be felt.
Data. Behavioural information collected and used for targeting, or sold to brokers. This is usually combined with advertising rather than standing alone, and it is the least visible of the four.
What one advert impression is worth
Very little on its own, which is the crux of everything else.
A single advert shown to a single person typically earns the app somewhere between a fraction of a cent and a few cents, depending on the country, the format and how well the viewer is targeted. That range is worth sitting with: to earn a few pounds from one user over a month, the app needs to show them hundreds of adverts.
The only way to do that is to be opened often and held for a long time. This is why an ad-funded app is designed around session length and frequency rather than around finishing a task quickly.
The advert you see is also chosen in real time. In the fraction of a second while the screen loads, an automated auction runs: advertisers bid for the chance to show you specifically, based on what is known about you. That auction is an algorithm running billions of times a day, and it is the actual product.
If the app is free and shows adverts, the transaction is not you receiving software for nothing. It is the app selling access to your attention, in small quantities, very many times.
"You are the product"
The phrase is a bit glib but it is not wrong. In an ad-funded model the advertiser is the customer, you are the inventory, and the app is the marketplace.
The consequence shows up in the design. Feeds do not end. Notifications arrive when engagement dips. The next item begins before the current one finishes. None of this is accidental, and none of it requires anyone to be a villain: a business paid by time spent will, over enough iterations, discover the designs that maximise time spent. That is also the machinery underneath what people call brain rot.
Free VPNs and why they are a bad trade
The clearest case of the model mattering. Running servers costs real money continuously, so a free VPN is being funded some other way, and the asset it holds is a complete log of its users' browsing.
Several free providers have been found injecting adverts, selling browsing data, or renting out users' bandwidth. The problem is not that they monetise. It is that the thing being monetised is exactly what you installed the app to protect, as a look at what a VPN really does makes clear.
Why free apps suffer first in a downturn
Advertising is among the most cyclical line items in any company's budget. It can be cut this quarter without breaking anything, so it is cut this quarter.
That makes ad-funded businesses an early indicator: their revenue falls before most other sectors feel much. It is one reason the tech sector's mood often shifts ahead of the official confirmation that a recession has begun.
How to tell which model you are inside
| Signal | Likely model |
|---|---|
| Adverts, infinite feed, frequent notifications | Advertising |
| Currencies, timers, cosmetic items | In-app purchases |
| Free tier with a nagging limit | Freemium |
| Free, no adverts, no obvious upsell | Data, or venture funding not yet converted to either |
That last row is the one to look at hardest. An app with no visible way of making money is either being subsidised by investors while it grows, in which case the monetisation is coming later, or it is already earning from something you have not been shown.
The short answer
Nothing about this is hidden or scandalous; it is simply not stated on the download page. Free means the money arrives from somewhere other than your wallet, and where it arrives from shapes what the app is trying to get you to do. The useful habit is to ask, before installing: who pays for this, and what do they want in return?