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How do apps make money? 8 monetization models and how to choose

How apps actually make money: direct sales, commissions, subscriptions, freemium, in-app purchases, ads, listing fees and B2B licences, with Gulf examples.

Fanann Team10 min read
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Apps make money through eight main models: selling a product or service directly, a commission on each transaction in marketplaces and bookings, monthly or yearly subscriptions, freemium with paid features, in-app purchases of digital content, advertising, listing and promotion fees, and licences or subscriptions sold to businesses. Most successful Gulf apps start with one clear model tied to the value the customer receives.

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How do apps actually make money?

Apps make money when a person or business pays for clear value: a product delivered, a service booked, time saved or income earned through the app. There are eight common ways to collect that money: direct sales, commissions, subscriptions, freemium, in-app purchases, advertising, listing and promotion fees, and business licences. The right choice depends on who pays, how often they need the service, and whether the value is digital or physical.

Many founders start with 'how do I get downloads?' and postpone the revenue question. In the Gulf that is expensive: ads on Snapchat and TikTok cost money, and customers expect quality from day one. So decide your revenue model while choosing the idea itself, not after launch. If you are still looking for the idea, start with profitable app ideas for the Gulf.

If you do not know who pays and why, you have a nice hobby, not a business.

The eight monetization models in one table

ModelHow it worksGulf exampleFits
Direct salesThe customer pays for a product or servicePerfume and oud store, café pre-ordersOwners of the product or service
CommissionA percentage or fixed fee per transactionPitch booking, tutor marketplace, equipment rentalTwo-sided marketplaces
SubscriptionA recurring monthly or yearly paymentGym, clinic appointment systemRecurring services and tools
FreemiumFree basics, paid advanced featuresFree invoicing tool up to a limitTools that spread easily
In-app purchasesBuying digital content or featuresExtra lessons, in-game itemsDigital content
AdvertisingAdvertisers pay for visibilityA restaurant guide or large content appHuge, active audiences
Listing and promotionFees to list or boost a listingCar or property classifiedsMarketplaces and classifieds
Business licenceAn annual contract with a company or public bodyAttendance system, internal training platformB2B and enterprise solutions

Many apps combine two models later, such as a marketplace that takes a commission and also sells promoted listings to sellers. But starting with one clear model is easier to sell and to measure.

Commissions and marketplaces: earning on every transaction

Commission is the natural model for booking apps and marketplaces: the venue, stylist or equipment owner gets a customer, and the app keeps part of the transaction value. Your revenue grows with volume. The downside is that partners may try to take repeat business outside the app after the first meeting.

  • Reduce leakage by giving partners real value: schedule management, guaranteed payment, reviews and automatic reminders.
  • Collect payment inside the app and pay partners out, so you see every transaction and calculate commission accurately.
  • Show fees clearly to both sides in your terms and before payment, to avoid disputes and refund requests.
  • Plan partner payouts: when you pay out, and how you handle cancellations and refunds.

Subscriptions and freemium: recurring revenue

Subscriptions are the model investors like most because they produce predictable monthly revenue. They fit services customers need continuously: a gym, a monthly car wash package, a clinic appointment system or Quran memorization circles. The biggest challenge is churn: customers who cancel after a month or two.

Subscriptions work when
  • The customer uses the app at least weekly
  • Value accumulates: history, progress, data
  • Renewal is automatic with a saved card and a reminder before renewal
  • There is an annual plan with a sensible discount
Subscriptions struggle when
  • The need is seasonal or once a year
  • Customers see no clear difference between free and paid
  • Repeated payment failures go unchased
  • Cancelling is hard, which makes customers angry

Freemium gives away a useful free version and keeps advanced features for paying users. It works when spreading is easy and the cost of each free user is low. The risk is a free tier good enough for everyone. For the technical side, read subscription billing for apps in the Gulf.

App stores: when do payments go through apple and google?

An important question if you publish on the App Store and Google Play: must payments go through the store's in-app purchase system? The general rule is that digital content and features consumed inside the app (a digital course subscription, premium features, game currency) usually fall under the store's purchase system and its commission. Real goods and services (a food order, a pitch booking, a car wash, a shipped product) are usually paid through your own gateway, with mada and Apple Pay.

This is one reason service and booking apps are attractive in the Gulf: payment goes through your gateway, and customers see familiar options such as mada, Apple Pay and STC Pay (now part of STC Bank) in Saudi Arabia, or KNET in Kuwait. The payments page shows what Fanann supports.

How to choose a model and set a price

  1. 1
    Decide who pays

    The end customer, the partner (venue, technician) or a company? In marketplaces it may be both.

  2. 2
    Define the type of value

    A single transaction (booking, order) leans toward commission or direct sales. Continuous use leans toward subscription.

  3. 3
    Find what people pay today

    What do they pay for the current alternative? That is your first price reference, not your own costs.

  4. 4
    Test two prices

    Show two prices to two small groups and watch which brings more revenue, not more sign-ups.

  5. 5
    Count every cost

    Payment gateway fees, messaging and hosting costs, store commission where it applies, and VAT.

What about selling to companies and public bodies?

If your customer is a company or a public body, the model is usually an annual licence or a subscription per user or per branch. Sales cycles are longer, and you may need a formal quotation, an e-invoice, a service level agreement and sometimes in-country hosting for certain sectors. In return, one customer pays more and stays for years once the tool is part of their work. Start with a short paid pilot for one branch rather than a large contract.

Build the revenue model into your app

Paste this into Fanann

Build a marketplace for renting camping and trip equipment in Saudi Arabia, Arabic first. Owners list equipment with photos, a daily price and a refundable deposit. Renters sign in with their phone number, choose dates, and pay rent plus deposit with mada, Apple Pay or Tabby. The app takes a commission on each booking, calculated automatically, and shows owners their net payout. Add an option to promote a listing to the top for 7 days for a fee. Add an admin panel showing monthly revenue from commissions and promotions, plus cancelled and refunded bookings. Calculate VAT and issue a QR-coded e-invoice.

Try it in Fanann

Your next step: write one line, 'who pays, for what, how often', and show it to five potential customers. To understand the technical side of payments, read how to add payments to your app.

Key takeaways

  • Tie what the customer pays to the value they get: a booking, an order, time saved or income for a partner.
  • Commissions suit marketplaces and bookings; subscriptions suit tools and recurring services.
  • Advertising needs a huge audience, so it is rarely the right starting point for a local app.
  • App stores have rules for digital content; real goods and services are usually paid through your own gateway.
  • Start with one model and test the price with real customers before adding more revenue streams.

Frequently asked questions

How do free apps make money?
Through commissions on transactions, subscriptions for advanced features, fees from partners, or ads when the audience is large. Free to download does not mean there is no revenue model.
How much do apps make from ads?
It varies widely with audience size, engagement and content type, and there is no fixed figure. Ads need a large audience to produce meaningful revenue, so they are rarely the best start for a small local app.
What is the best monetization model for a booking app?
Usually a commission per booking or a monthly subscription for the venue. Commission is easier to start with because the partner only pays when a booking happens.
Do I have to pay Apple a commission on every payment?
Not always. As a general rule, digital content used inside the app goes through the store's purchase system, while real goods and services are paid through your own gateway. Check the store's current guidelines.
Is a subscription or a commission model better?
Subscriptions suit recurring tools and services because revenue is steady; commissions suit marketplaces and bookings because they grow with volume and make it easy for partners to join.

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