How Free Apps Make Money

The phone you never pay for

It's eleven at night. You've been on your phone for an hour, and you haven't paid a cent. Ninety-seven percent of the apps on that phone are free. Someone built them. Someone hosts them. Someone is getting paid. So who?

Free is not a discount. Free is the most profitable price in software. In 2024, people spent one hundred and fifty billion dollars inside apps they had downloaded for nothing. And that's the small number.

This is Stickonomics. Today: the four doors behind every free app, what each one quietly takes from you, and the one that's winning.

Half a trillion dollars behind the word free

Put the two together. About one hundred and fifty billion in purchases and subscriptions. Roughly three hundred and eighty billion in advertising shown inside apps. That's more than ten times the entire global cinema box office. All of it sitting behind the word free.

Door 1: Ads, and the auction you never see

Door one. Ads. You know this one. You don't know how fast it is.

Every time a screen with an ad slot loads, your phone sends out a little packet: which app you're in, your rough location, your device, an advertising ID. In about a tenth of a second, companies bid on you. The highest bidder's ad appears. You never notice the auction. It finished before the page did.

In the US, that broadcast goes out about seven hundred and forty-seven times a day, per person. In Europe, three hundred and seventy-six. Each one is a tiny bid request. Each one is a tiny leak.

So what are you worth? A rewarded video, the one you watch for an extra life, pays the app about nineteen dollars per thousand views in the US. That's two cents for your thirty seconds. A banner ad? Half a cent. Your attention is sold by the thousand, like eggs.

That sounds like nothing. It is nothing, per person. Multiply by a few billion sessions a day and it's a skyscraper. The business was never you. The business is everyone.

Door 2: Data, 135 companies and 3 cents

Door two is quieter. Here the app doesn't sell your attention. It sells you.

In 2020, researchers in Norway took ten ordinary apps. A dating app, a period tracker, a makeup app, a kids' game, a keyboard. They watched where the data went. Those ten apps sent user information to at least one hundred and thirty-five different companies.

One dating app sent users' exact GPS position, age and gender to its advertising partners. Not 'somewhere in this city'. The building you were standing in.

How does it get there? Through a few lines of code a developer pastes into the app. It's called an SDK. A company called X-Mode paid developers about three cents per American user, per month, to include theirs. Around four hundred apps said yes. Twenty-five million phones a month, tracked, and the developer never had to touch the data.

Where did it end up? Reporters at Vice found some of that location data was sold on to contractors working for the US military. One of the apps in the chain was a prayer app with ninety-eight million downloads. Its users had never heard of X-Mode.

And it isn't only shady apps. Avast, the antivirus that promised to block trackers, was fined sixteen and a half million dollars in 2024. Its subsidiary had sold browsing data from a hundred million users to more than a hundred buyers, since 2014. The product that protected you from tracking was the tracker.

Door 3: Whales, the 0.15%

Door three is the loudest. It built the most valuable games on Earth, and it needs you to pay nothing.

In a free game, almost nobody pays. A famous study by the analytics firm Swrve tracked tens of millions of players. In a given month, only about one and a half percent spent any money at all. Everyone else played for free, forever.

And inside that one and a half percent, the top slice, fifteen players in ten thousand, generated half of all the revenue. The industry calls them whales. The whole game is a net, designed for them.

This is why the game is free. Charging five dollars at the door would lose ninety-eight percent of the players, and the whales need those players. As opponents. As a leaderboard to climb. As a crowd to be seen by. You are not the customer. You are the scenery.

Candy Crush has made more than twenty billion dollars. It has never cost a cent to download. Five billion installs, and a design that offers you five more moves exactly when you're one jelly short.

The tricks have names. Energy that runs out and refills in two hours, unless you pay. Timers. Limited-time offers that come back every week. A currency that's always slightly more than you need. None of it is an accident. It's tested on millions of people, in real time.

Door 4: Subscriptions, the quiet winner

Door four is the one quietly winning. It's also the only door where you actually know you're paying.

Take Duolingo. More than a hundred million people use it every month. About eight million pay. That's eight percent. And that eight percent produced eighty-one percent of the company's seven hundred and forty-eight million dollars of revenue in 2024.

So what do the other ninety-two million do? They are the marketing. Every streak shared, every friend invited, every 'I'm learning Spanish' at a party is a free advert. The free tier isn't charity. It's the cheapest customer acquisition in history.

Subscriptions solve the problem the other doors have. Ads need your attention. Data needs your permission. Whales need your weakness. A subscription just needs your card, and your forgetfulness. Most people are paying for at least one thing they've forgotten.

What Apple changed in 2021

So why is everything suddenly asking you to subscribe? Because in 2021, Apple changed one setting.

App Tracking Transparency. A pop-up asking whether an app may follow you across other apps. Most people tapped no. Meta told investors it would cost them ten billion dollars in a single year. The shares fell twenty-six percent the next day.

When door two got harder, the money moved. Toward rewarded ads you choose to watch. Toward subscriptions. Toward games that bundle all four. The doors don't close. They rotate.

The price list for free

So here's the price list for free. An ad-funded app charges you in attention, sold by the thousand. A data-funded app charges you a trail: where you sleep, where you pray, where you go at two in the morning. A whale-funded app charges ninety-eight percent of people nothing, and a few people everything. A subscription charges you in forgetting.

Three questions for any free app. One: if I'm not paying, who is? Two: what do they get for it? Three: if I stopped using it tomorrow, would they lose a customer, or a product? If the answer is a product, you now know which door you walked through.

Free is a price

None of this makes free apps evil. The ad auction pays for the news you read for free. The whales pay for the game your kid plays for free. The subscriptions pay for the app that taught you Spanish. Free is a price. It just isn't paid in money.

If you want the hidden economics of ordinary things, drawn in ink, that's Stickonomics. Next time: how a dress can cost five dollars. Subscribe, and we'll follow the receipt.