Free-to-play is more profitable than paid apps

What is the best way to monetize an app? Where is more money? What do developers choose more often? Flurry recently answered these and other questions by analyzing the revenues of the top 100 apps in the App Store.

Now there are two main models of monetization: the so-called free-to-play model (also known as the freemium model) and the traditional paid one. In the second case, the user must first pay (the standard price is $0.99) to download the application. The Freemium model implies that the application can be downloaded and used for free, and then, if desired, buy virtual currency or items inside.

Those who have always chosen the traditional method, with payment immediately, the very idea of releasing a free version is terrifying. Will the application be able to earn in this case and will the developer not be the loser?

Doing analytics for more than 90 thousand applications, Flurry specialists were able to calculate the amount of revenue from the application based on its place in the American top of the most profitable applications on the App Store – in Top Grossing. After that, they simply compared the revenues of the 100 most profitable apps in January and June 2011.

The table shows the percentage of revenue from paid and free-to-play applications:

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As can be seen from the table, in January the share of revenue from free apps was 39%, but in June it increased to 65%. The success of the freemium model cannot be denied, revenues from it continue to grow. In addition, given that 75% of the applications in Top Grossing are games, we can say that the freemium model now clearly dominates the mobile application industry.

In the old world of paid computer games, the success of a title could be measured by multiplying the number of copies sold by the cost of one copy. This is how boxed games are still distributed. In the new world of digital distribution, everything depends on how many players you can keep in your free game and how many opportunities you will give them to spend money inside the application.

What can you expect when making the game free with the possibility of in-game purchases (i.e. distributing the game according to the freemium model)? Firstly, more people will install your app, because you don’t have to pay for it. Secondly, most likely, you will be able to earn more money, because each player will be able to spend exactly as much as he sees fit, depending on his income and preferences. It’s no secret that fans can spend tens of thousands of dollars on their favorite games.

According to Flurry statistics, from 0.5% to 6% of people who downloaded a free game will spend money in it later; the percentage largely depends on the quality of the game itself and its mechanics. And although this means that more than 90% of players will not spend a penny at all, it also means that players who like your game will spend much more than $0.99 – which is how much a paid application costs.  In addition, do not forget that since you are distributing the game for free, the number of those who spend a lot may increase in proportion to downloads.

The free-to-play model will almost certainly become more and more popular. And developers of games for mobile platforms should understand better than others how to use it.

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