At the start of the year, we always see a deluge of prediction articles. In January 2022 on this very blog, I mentioned the rise of hybrid monetization for subscription apps. I spoke about this prediction multiple times, for Techcrunch and at in-person events.
At the time, it didn’t take off. The pressure wasn’t strong enough yet. Fast forward a couple of years, and AI has quietly turned usage into a revenue drag. 2025 showed signs that hybrid monetization was on the rise, but in 2026, pretending otherwise will be fatal for subscription apps. 2026 is the year of take off for hybrid monetization!
Incidentally, this 2022 blogpost was also where I discussed non-store payment options — and here we are now in 2026 with new uncertainty following App Store’s term changes…
Before we jump into what moving your growth model towards hybrid monetization means for subscription apps, let’s look at the ‘why now’. (Spoiler alert: it’s AI again.)
Pre-AI: subscriptions won because marginal costs were invisible
For most of the past decade, subscription apps benefited from a hidden advantage: there were virtually no variable costs, whether you served one user or one million users — development and design aside, serving an additional user was effectively free.
That shaped how the entire pricing ecosystem evolved:
- Flat pricing felt fair
- Power users were an upside, not a risk
- Monetization focused on conversion and retention, not cost containment
We couldn’t imagine a time where more users or more active users could be a bad thing. This is why ‘all you can eat’ subscriptions became the norm outside of gaming. The model worked because the economics were forgiving.
AI breaks that forgiveness. 2026 is the year this shift becomes impossible to ignore. Not because AI is new, but because its economics are now colliding with a maturing subscription market.
The growing cracks
Lately, subscription-based apps are ‘winning’ the App Store. We see non-gaming App Store revenue overpassing the flatlined gaming sector and attracting founders, talent, capital, tools and more (many of whom are from the gaming vertical, ironically). But things are getting harder.
The cracks in the all-you-can-eat subscription model have been visible for years, but today they’re becoming an increasing headache for app profitability:
- Plateauing ARPU
- Converting barely a low single digit of user to premium features
- Rising churn
- Declining marginal returns from optimization
- Growing concerns for subscription fatigue
Why now? Three underlying factors accelerating hybrid
Predicting hybrid monetization’s rise back in 2022 was early. What’s different in 2026 is that multiple pressures are converging at once.
There are several factors that are making the shift to hybrid monetization not a nice-to-have but a necessity:
1. AI has massively increased competitive density
AI-assisted development has seen the amount of new apps explode. Vibe coding has lowered the cost of shipping and iterating apps. More teams are building faster, copying proven monetization patterns, and competing in the same categories.
The result: more apps, similar funnels, and less room for monetization mistakes.
2. Optimization is no longer a lasting edge
Paywall design, pricing tests, and onboarding flows used to be meaningful differentiators. Today, they’re table stakes. Today, paywall optimization is showing declining marginal return: it’s no longer a competitive edge, see it as a base requirement!
Vahe Bagdasaryen once made $1m selling easy-to-apply paywall layouts in his first year of consulting — great, but now everyone is using the same layouts (hence the limits of Blinkist-like paywalls). These tactics are mandatory to master, but they quickly become commoditized; incremental gains shrink while costs keep rising as new apps vie for attention in the same few places.
3. User acquisition keeps getting harder
Attention hasn’t scaled with supply. More apps, same amount of eyeballs on the Tiktok feed or the App Store. User acquisition (UA) costs continue to climb, while conversion rates and ARPU plateau in many non-gaming categories. Ad bids are harder to win, big fish are taking over ASO real estate, and there’s more competition than ever. Increasing ARPU by 20-25% yearly is just the beginning to compensate for UA inflation, it’s only what comes on top that is a win.
Why now? The variable cost of AI is an ignition towards hybrid monetization
For a long time, most subscription-based businesses had variable costs of virtually zero. AI-based features make this obsolete. It’s a structural break: apps using AI as part of their core value are actively spending more money with each user they acquire.
If your most engaged power users cost more than they pay, or free users can generate cost, the model needs to be rewritten.
While primarily thought for SaaS businesses, Anh Tho Chuong’s article So you want to price your AI features is applicable to any AI app:
“The zero marginal cost era of software is over the minute you touch LLM APIs. AI has real COGS and it is something we will have to learn to deal with.” — Anh Tho Chuong, CEO & Co-founder of Lago
High variable cost means a few outliers can literally bankrupt you. But it also threatens the ‘all-you-can-eat’ nature of most subscription-only models:
- Power users were your best asset, now they can become a liability!
- Free users were generating indirect value for free (ratings, virality, late conversions…) but now carry negative unit economics
- Free trials have to be thought very differently
- ARPU averages hide catastrophic tail risk
It doesn’t mean subscriptions shouldn’t be the core of monetization for AI-based apps, but there is the need to build on top and adjust to those costs. I’m aligned with Anh Tho’s bet that hybrid pricing will be more common, keeping recurring revenue stable while increasing LTV.
Put together, the variable cost of AI plus the pressures discussed above look like this:
More app competition + similar monetization and acquisition playbooks + higher variable costs = a forced evolution of the subscription monetization model.
But what does that model look like in practice?
- Access is predictable: subscriptions still anchor revenue, expectations, and retention
- Consumption is bounded: usage-heavy behaviors are capped, metered, or monetized separately
- Power users self-select into higher spend: instead of being subsidized by everyone else, they fund the costs they generate.
Here are two inspirations to move you to action:
- Learn the fundamentals: my recent article covers how subscription apps can capture more revenue through hybrid monetization, outlining key techniques and models, with real app examples.
- Delve into the specifics: Alice Muir Kocourková wrote a detailed explanation of how AI has disrupted app pricing models, with examples of how AI apps are pricing their top features.
Hybrid monetization is the natural evolution
Despite all of the above, I still believe subscriptions are a powerful model — just not in the static, all-you-can-eat form that has dominated monetization, retention, and acquisition for the past decade.
All these factors are pushing for the natural next phase of model maturity: it’s not about abandoning subscriptions at all, but getting smarter and building on top.
AI apps barely have a choice. AI apps need to better reflect the usage-based costs of heavy users. But this isn’t just for AI apps. Even apps without heavy AI features now compete in markets shaped by these dynamics — even without the variable cost issue, growth is business model competition.
What to do if you’re building a subscription app today
This blog isn’t a tactical checklist per se, but there are a few directional implications from my observations which are hard to ignore:
- If your app has AI features: you’ll eventually need to separate access from consumption; ignoring this early only makes the correction more painful later, and risks you being swamped by competition
- If your app doesn’t use AI (yet): don’t rest on your laurels or think you’re exempt from the pressure — you’re still competing in an ecosystem shaped by AI economics, so expect pricing shifts, faster imitation, and shorter monetization half-lives
- If you’re early-stage: defaulting to all-you-can-eat subscriptions is no longer the safe choice it once was — design pricing that can evolve as usage patterns emerge, but consider the added complexity of hybrid models
Ultimately, the wisest thing you can do is keep an eye on your revenue streams. Watch for any outliers or heavy users if you have AI variables, and start thinking how you can protect your pricing model against the coming changes.
The bottom line
Subscriptions aren’t failing. They’re being asked to do a job they were never designed for.
AI makes usage expensive. Hybrid monetization is how subscription apps adapt, by preserving predictable revenue while aligning pricing with real costs and value. 2026 is the year hybrid monetization stops being an experiment and becomes the default shape of modern subscription businesses.