Freemium done right: the Splice story
In this post I’m going to look at the most common pricing strategies for mobile apps, the types of apps that use them, and how the freemium model affects user adoption, experience and monetisation.
LumaFusion video editing app is £29.99 on the App Store. When was the last time you paid that much before even downloading an app? I bet you can’t remember, and there’s a reason for that: around 98% of mobile app revenue now comes from free apps. That price tag is an invitation to try all the free video editors before paying that much. But in mobile, “free” usually means you’ve just stepped into a monetisation trap.
Common monetisation models
Apps fall into a few broad categories: Entertainment, Gaming, Social, Shopping, Health, etc. Each with its own pricing model depending on how people use them, but most of them make money via subscriptions, in-app purchases or ads. For example:
Streaming apps like Netflix and Spotify usually go for subscriptions. YouTube is a bit different, it uses a hybrid model. Most of its content is free and supported by ads, but it also offers a paid subscription.
Games like Fortnite rely heavily on in-app purchases, while smaller games make money through ads.
Health and fitness apps usually ask 1,000 questions about your body and diet, and when you are about to get a weekly or monthly personalised fitness plan, they push for a subscription. Because, who wants to answer all those questions again, right?
Productivity tools like ChatGPT or Slack provide free access for basic tasks, then offer a subscription if you want better features or fewer limits.
Amazon and Uber just take a cut when you buy something or book a ride.
Social apps like Instagram or TikTok stay free but make money with ads, while LinkedIn and Twitter offer free access with core features, and the option to upgrade to paid plans for more advanced features.
Other social apps like Gmail or WhatsApp offer free services in exchange for your data. (Like I always tell my friends, no one knows you better than WhatsApp)
And finally, video editing apps use different models: one-time purchase apps like LumaFusion, freemium apps with in-app purchases like InShot or VN Video Editor, and subscription-based services like Splice.
The difference between free and freemium:
A free app gives users access to all features without charge. A freemium app offers a basic version for free, with the option to upgrade to a premium version with more features if you subscribe.
If you are developing a mobile app and want to make money, here are the best monetisation models to do it:
Free-to-Freemium (recommended)
Freemium + In-app purchases (recommended)
Freemium + Subscription (recommended)
Ad-supported
Pay-as-you-go
Subscription
One-time purchase
With Free-to-Freemium, you offer the app for free and keep improving it based on user feedback until you have a loyal user base that loves it. Then roll out paid features or lock existing ones. It’s the playbook Splice followed because people are far more likely to pay when they already trust and use your app.
Growth strategy
There are nearly 2 million apps in the App Store, so charging up front is usually seen as a mistake. This is because free apps spread faster, which helps with rankings, reviews and visibility. That’s why the Freemium model works so well. If you give someone the choice between trying something for free or paying £2.99 just to see what it does, they’ll go with free every time. Not even the most popular mobile app ever, ChatGPT, dared to charge upfront.
Also, app store algorithms tend to favour free apps because they improve the user experience. But don’t list your app as free, then lock everything behind a paywall and push users into expensive subscriptions, because bad ratings and reviews will bury your app. Allowing users to install and use your app for free is part of the growth strategy. First you need to build a user base, which is not easy, then figure out how to monetise.
💡 Tip: Start building your user base while you’re still building the app. Create a simple page that explains the problem your app will solve and who it’s for, and let people subscribe for updates. After they subscribe, redirect them to a wishlist page where they can submit feature requests using tools like Canny or Upvoty. This way, you can gather feedback early and use it to prioritise your feature roadmap.
Splice case study
Splice is one of the most popular video editing apps and one of the few in its category, along with CapCut, that I’ve seen grow from an MVP to an MLP and eventually become a global success story. An MLP, or Minimum Lovable Product, is the “wow” version of a product that users genuinely love. Not something they just use because they need to. It goes one step beyond an MVP, it does the basics but also creates a strong first impression, something that makes people say: “This is brilliant”, instead of: “It works.”
Last month alone, Splice had 300K downloads and made around £3 million in revenue. It all started in 2010, when a company called Path 36 launched Splice. It was later acquired by another startup called Vemory, who turned it into an MLP. When that happened, all the attention shifted to Splice:
“Can this video-editing app compete with Apple?” — Fortune, 2015
In 2016, GoPro was in trouble. Its stock had dropped more than 70%, wiping out billions in market value and leaving customers and investors wondering if the GoPro camera was just a one-hit wonder. To turn things around, the company decided to create a video editing app and began acquiring companies to speed up the process. One of those acquisitions was Splice, a video editor that was already competing with iMovie.
By 2018, GoPro realised they were not a software company and sold Splice to Bending Spoons to refocus on their core business of making and selling cameras. This high-profile acquisition gave the Italian startup the chance to prove they had the drive and expertise to turn Splice into a successful product. They knew that to achieve that, they had to offer a great user experience, and the only way to do it was by redesigning the app’s UI to make it simpler, clearer and more intuitive. I assume their founders learned the value of this approach from Apple.
Bending Spoons founders Luca, Francesco, Matteo, and Tomasz also knew that an MLP with a loyal user base had a much better chance of becoming a successful and profitable product. And that’s exactly what happened. They spent 2 to 3 years redesigning the UI and adding new features, and by 2021, Splice ranked highly for 129 popular keywords and nearly 1,000 keywords in total.
It became even more popular thanks to its sleek, user-friendly interface, and the fact that it was free. 100% free. No ads, no subscriptions, no in-app purchases. Around 2021, Bending Spoons had millions of users and saw a great opportunity to turn that traction into a monetisation plan.
They started by offering a free trial and locked everything behind a paywall once the trial ended. But after seeing many of their users ditch the app and move to CapCut, they switched to a freemium model and added the option to upgrade to a paid plan through a subscription. You can now download Splice for free, explore the app with some limitations, and unlock the core features by subscribing. They run A/B tests to decide which features to lock or keep free, and tweak things based on user engagement.
The reason I think Splice went with Freemium + Subscription instead of In-App Purchases is that, while both models rely on a small percentage of users generating most of the revenue, they were preparing for their first round of investment and investors prefer ongoing services over one-off products, so they went with a more reliable income stream, or at least that’s what Luca Ferrari suggested in this podcast. That same year, he said:
“A price increase will generally lead to losing some customers. But if you do it right, it can be a net positive, because the customers you retain are often more committed and contribute greater revenues, which you can then reinvest in the product.”
Thanks to Splice, Bending Spoons proved to investors that they could turn great tools into money-making machines, and that’s how in 2022 they secured a £250 million Series D funding round. This video editing app is a good example of how important it is to prove to investors that you can talk the talk and walk the walk, and also show that you can monetise your products, which is not easy, even when you have one of the best on the market.
Let’s look at the numbers: with over 70 million downloads, if Splice charges £8 per week and made £3 million in the last 30 days, that means only around 87,500 users are actually paying. That’s roughly 0.1% of their user base. Most of them are probably part of a smaller segment of professionals who are happy to pay to unlock everything. And while £32 a month falls into the mid-to-premium subscription range, it’s still expensive considering users have great free alternatives like CapCut and VN, or InShot which charges just £4.99 a month. That alone is a true testament to how good their product is.
But competition in mobile is ruthless.
Newer apps have studied what works for Splice and copied the best parts. VN Video Editor (rank #55 on the App Store) offers the same experience as Splice (rank #85) but is completely free. They chose a Free + Pay-as-you-go model, a clever way to attract unhappy Splice users and still make money. Like many others, I switched to VN the moment Splice asked me to pay £8 per week just to add a fade-in-fade-out transition. It made me wonder, if they had asked whether I was willing to pay £4.99 for each video I saved, I probably would have kept using it. The lesson I took from this is that a personalised pricing strategy could have helped them keep more users and make more money. By personalised, I mean offering different plans or prices to different audience segments based on how they use the app.
In my head, I can hear Neo telling me, “Do not try and bend the spoon. That’s impossible. Instead, only try to realise the truth.” And the truth is:
Bending Spoons is in the business of acquiring apps like spliceapp.com, meetup.com and evernote.com, then transforming them based on user feedback and a clear vision of what good UI and UX should be. They know which apps are stuck and need a revamp.
They are master communicators, and their users always know which bugs were fixed and which new features were shipped because they understand product marketing better than most startups.
They have been outranked by similar apps that offer the same experience but use a different monetisation model, like VN.
So I guess solving real problems, building engaging user experiences, obsessing over your customers, finding that segment who loves your app and is willing to pay for it, and offering different options to match their needs, that’s how you build a product that grows and makes money.