For the vast majority of subscription apps, the most reliable path to profitability is simple: lock your core value behind a hard paywall.

The data backs this up. According to our State of Subscription Apps report, hard paywalls convert downloads to paid at a median of 10.7% — five times better than the 2.1% median for freemium apps. The floor for hard paywalls (4.2%) is actually double the median for freemium.

“If you’re a bootstrapped startup or you’re operating with limited outside capital, it’s a much more reliable and low-risk way of growing your business,” explains growth advisor Phil Carter in a recent episode of the Sub Club podcast.

But what if you want to build a billion-dollar company?

“There are a lot of examples of apps like Spotify, Duolingo, Strava that have done that through freemium,” Phil says. “You’re just going to attract a much larger user base at the top of the funnel if you have a free version of your product.”

The transition from a hard paywall to freemium is the highest-ceiling growth lever a mature app can pull. It’s also the most dangerous. To illustrate the stakes, Phil shared the story of his biggest win — and his biggest failure — from the past year. Both involved the exact same strategy.

The win: a 75% increase in LTV

Phil’s biggest win came from helping an established subscription app move away from a traditional hard paywall. But rather than simply opening up the app and hoping users would eventually subscribe, his team implemented a “multistep paywall.”

The strategy reframed the value proposition. Instead of saying, You have to pay for this product now, the new onboarding flow communicated a different message: This product is free and will always be free, but we want you to try the best version of it for seven days. After that, we’d love to have you continue paying to get maximum value.

The results were staggering.

“We saw a 75% increase in LTV per user through the implementation of this multistep paywall along with some other pricing and packaging optimizations,” Phil says.

By removing the hard gate, the app widened its top-of-funnel significantly. More users experienced the core product, organic acquisition accelerated, and the multistep paywall successfully captured the revenue upside.

“It pretty fundamentally altered the full potential size of this business,” Phil notes.

The fail: a 50% drop in conversion

The success of the multistep paywall might suggest that every scaling app should immediately drop its hard paywall. But Phil’s biggest failure of the year serves as a stark warning against treating freemium as a silver bullet.

With a different client, Phil’s team attempted a similar shift to freemium. The results were disastrous.

“The initial results didn’t work at all,” he admits. “We saw more than a 50% reduction in subscriber conversion. We very quickly pulled off of it after a couple of weeks.”

Why did the exact same strategic move produce such radically different outcomes?

It comes down to product-market fit and the inherent complexity of managing a freemium model. When an app relies on a hard paywall, it forces a binary decision before the user has fully experienced the product. The conversion is driven by the promise of value, the quality of the marketing, and the friction of the paywall itself.

When you remove that friction, you’re entirely reliant on the product’s ability to demonstrate ongoing, undeniable value. If the free experience is too generous, users have no incentive to upgrade. If it’s too restrictive, they churn before forming a habit.

According to State of Subscription Apps 2026, 55% of all 3-day trial cancellations happen on Day 0 — meaning the battle for the subscriber is won or lost in the first session.

As Phil puts it, moving from a hard paywall to freemium is “like moving from playing checkers to playing chess because it requires a lot more sophistication.”

When should you make the switch?

If you’re considering dropping your hard paywall, the data and Phil’s experience suggest a clear framework for the decision:

1. Stay with a hard paywall if:

  • You’re bootstrapped or highly capital-constrained
  • You need immediate cash flow to fund paid acquisition
  • Your product solves an acute, immediate problem rather than building a long-term habit
  • You don’t have the product analytics infrastructure to rigorously test feature gating

2. Consider testing freemium if:

  • You’ve achieved strong product-market fit and high retention among your core users
  • You’ve got the runway to absorb a temporary dip in conversion rates while you optimize the model
  • Your product benefits from network effects or user-generated content (like Duolingo’s massive free experience)
  • You’ve hit a growth ceiling with paid acquisition and need to unlock organic, word-of-mouth growth at scale

Freemium isn’t a pricing strategy; it’s a product strategy. If you treat it simply as a different way to display your paywall, you risk halving your conversion rate. But if you treat it as a fundamental shift in how you deliver value, it might just be the move that turns your app into a billion-dollar business.