Most mobile apps follow a very familiar pattern:' you use it for a while, maybe start a free trial, and eventually you hit a paywall in order to continue using the features you fell in love with. Or maybe you never make it that far and they hit you with the paywall as part of onboarding (ugh). This is an all too common model and clearly it works for many because you’d be hard pressed to find an app that isn’t following it.
To understand why this model is so lucrative and appealing to our favorite apps, we have to understand the benefits. The first is the Operating Cost per User. It’s difficult to build a mobile app (or any software for that matter) that doesn’t rely on some services provided by another company, whether it be for a database, a piece of software you don’t wanna rebuild, analytics, AI, and much, much more. Each one of these things costs money per use, per month, or both. Sometimes it’s just not possible to build an app without these overhead costs that are innately consumed by your end user whether they pay or not.
For example, MyFitnessPal has it’s own database of food products that you can add to your calorie tracker, crowd sourced by past users who have added the same thing. You’d think this would mean it’s free since they are using their own data, but where does all this data live? Their website boasts that you can “Track over 20 million global foods”, and somewhere (likely on an AWS/Google Cloud servers) there is a database storing that massive amount of data. Not only does it cost money just for that data to live there, but MyFitnessPal is also getting charged each time someone makes a request. Granted, it’s probably something like $0.0000035 per request, but multiply that across their hundreds of thousands of daily users times each meal/food item they add per day, and it really starts to add up. Now consider the users who use the bar code scan feature, which has to source data from the USDA or other similar services. MyFitnessPal is once again charged a slightly higher fee for that request. And maybe after the bar code scan MyFitnessPal has to cross check against their own database. In this example, at this scale, infrastructure costs eventually amortize and become relatively cheap per user. However, getting to that point is punishing for indie developers or small teams, where even modest per request costs, third party services, and usage spikes can erase margins long before scale ever arrives. Even a seemingly simple calorie tracker can accrue substantial costs well before it ever converts its first paying subscriber.
In addition to the cost of services to actually support your app, it is almost impossible to scale without some sort of ad spend. With the influx of “vibe coded” apps hitting the market in recent years, it’s hard to stand out among the crowd, even if you have a great product. You have to meet your potential users somewhere, be it through Apple Search Ads, social media, commercials, or a combination of the three. The Apple Search Ads tool is a large contributor to attracting users, since opening the app store at all implies a willingness to download a new app. Although you can target users interested in certain topics or in certain demographics on social media, they don’t always want to download an app. They might just be doom scrolling, and now you’ve wasted an impression. And if you use commercials, who knows if that person even has an iPhone. Bottom line, most apps have to have some sort of spend to get users to use their app, and even still, most of the users who do download an app churn within a day. This is known as an apps CPA (cost per acquisition), and it represents the amount the company is spending on average to acquire one user. Combine all of the operating expenses discussed above with the CPA, and you get the number that the average LTV (life time value) of a user must exceed in order for the app to generate a profit. And that’s not even considering the cost required to maintain that app and make updates. If you aren’t doing the development work yourself, you are surely paying handsomely for someone (or a team) to do so for you.
Another reason companies dive at this paywalled model has less to do with cost, and more to do with effectiveness. With a free trial, I am far more likely to try a service and start to love it if I have a week or a month to use it before committing. And I’m sure it doesn’t hurt that a huge percentage of app purchasers forget to cancel before the first payment. This is a tried and tested strategy to make sure you are getting users to progress from seeing your app in an ad (impression), to tapping on that ad, to downloading the app, and then finally converting to a subscription. This system just works (at least thats what the numbers will tell you).
Apple will often point to subscription success as proof of user preference, arguing that developers would abandon the model if it did not work. But this framing assumes that the App Store is a neutral marketplace, when it clearly is not. Apple controls the distribution (App Store), discovery (Apple Search Ads), ranking, payments, refunds, and other analytics developers rely on to make decisions. Subscription apps are favored through tooling, featuring, and monetization infrastructure, while alternative models are largely invisible or unsupported. It took years of fighting in courts for the EU to open up app distribution beyond the Apple App Store. What “works” in the App Store is therefore not a pure reflection of user desire, but the result of a tightly constrained system.
None of this is to say that app developers are greedy or malicious. Most are just responding to the incentives placed in front of them. The App Store rewards recurring revenue, aggressive conversion funnels, and fast monetization. For indie developers building thoughtful, simple software that does one or a few things extremely well, it is hard to even get a foot in the door. This is especially true when the app has low overhead and does not rely on heavy monetization or ad spend. The pressure is always on the developer to optimize, optimize, optimize.
The result is an ecosystem where users feel nickel-and-dimed and indie developers feel trapped. You either play the game or slowly bleed out through ad spend (or just plain frustration). And when everyone is forced into the same business model, creativity suffers. Apps stop being tools and start becoming funnels for profit.
