How do free games make money? Strategies for free games

There are thousands if not millions of free games out there on Play Store and App Store, each of them beautiful and interactive in their own way. These games can be downloaded and played without paying a single dollar. Moreover, developers spend so much time and effort in creating them. This begs the question: how do free games make money? Think about it. No one is paying for these PC or mobile games. In fact, a great number of people don’t even spend money a lot on in-app purchases in the game. Yet, these games generate billions in revenue. How is it possible?

F2p game developers use several monetization strategies like advertisements, in-app purchases and other such microtransactions to generate revenue. This makes free-to-play model as one of the most successful ones in the gaming industry. If you want to pursue your career as a game developer, then creating free games is one of the best revenue models out there.

In this guide we will explore how do free games make money through various monetization stratgies and how much do these developers make annually. 

How do free games make money? Free-to-play monetization strategies

Game developers monetize their free to play games through various strategies turning the f2p model into an effective business strategy. Instead of buying the game through digital stores like Steam, developers generate revenue through in-game purchases, advertising, subscriptions and premium upgrades.

Basically, free games focus more on volume and engagement rather than upfront sales. The longer the players stay, the more opportunities the game has to monetize them. Let’s break down the exact revenue streams free to play games use. 

1. Microtransactions (in-app purchases)

Microtransactions are the most popular way free-to-play games make money. These are small in-app purchases that allow the players to purchase virtual goods using real money. Rather than charging upfront money for the game directly, game developers time-to-time release newer purchasable features (skins, energy boosters, extra lives etc.). This generates a recurring revenue for the game developers. 

How it works

Game developers often create some limitations in free-to-play games which affect the gaming experience of the players. These limitations could be limited lives or energy for the character, limited in-game money, low-quality skins, weapons, outfits etc. And, then they introduce their microtransaction model for these virtual items. If even 5 out 100 players pay for anything that costs like $5 weekly, this generates a recurring revenue of $20/month. This is just an example. Popular games played by hundreds to thousands of players often have more people purchasing these things. Here are some of the popular examples.

Fortnite

Fortnite is one of the most popular games out there developed by Epic Games. It is a free-to-play game across all platforms (PC, Xbox, PlayStation and Android) which makes most of its revenue through in-game purchases. While the exact number is unknown, it is reported that high-profile skin collaborations can generate over $50 million per month with total annual revenue reportedly exceeding $3-$5 billion. And, these are just skins or cosmetic items. There are other purchasable items as well like Battle Passes which further boost the revenue.

PUBG Mobile (PUBGM)

Another popular battle royale game played widely during lockdown which generated most of its revenue from in-game transactions. It is reported that between 2019-2022, PUBGM generated over $1.5-$2 billion through microtransactions.

This shows that microtransactions can become very profitable for free-to-play games if the game is popular enough to take the world by a storm like PUBG and Fortnite did during lockdown.

2. Advertisements in f2p games

Advertisements are another major revenue source for free-to-play games, especially mobile games. Instead of charging players directly, developers earn money by showing ads inside the game.

How it works

Game developers integrate different types of ads such as banner ads, interstitial ads (full-screen ads between levels), and rewarded video ads. Rewarded ads are the most effective because players voluntarily watch a 20–30 second video in exchange for rewards like coins, extra lives, or power-ups.

Even if a player never spends money on microtransactions, they still generate revenue for the developer by watching ads. If thousands or millions of players watch even 2–3 ads daily, the total revenue becomes significant. Some of the most popular examples are given below:

Candy Crush Saga

Candy Crush Saga is one of the highest-grossing mobile games in history. While it makes billions through in-app purchases, it also earns a substantial amount from in-game advertisements. Players often watch ads to gain extra moves or lives. With millions of daily active users, even small ad revenue per user turns into massive annual earnings.

Subway Surfers

Subway Surfers is another free-to-play mobile game that heavily relies on advertisements. Players can watch ads to continue a run or gain bonus rewards. Despite being completely free to download, the game has generated hundreds of millions of dollars largely through ads combined with optional purchases.

This shows that advertisements can become extremely profitable when a game has a large and active player base.

3. Subscriptions & VIP membership models

Along with ads and in-app purchases, subscriptions are another popular revenue source for free games. Players can pay a monthly amount in exchange for premium features which enhances their playing experience. 

How it works

Game developers can again create a common limitation which can be resolved by some sort of subscription model. This common limitation could be as simple as playing without ads, getting a certain quantity of in-game items monthly or access to exclusive features. Here are some of the most popular games which use this clever business model.

Chess

Chess is another one of those games that got widely popular during lockdown. It can be played online on Chess.com, the most popular chess platform there is. Chess.com offers various subscription models like Diamond, Platinum, Gold and Silver membership plans. These plans offer more game analysis, access to computer engine moves etc. Although the exact figures are not disclosed, it is reported that the company generates over $100 million annually through these plans driven by their massive fan base. This shows how profitable subscription model can be for certain types of games.

Genshin Impact

Genshin Impact offers a monthly subscription called “Blessing of the Welkin Moon,” which provides daily in-game currency. This low-cost recurring purchase model encourages consistent spending from dedicated players.

4. Sponsorships and Brand Collaborations

Large free-to-play games often collaborate with brands and celebrities to launch special in-game content.

How it works

Developers introduce limited-time skins, characters, or events tied to real-world brands or celebrities. These collaborations create hype and encourage players to spend before the content disappears. Here are some of the most popular examples.

Fortnite

Fortnite has collaborated with global brands and franchises such as Marvel and Star Wars, introducing limited-time skins and events. These collaborations reportedly generate tens of millions of dollars within weeks of launch.

PUBG Mobile

PUBG Mobile has partnered with celebrities and brands for exclusive skins and themed events. These collaborations increase both engagement and revenue significantly.

5. Data Analytics & Targeted Advertising

There is a popular saying in the tech industry:

“If something is free, then you are the product”

While this statement is often exaggerated, free-to-play games do rely heavily on data analytics to generate revenue.

How it works

Free games collect certain types of user data such as:

• Gameplay behavior
• Time spent in-game
• Purchase patterns
• Device type
• General geographic region

This data is primarily used to:

• Improve the gaming experience
• Personalize in-game offers
• Optimize advertisements
• Increase conversion rates

Most large game companies do not sell sensitive personal information like passwords or private messages. Instead, they work with advertising networks that use anonymized or aggregated data to show targeted ads.

For example, if a player frequently purchases in-game items, they may see ads for similar premium products. This improves ad performance and increases revenue for the developer.

It is important to understand that data tracking is not limited to games. Almost every online platform — including social media and e-commerce websites — uses similar analytics systems.

However, players should always review a game’s privacy policy to understand how their data is handled.

Now that we have understood the different revenue streams used by free games, let’s understand how much do f2p games really make.

Earning potential of free games

Free-to-play games aren’t just popular, they are extremely profitable. While the games themselves can be downloaded without spending a single dollar, the revenue generated through microtransactions, ads, subscriptions, and collaborations is staggering. In fact, in 2026, the majority of the global gaming revenue is expected to come from free-to-play titles rather than premium games. The above section has explained how much money did some of the most popular free games make. Let’s understand their general earning potential.

F2p games if marketed properly can generate a lot of money usually comparable to many blockbuster movies. In fact, statistics have shown that games generate money quicker than movies. And, most of these games are popular free games. Titles like Fornite, PUBG and Clash of Clans show that you can generate billions in annual revenue if you design and promote your game properly. After understanding the earning potential, lets compare the revenue of paid games vs free games.

Paid vs free games: which are more profitable?

While free-to-play games generate revenue through microtransactions, ads, subscriptions, and collaborations, paid games rely on upfront purchases. Players pay once to download or unlock the game, and that’s usually the only source of revenue. This fundamental difference has a major impact on profitability and long-term revenue potential.

Revenue model comparison

• Free-to-play games: Make money from a small percentage of paying users, ad revenue, and subscriptions. Popular titles can generate billions annually. The key is large player engagement.
• Paid games: Revenue comes from one-time purchases. Even if a game is priced at $60, it relies on a large number of purchases to reach high revenue. Blockbuster games like Call of Duty or FIFA earn hundreds of millions, but growth slows after initial sales.
• Hybrid model: Some games combine both upfront payment and in-app purchases. For example, GTA V is sold as a paid game, but its online mode offers microtransactions for virtual currency, boosting revenue well beyond the initial purchase price. This hybrid approach allows developers to benefit from both upfront sales and long-term player spending.

Player engagement and retention

Free games often keep players engaged for months or years with events, new content, and rewards, which continually generates revenue. Paid games tend to have a shorter engagement lifecycle, unless they also implement DLCs, expansions, or microtransactions.

Examples

• Free-to-play: Fortnite, PUBG Mobile, Clash of Clans — annual revenues in billions, fueled by microtransactions and in-game events.
• Paid games: The Witcher 3, Cyberpunk 2077, Red Dead Redemption 2 — sell millions of copies, but revenue largely peaks at launch. Additional revenue comes from DLCs, expansions, or microtransactions in some cases (GTA V).

While free games retain more players, paid games generate money that could last a lifetime for a company. For example, GTA V generated $6 billion globally making it the highest grossing entertainment product in history. This shows that paid games often make far more money (due to hype among players) than free games. But paid games often tend to lose their hype as well after some time slowing down their long-term growth in contrast to free games which remain relevant for a long time.

Free-to-play games dominate long-term revenue potential because their business model leverages both volume of players and recurring spending, while paid games generate upfront profits but have limited long-term monetization. Hybrid games like GTA V show that combining both approaches can maximize revenue, appealing to both paying and casual players.

Conclusion

This article has explained the different ways free games make money and their comparison with the revenue generated by paid games. Free-to-play games have transformed the gaming industry, generating billions in revenue while remaining accessible to players worldwide. Through smart monetization strategies like microtransactions, advertisements, subscriptions, and collaborations, developers turn engagement into profit.

While paid games still have their place, the F2P model dominates because it combines accessibility, player retention, and recurring revenue. Whether you’re a player, developer, or simply curious about the gaming market, understanding how free games make money shows why this model is here to stay. 

Do you have any questions? Let us know in the comments.