Free vs Paid vs Freemium vs Subscription vs IAP vs Ads. When each one wins.
6
Models
3-7%
Healthy Freemium Conv
30-50%
Annual Sub Discount
$1-10
Typical eCPM (Ads)
The 6 models, fit for AI apps
BAD FIT FOR AI
Paid up-front
Revenue stops at install. AI costs continue. Only viable for no-server-cost apps.
INDIE DEFAULT
Freemium unlock
Free with paid unlock at value moment. RDR2 pattern. 3-7% conversion.
Subscription
Best for continuous value + recurring AI cost. Highest LTV. Annual at 30-50% off reduces churn.
IAP / credit packs
Buy units of usage. Aligns revenue with AI cost perfectly. Some users find it nickel-and-diming.
Ad-driven
Free, ad-supported. eCPM $1-10. Rarely covers AI cost. Avoid for AI-heavy apps.
Hybrid
Free + ads + IAP to remove ads + Pro sub. Most successful apps mix.
Winning
For AI Apps Specifically
Per-user cost is real and ongoing. Pure paid-up-front doesn't work long-term. You need recurring revenue (subs) or usage-based (credits). Rate-limit "unlimited" tiers aggressively.
Common Mistake
Promising "unlimited AI" without rate limits. A power user can run up $100/mo in your costs while paying $9.99. Always cap.
Decision tree
Pricing patterns
Has per-user variable cost? YES → skip pure paid-up-front