You’ve created your app, and people are starting to download, but now you have a new challenge:

How, then, do you convert that growth into revenue? When it comes to app monetization strategies, there are many, from paid apps to subscriptions, freemium models, sponsorships and more. But there are two dominant approaches that are usually the most popular, and still the most controversial:  in-app purchases vs ads.

In this article, we’ll walk through how both models work, their pros and cons, examples of successful apps that are using the two approaches, and practical guidance to help you decide which one is the right fit for your business and product.

Understanding In-App Purchases

In-app purchases (IAPs) are probably the most well known app monetization methods. They allow users to unlock additional features, purchase consumables, cold-pack cosmetic upgrades or subscribe to premium services.

In-app purchases (IAPs) are one of the most familiar app monetization strategies. They let users unlock extra features, buy consumables, pay for cosmetic upgrades, or subscribe to premium services. For many app owners, IAPs can be highly rewarding because they allow for predictable, recurring revenue and create a clean, ad-free experience for users.

But they come with challenges too. In app purchases typically have very low conversion rates, only around one to two percent of users actually pay. On top of that, app stores take a 15–30% commission on each purchase of your app. This means you need to clearly communicate the value of your premium features, or risk losing users because If they don’t see the value, they might stop using your app or cancel subscriptions. Popular examples of successful IAP-driven apps include Candy Crush, Duolingo,Clash of Clans and Spotify.

Understanding In-App Ads

Advertising plays a big role when it comes to the whole in-app purchases vs ads discussion. The main advantage of using In-App ads is that it lets you monetize every single user, not just the ones who pay. That’s why they work well for apps that have big user bases like YouTube. Ads can show up in different formats such as banners, interstitials, native placements, or rewarded ads where users choose to watch in exchange for a perk.

The good part is you start earning right away, and from 100% of your audience. The downside? If a user sees too many ads that they have no control over they might get impatient and irritated making them uninstall. On top of that, CPM rates (It’s basically how much advertisers pay for 1,000 ad impressions) keep changing with the ad market, so revenue isn’t always predictable. The exception is rewarded ads, which are usually received more positively since they feel like an option. That’s why platforms like YouTube, TikTok, and many free-to-play games rely heavily on ad models.

In-App Purchases vs Ads: A Quick Comparison

When it comes to in-app purchases vs ads, it’s all about balancing what you gain and what you give up. Purchases generate higher revenue per user but only capture a small slice of your audience. Ads reach everyone, but often bring in less money per user and can hurt the user experience if not implemented carefully.

The best option often depends on your app’s category. Games and productivity tools frequently succeed with in-app purchases, while content-driven platforms like social media apps or streaming services tend to monetize better with ads. Many developers now combine both, offering rewarded ads alongside optional premium purchases or ad-removal subscriptions.

Beyond the Big Two: Other App Monetization Strategies

Of course, in-app purchases vs ads aren’t the only paths to revenue. Other app monetization strategies include 

• charging for a paid app upfront
• using a freemium model with core features
• free and premium upgrades
• forming sponsorships or partnerships
• branching into e-commerce or merchandising

Still, ads and IAPs remain the backbone for most successful apps today.

Real-World Examples

There are plenty of examples out there as we showcase some before. Candy Crush Saga is probably the most famous when it comes to in-app purchases. The game is free to play, but if you want extra lives, boosters, or to move ahead faster, you pay. It’s built around little moments where spending a bit feels worth it. That’s the whole strength of in-app purchases, when the app makes progress or convenience valuable enough that people don’t mind paying.

On the ad side, we have giants like YouTube and TikTok. These apps have huge audiences, so ads are the easiest way to turn all that attention into revenue. Instead of charging users directly, they keep people watching for as long as possible and fit ads into the experience. Formats vary, from pre-rolls and mid-rolls on YouTube to TikTok’s scroll-stopping ads that feel like part of the feed.

Oh and it doesn’t have to be a case of  in-app purchases vs ads, when you can have both! Duolingo is a great example of a hybrid model approach. The free version shows ads between lessons, but you can pay for premium to remove them and get extra perks. A lot of mobile games do the same, mixing rewarded ads (watch a short video, get coins or a retry) with regular in-app purchases. This way, developers earn from both free and paying users, and players get options: spend money, or spend time.

Conclusion: Finding the Right Strategy

So, which is better, in-app purchases vs ads? The truth is, there’s no universal winner. The right decision here depends on your app type, audience, and market. Games may benefit from a hybrid approach, productivity apps often lean on subscriptions, and social platforms succeed with ad-driven models.

From my perspective as a user, Intrusive ads can make me uninstall an app almost instantly, they interrupt the flow and remind me that I’m not really in control of the experience. But on the flip side, apps that lock too much behind strict paywalls feel just as unwelcoming.

The apps that actually keep me around are the ones that find a middle ground. If they use ads, they do it in a way that doesn’t constantly disrupt me and they are actually providing a service that is worth waiting for. And if they use in-app purchases, they make those purchases feel like upgrades or shortcuts, not necessities. 

In the end, the best app monetization strategy isn’t just about revenue, it’s about building an app people actually want to keep using. So your best move is to start with one model, experiment, and adapt. Many of today’s most successful apps succeed not by choosing between in-app purchases vs ads, but by combining them into a user-friendly system. Whatever path you choose, keep testing, listen to your audience, and refine your app monetization strategy until it fits your product perfectly.
For more business tips and growth insights, you can explore our business tips articles at The Cyberia Tech.