What is the SaaS Advertising-Based Revenue Model?

The SaaS advertising-based revenue model is a revenue-generating approach where SaaS companies display advertisements within their product or software to gain income. Using this tactic, SaaS businesses monetize wide user bases and offer lower-priced versions of their software to customers. US digital advertising revenue reached nearly $300 billion in 2025, according to IAB/PwC.

Advertising-based revenue models can be an appropriate option for audiences that are hesitant to commit to paid subscriptions. Search engines, social media platforms, content websites, and mobile apps commonly earn this way.

The advertising-based revenue model differs from the subscription and freemium models based on who pays for them:

• The subscription model: In this revenue model, SaaS companies generate income by charging a subscription fee to offer customers access to the platform’s features. The success of this revenue model relies on how many paying users a SaaS product has.
• The freemium model: SaaS companies offer a basic version of their software free of charge. If the customer requires access to advanced features or functionalities, they can upgrade to a paid plan.
• The ad-based revenue model: In this model, SaaS businesses gain income through the payments made by different advertisers instead of software users. For ad-based models to be effective, the SaaS business implementing it needs to appeal to a wide audience.

A SaaS company can appropriately adopt an advertising-based revenue model in three situations:

• Your product is appealing to a large and specific customer base.
• Your focus remains on user experience, and the ads you are displaying within the software do not disrupt it.
• You accept that advertisements might influence the user’s perception of your product.

To evaluate the performance of the ad-based revenue model, SaaS companies can monitor the following metrics:

• Number of active users
• User engagement (consider aspects like time spent using the software, pages visited, or other relevant usage indicators for your product)
• Click-through rates (CTR) on the displayed advertisements
• Cost per click (CPC) (how much are advertisers paying per click)
• Cost per thousand impressions (CPM): what advertisers pay per thousand ad views (Google Ads Help)

SaaS businesses can employ these four strategies to optimize the results given by the ad-based revenue model:

• Personalized advertising: Assess your customers’ interests and focus on displaying advertisements that are relevant to ensure engagement.
• Effective ad placement: Display ads in a visible yet discreet manner.
• Test ad formats: Experiment with different ad formats and types.
• Offer a no-ad package: Consider providing users with a plan that removes ads to appeal to users interested only in using your software; such a plan can add subscription revenue to ad income.