How to make money from apps: costs, steps and models

Published Monday 30 March 2026

Table of contents

• Why people like the app business
• Can you still make money from an app?
• Ways to make money from an app
• Define your app idea
• Costs of developing an app
• The process of building an app
• Marketing your app
• After launch
• Track your app business finances with Xero
• FAQs on making money from apps

Key takeaways

• Validate your app idea before development by identifying the specific problem you're solving, researching your target users, analysing competition, and testing demand through landing pages or surveys to avoid building something nobody wants.
• Focus on creating a minimum viable product with only one or two essential features to keep development costs low, as changes become ten times more expensive with each development stage.
• Choose a monetisation model that matches your app type and user behaviour, such as subscription models for ongoing value, freemium for products with clear upgrade paths, or advertising for high-volume apps.
• Prioritise user retention over initial downloads since more than 90 percent of users abandon apps within 30 days, making long-term engagement crucial for sustainable revenue.

Why people like the app business

The app business model offers scalable revenue with low incremental costs. Once you build an app, you can sell it repeatedly without rebuilding it for each new customer.

Apps automate everyday tasks, from managing projects to identifying songs. The successful ones become significant revenue generators because each new user costs little to serve.

Can you still make money from an app?

Yes, you can still make money from an app, but profitability depends on your user volume and pricing strategy. Most apps charge nominal fees, so you need significant downloads to generate meaningful revenue.

Business-to-business (B2B) apps can charge hundreds per year, but consumer apps typically compete on low prices. The market expects useful apps at affordable rates.

The key question: how many users do you need? That depends on your costs to develop the app and how you monetise it.

Ways to make money from an app

App monetisation is how you generate revenue from your product. Choose a model that matches your app type, target audience, and the value you provide.

Here are the most common ways to make money from an app:

• Subscription model: Charge users a recurring fee (monthly or yearly) for ongoing access. Works well for apps that deliver continuous value, like productivity tools or content platforms.
• Freemium model: Offer a free basic version with paid upgrades for premium features. Attracts a large user base while converting engaged users to paying customers.
• In-app purchases: Sell additional features, content, or virtual goods within the app. Common in gaming and lifestyle apps.
• Advertising: Display ads to users and earn revenue based on impressions or clicks. Requires high user volume to generate meaningful income.
• One-time purchase: Charge a single upfront fee to download the app. Simpler to manage but limits recurring revenue.
• Business-to-business licensing: Sell your app to businesses for internal use or white-label it for other companies. Typically commands higher prices than consumer apps.

Many successful apps combine multiple models. For example, a freemium app might include ads for free users and remove them for subscribers.

Define your app idea

Validating your app idea before you develop it saves time and money. Many apps fail because they solve problems users don't actually have or face too much competition.

Follow these steps to test your concept before you build:

1. Identify the problem you're solving: Define the specific pain point your app addresses. Ask yourself: would people pay to solve this problem?
2. Research your target users: Understand who needs your app, how they currently solve the problem, and what they'd pay for a better solution.
3. Analyse the competition: Search app stores and the web for similar products. Identify gaps you can fill or ways to differentiate your offering.
4. Test demand before building: Create a landing page, run a small ad campaign, or survey potential users. Real interest signals a viable market.

A validated idea reduces your risk of building something nobody wants. Invest time to research before committing budget to develop your app.

Costs of developing an app

Developing an app can cost from $60,000 for a simple web app to over $200,000 for a full mobile product, with research showing the average cost to develop an app is just over $90,000.

US company Echobind develops apps and has created products for hospitals, commodity traders, and gamers. Chief executive officer Michael Yared outlines key price points to consider.

Michael Yared, chief executive officer of Echobind, explains:

Web apps are cheaper to produce. You can create a web app that does one thing really well for about $60K. Double that if you want it to do lots of things. And if you want it to live on mobile too, then you're looking at over $200K.

Keep these cost factors in mind:

• Web apps: around $60,000 for a focused, single-purpose product
• Feature-rich web apps: approximately $120,000 for multiple functions
• Mobile apps: over $200,000 when adding iOS or Android versions
• Marketing costs: budget separately for user acquisition after launch

These numbers are significant for first-time founders. However, a well-defined product with clear market fit can deliver strong returns. You can also reduce costs by building the app yourself if you or your partners have coding skills.

The process of building an app

Building an app profitably starts with keeping costs low through careful planning. Focus on creating a minimum viable product (MVP), which is a version with only the essential features needed to solve your users' core problem.

Yared recommends a disciplined approach: "Decide on one or two features that the app simply must have. Don't build more than that. You want to create the MVP at the lowest possible cost. No one is going to overtake you by putting out a more feature-rich version of your MVP. I've never seen that happen."

Follow these five steps to move from idea to working app:

1. Discovery: Identify the essential features and design user flows that make them easy to access. This is the most important step.
2. Wireframes: Sketch each page in basic black and white using blocks to show layout, without pictures or design elements.
3. Prototypes: Convert wireframes into a clickable prototype that lets you navigate through the app, even though it won't function yet.
4. Designs: Transform wireframes into fully designed pages, defining how each menu, button, and screen will look and behave.
5. Development: Write the code that makes everything work. Build the complete product based on your validated designs.

Yared emphasises making changes early: "Discovery is the most important part of building custom software. Otherwise you risk building a house with the wrong foundations."

Changes get ten times harder and more costly with each successive step. Validate your concept thoroughly before moving to wireframes and development.

Marketing your app

Marketing your app is essential because you won't generate revenue until users sign up. Building a great product is only half the job.

Use these marketing tactics to attract your first users:

• Test with beta users: Distribute an early version to test audiences before launch. Their feedback improves your product, and testers often become paying customers.
• Optimise your app store listing: List your app in the app stores with clear descriptions of the problem it solves. Use relevant keywords to help users find you.
• Create a product website: Build a dedicated website that explains your app's value and provides a direct path to download or subscribe.

After launch

Retaining users matters more than initial downloads. Because apps struggle to retain users, with more than 90 percent of users abandoning an app within 30 days, you need customers to stay if you want sustainable revenue from your app.

Early adopters play a crucial role beyond their subscription fees. Yared explains how they help you succeed long-term.

Michael Yared, chief executive officer of Echobind, shares his advice:

See how the app is bearing up to real-life use. Certain areas may be getting more traffic than you'd anticipated, which can slow down performance. Deal with those things. Take note of which features are popular and make those experiences as good as you can. If a feature's going unused, decide if you'll drop it or promote it more so users know it's there.

Track your app business finances with Xero

Running an app business involves managing costs to develop your app, tracking subscription revenue, monitoring marketing spend, and forecasting cash flow. When you can clearly see your finances, you can make informed decisions about how to grow your business.

Xero's accounting software helps you stay on top of your app business finances:

• Track expenses: Monitor what you spend to develop, host, and market your app in one place
• Monitor revenue: See income from different monetisation channels in real time
• Generate reports: Understand profitability with customisable financial reports
• Manage invoices: Handle payments to developers, agencies, and contractors
• Stay compliant: Keep accurate records for tax obligations

When you can see your numbers clearly, you can decide when to invest in new features, increase marketing spend, or hire additional help. Get one month free and take control of your app business finances.

FAQs on making money from apps

Still have questions about building a profitable app business? Here are answers to common concerns.

How long does it take to make money from an app?

Most apps take 6–18 months to become profitable. This factors in time to develop (the timeline to develop a mobile app is about 11 months on average), plus marketing budget and how quickly you achieve product-market fit. Apps that validate well before launch and acquire users effectively typically become profitable faster.

Do I need coding skills to build a profitable app?

No. You can hire developers, use no-code platforms, or partner with someone who has technical skills. Business skills like researching markets, planning finances, and marketing are equally important to become profitable.

How many users do I need to make my app profitable?

It depends on your costs and monetisation model. An app charging $10 per month needs 100 subscribers to generate $1,000 monthly, while an ad-supported app might need 10,000 active users to earn the same amount.

Should I build for iOS, Android, or both?

Start with the platform your target users prefer, but also consider data on retention. For example, iOS apps retain users slightly better after 30 days (3.7%) than Android apps (2.1%). If budget is limited, choose one platform, validate your concept, then expand. Cross-platform development tools can reduce costs when building for both.

What's the best monetisation model for my type of app?

Match your model to user behaviour. Subscription models work for apps delivering ongoing value. Freemium suits products with a clear upgrade path. Advertising requires high user volume. Business-to-business licensing commands premium prices for specialised solutions.