In-App Purchases vs Ads: Which Earns More?

Neither one wins by default. Ads earn a little from nearly everyone. In-app purchases earn a lot from very few. Which total is bigger depends on three numbers: how many of your players pay, how much each payer spends, and where your audience lives.

In the example we work through below, an ad-funded casual game with a mixed audience earns about $0.15 per install over its life. An in-app purchase model matches that only when roughly 2% of installs become payers at $8 each, after the store takes its cut. Move the audience to the US and UK and the bar rises to about 4.6%. Move it to Tier 3 countries and it drops to about half a percent.

So the honest answer is a break-even calculation, and then, for most free apps, a decision to run both. This guide shows the calculation, the store fees that sit inside it, how to design an economy where ads and purchases help each other, and the policy rules you cannot ignore. All ad figures are modelled estimates from our benchmark tables, and every purchase figure is a labelled assumption.

The two income shapes

Ads pay per impression. Every active user generates a few cents a day, whether or not they ever intend to spend a dollar. Revenue tracks daily active users, so it rises smoothly as the audience grows and falls the same way when it shrinks. The unit to watch is ARPDAU, revenue per daily active user, which our ARPDAU and LTV guide covers in detail.

Purchases pay per transaction. Most players pay nothing. A small share pay once, and a smaller share pay again and again. Revenue is lumpy, driven by those few players and by how many new users you add. The unit to watch is ARPPU, revenue per paying user, alongside the share of users who pay at all. Firebase defines both in its AdMob and Analytics documentation: ARPU includes AdMob earnings plus purchase values, while ARPPU counts purchase value only.

That difference in shape drives most of the strategy. Ads are steady and broad. Purchases are spiky and narrow. A game with 100,000 installs and 1,000 payers has 99% of its players who will never buy anything, and ads are the only way to get paid for them.

Store fees and what you keep

Purchases carry a cost that ads do not: the store takes a cut before you see the money. Estimated earnings in an ad dashboard are already what the network owes you. For purchases, you have to subtract the fee yourself.

Apple's standard commission is 30%. Under its App Store Small Business Program the rate is 15% on paid apps and in-app purchases for developers who earned up to $1 million in proceeds in the prior calendar year (and not more than $1 million so far in the current one). Apple's standard terms also lower the rate on auto-renewing subscriptions after a subscriber's first year, and some regions, including the EU, Japan and China, have their own rates. Check the figure for your storefront before you build a forecast around it.

Google Play changed its structure in 2026. For users in the US, UK, European Economic Area, Australia and Japan, the service fee now depends on whether the user's install is new or existing relative to a regional rollout date, and a separate 5% billing fee applies to purchases made through Google Play Billing. For the remaining markets, Google's page lists 15% on the first $1 million of annual revenue for enrolled developers and 30% above that, with auto-renewing subscriptions at 15%. The full tables are on Google's service fees page, and they are worth reading rather than relying on a summary from anyone else, including us.

For the examples below we use two round figures: 15% for a small developer on a reduced rate, and 30% as the cautious case. If your real fee sits between them, so will your results.

One more point on the rules. Google Play's Payments policy requires Google Play's billing system for in-app purchases of digital goods, with listed exceptions. Apple's App Review Guidelines at 3.1.1 require in-app purchase for access to features or content such as subscriptions and in-game currencies. You cannot sidestep the fee for digital goods by selling them through your own checkout inside the app, except where the stores' own programs allow it.

A break-even example, with assumptions

This is an example, not a measurement. Take a casual game with 100,000 installs. Each install stays active for 6 days over its life. Daily users see 2 rewarded videos, 3 interstitials and 8 banners, with AdMob eCPMs from our Android tables. How much apps make from ads works through that same mix.

Ad income per install is 6 days times ARPDAU:

Now the purchase side. Suppose payers spend an average of $8 each over their lifetime in the game, which is a pure assumption. The store keeps 15%, so you net $6.80 per payer, or $5.60 if the fee is 30%. The question becomes: what share of installs must pay for purchases to match ads?

Read it as a rule of thumb: with an $8 payer and a mixed audience, you need about two or three installs in a hundred to pay before purchases beat ads. For a US-heavy audience the ads are worth so much that purchases need to convert more than four in a hundred. For an audience in Tier 3, purchases win with fewer than one in a hundred, because the ads there pay so little.

Raise the average spend to $20 and every threshold falls by more than half. Cut it to $3 and they more than double. The exact payer spend depends on the game, so the table is for the shape of the argument, not for a forecast.

What conversion rates look like

We do not have a trustworthy industry-wide figure for the share of players who pay, and you should be suspicious of anyone who quotes one with confidence. Reported numbers for games vary a lot by genre, platform, year and, importantly, by how the share is measured: of all installs, of daily users, or of users past day 7. You will often hear that only a low single-digit percentage ever buy anything. The break-even table above lets you test that claim against your own data instead of taking it on trust.

For subscription apps, RevenueCat publishes a yearly benchmark. Its 2026 report summary puts the median day-35 conversion for freemium apps at 2.1%, against 10.7% for apps with a hard paywall. The page uses both "trial-to-paid" and "download-to-paid" for the metric, so read the full report before leaning on the definition. It covers subscription apps, which behave differently from games and utilities selling consumables.

Your own number is better than any of these. In Firebase, link your app to AdMob and log purchase events, and you get ARPU and ARPPU side by side. Divide payers by installs for each install cohort, and you have the figure that goes into the table above.

Why most free apps do both

If purchases and ads each take money from a different group of players, running both should beat either alone. It usually does, with one caveat: ads can talk payers out of paying, and payers can leave a hole in your ad revenue.

The simplest hybrid is the oldest one. Show ads to everyone, then offer a purchase that removes them. The price has to be higher than what that user would have earned you in ads. Using the Tier 1 ARPDAU above, a user who would have stayed 60 more days is worth about $3.14 in ads. A $3.99 remove-ads purchase nets $3.39 at a 15% fee, or $2.79 at 30%. That works at 15%, and loses a little at 30%. For a Tier 3 user, the same 60 days of ads are worth about $0.36, so the same purchase is a good deal for you. The more valuable the user is to advertisers, the higher the price of removing ads needs to be, or the more carefully you remove only some of them.

A softer version removes only interstitials after any purchase, and keeps rewarded video as an optional extra. Interstitials annoy people. Rewarded ads do not interrupt anyone, so there is less reason to take them away. Rewarded or interstitial covers that split.

Rewarded ads as a path to the first purchase

Rewarded video earns more per impression than other formats in our tables (about $12.00 for AdMob in Tier 1, against $8.00 for interstitials and $0.90 for banners). It also does something else: it gives non-paying players a taste of what paying players have. A player who earns a power-up by watching an ad understands the value of the power-up, and some of them will buy the next one.

We would not promise that effect, because it depends on the game and we have no data to offer for it. It is easy to measure, though. Run the rewarded offer for half of new users and compare payer conversion between the groups after a few weeks. If the exposed group converts at least as well, you have free income. If it converts worse, the ad is cannibalizing the purchase, and you should move the reward to something payers never want.

Where hybrids go wrong

Three patterns come up repeatedly:

• The purchase is cheap and the ad reward is generous, so nobody buys. If one rewarded video gives the same boost as a $2 pack, the pack is competing with free.
• The remove-ads price is lower than the ad value of the people who buy it. Heavy users in high-paying countries can be both the likeliest buyers and the most valuable ad audience.
• Every screen shows both an ad and a purchase prompt, so the app feels like a till.

The fix for each is the same: decide what ads are for and what purchases are for before you set prices.

Designing an economy that supports both

Think of two currencies. A soft currency is earned through play and ads. A premium currency, or a one-off feature purchase, is only bought. Rewarded ads pay out in soft currency, in small amounts, capped per day. Purchases give time savings, cosmetics, extra content, or premium currency.

That arrangement keeps the ad reward from undercutting the product. The player who watches five ads a day progresses slowly and pays with attention. The player who would rather not watch pays with money and skips the wait.

A few specifics worth setting early:

• Make the rewarded offer visible at the moment of need, such as when a player is short of currency or has just lost a life, and nowhere else.
• Cap rewarded views per day so they do not flood the soft currency.
• Suppress interstitials for a few minutes after a rewarded view and for the whole session after a purchase.
• Keep the first session mostly free of interruptions. Retention feeds both income streams.

Our mobile ad eCPM benchmarks give you the price of each of those ad slots, and the AdMob revenue calculator can model how many rewarded views per user you need to match an average payer.

Rules that limit the design

A few policies shape what you are allowed to build.

AdMob requires users to opt in to a standard rewarded ad and to see the reward before the ad plays. The policy also says declining an ad must not stop normal use of the app, and that random rewards are allowed only if the odds are disclosed. Cash, cryptocurrency and gift cards cannot be rewards. The details are in the AdMob rewarded ads policy.

Apple's guideline 3.1.1 says in-game currencies bought with in-app purchase may not expire, and that apps offering loot boxes or similar randomized purchases must disclose the odds of receiving each type of item before purchase. If your premium currency buys random items, the odds go on screen before the player pays.

Apps for children are a separate area, where both ads and purchases are restricted. Ads in kids apps covers it. On iOS, tracking consent affects what ads pay, which is the subject of App Tracking Transparency and iOS earnings.

Subscriptions in the mix

A subscription is a purchase that repeats, so its per-payer value is higher and its store fee can be lower. Google lists auto-renewing subscriptions at 15% in markets still on the older structure, and Apple lowers its rate after a subscriber's first year. That makes subscriptions attractive for utilities, content and tools. They suit games less often, unless the game has regular new content to justify the charge.

Ads and subscriptions combine well when the free tier is ad-supported and the paid tier removes ads and adds features. The break-even maths is the same as above: price the subscription above the ad income you give up, and count retention, because a subscriber who cancels after two months costs you a free user's ad income for all the months after.

Common questions

Do ads hurt in-app purchases?

They can, if they interrupt the player at the wrong moment or if the reward undercuts a purchase. They can also help, if rewarded video introduces the player to items they later buy. The only way to know is to compare payer conversion between users who see a given ad and users who do not.

Should a new app launch with ads or purchases first?

Ads are simpler to add and start earning from the first user, so many apps launch with them and add purchases once retention data shows who sticks around. If your product is a tool with clear premium features, build the purchase first and keep ads light. How to monetize an app compares every model for different app types.

Is a remove-ads purchase worth adding?

Usually, yes, as long as the price is above what that user would have earned you in ads. Check it against your own ARPDAU and your expected remaining days for engaged users. Our worked example above shows how fast the answer changes with geography.

Which earns more for a small app?

For most small apps with a few thousand daily users, ads provide the larger share in the early months, because purchases need a big enough pool of players to get a handful of payers. Both grow as the audience does, and the mix shifts toward purchases when retention is strong.

What to do next

Open your own numbers before you decide anything. In AdMob and Firebase, find last month's ad revenue per daily user and the share of installs that have purchased. Then fill in the break-even table above with your payer spend and your real fee.

If ads are far ahead, work on retention and format mix first; the seven ways to earn more from the audience you have is a good starting list. If purchases are ahead, protect them by keeping rewarded offers away from the items you sell. To model the ad side by network and category, open the AdMob revenue calculator, or the estimates page for casual games or mid-core games.