Friday Night Forum: The Growth of the Freemium App Revenue Model

Freemium vs. premium
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Developers around the world have embraced the freemium app revenue model on both iOS and Android. New data from App Annie finds that the freemium model is dominating, as free apps generate 69% of iOS app revenues and 75% of Android revenues. GigaOm reports that, “global revenues for freemium apps on iOS have quadrupled over the last 24 months,” and when it comes to Google Play, “worldwide freemium revenues have grown 3.5x in 2012.” Most data suggests that the paid app strategy is on the decline.

Alternatively, a number of developers continue to make money the good old-fashioned way – with a paid download. Just last week, we shared a VentureBeat interview with Corona developer Joe Kauffman, the creator of blockbuster games – The Lost City (with over 3.5M downloads) and The Secret of Grisly Manor. Thanks to his paid titles, Joe’s a self-made millionaire, with remarkable success that flies in the face of App Annie’s findings.

Where do you think the future of app monetization is headed? And, when is a premium app revenue strategy the smarter choice?

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This entry has 6 replies

  1. Brent Sorrentino says:

    Depressing. I have never liked the “freemium” model, and I was hoping it would be a temporary trend, not the “future of apps”. It baffles me that customers hesitate to spend a few dollars on a highly-rated app for their $200.00 phone with a monthly $59.99 4G LTE service plan while they sip on their $4.75 mocha-latte and munch on a $8.50 caesar salad.

    The “freemium” model is like going into a theater and seeing 15 minutes of the latest blockbuster movie, then it shuts off and you have to pay $8.00 to see another hour, then $15.00 to see the climax and conclusion. And that delicious buttery popcorn, well you get two handfuls for “free” and then each additional handful is $1.00 more.

    Of course, 98% of freemium games are so boring and predictable, nobody would pay even 99 cents for them, which I suppose is why this model has been “successful”.

    Joe Kauffman has it right. Design games that you love to design, and that people love to play. And SELL them: no loopholes, no gimmicks, no ads, no “pay now to play the final chapter!”. Of course, Joe is an anomaly in his success and few of us can afford the luxury he now enjoys with a massive bankroll to develop basically whatever he wants… yet his IDEA is motivational, and his dedication to creativity can serve as an inspiration to many.

    All of this is merely my opinion of course, and likely disagreeable to a lot of developers. But this is the Friday Night Forum, so let’s debate friendly-like! 🙂

    • Lucas says:

      I couldn’t say it better, Brent! Completely my remarks to! Thx for sharing.

  2. Joakim says:

    Thats great news, since we are using the freemium approach to our game. Will be uploaded to appstore within a couple of weeks.

    I dont understand your comparison to se a movie 15 minutes etc. It is all the same with “Lite” apps, they give you 15 minutes of gameplay. If you want the popcorn – you have to buy the “Full” version.


  3. Peter says:

    As a tightwad who keeps the in-app purchases turned off on my devices, I’m in the same boat as you. I look at a purchase as the whole enchilada of what it’ll cost me, not in bits and pieces.

    However, I think the freemium model success stems from a well-worn idea, which I saw best embodied on an Ambrosia software T-Shirt that said, “The best things in life are free for 30 days.” Freemium, in a sense, allows a sort of trial period for software on mobile devices that would otherwise not be allowed through the App store. People like to be able to kick the tires, take it for a test drive, and generally get their hands on an app before buying. Freemium allows them to do that, in a sense.

  4. Nick says:

    People that use the coffee argument aren’t thinking about the bigger picture.

    People bitch that no one is buying their .99 cent app when they “buy coffee for 4.75”. When a person goes to Starbucks, and spends money they KNOW what they are getting. When you are selling an app as an indie developer, and have no brand out there to show people – they will be hesitant to purchase it since it’s of unknown quality.

    On the freemium side, you go for a mass appeal and get the small % (which only about 1 to 3% of people who play will buy IAP). In the freemium land, if you don’t have 3 million downloads and a 3% conversion to IAP – you are dead and are considered a financial flop.

    Look at Punch Quest, one of the most awesome games ever released. There are articles that say it’s a financial flop. That’s one way to look at it, how about building a brand? Rocket cat games has some other titles under them that are good. Now that they have a brand built, it’s going to build on top of that. You could say that the freemium model starts compounding itself with other releases based on brand power.

    Keep in mind, I haven’t released my app and I’m probably going the paid model with IAP which seems to be successful. You can get away with it at .99 and then offering cheap IAP on top of that. Putting in a paywall is the dumbest thing ever (paywall is when you can’t go any further without paying for it – a wall of sorts) and when a game does that I want to punch them in the face.

    Also, people are going freemium due to the sheer amount of apps people have on their devices. If it’s free, they will be at least 10x more likely to download it. If it’s paid they will think “I have too many games already to play, and I don’t need another one” unless they are going for some graphical powerhouse such as infinity blade. Those graphical powerhouses are usually large in size and are also the first to be deleted (in my experience of course, not sure how it really is lol).

    Eh, where was I? Oh yea, freemium I’m not a big fan of it,but I think it does allow one’s app to reach a wider audience and perhaps build a brand at maybe the cost of sacrificing and app OR it becoming widely successful.

    It’s a gamble either way 🙂


  5. Alex says:

    @Brent, I posted on another forum thread but wanted to put this over here as well, where more people can comment.

    Can you comment on why you don’t like the freemium business model? I’m currently in the delivery-conception phase of development and I’m trying to decide between a lite/full release option, or a freemium option. I don’t really have a horse in the race; I just want to decide on the best method for players and myself.

    It seems to me that the lite/full model opens a developer to increased piracy rates. Maybe this is just heresay from over-cautious developers online, but it seems to be prevalent enough to warrant a second look at this option. Meaning, having a full version available means that an individual can crack it and make it available for download online. I have yet to release an app so I obviously can’t speak from experience, but this method seems like something at which a lot of developers are balking.

    The freemium seems like a good idea, in that you get part of a game for free to see if you like it, before spending money on it. In this it is similar to the above lite/full model, but instead of segmenting player actions from downloading something free and THEN downloading something paid, they can just buy the full version from within the app they already have on their device. I think the real downside to this is the stigma (or whatever you want to call it) that you reference above where players see a freemium game as inherently “crippled”. I suppose it gets difficult to discuss without talking about marketing focus and consumer targeting.

    After reading over my comments I know it sounds like I’m firmly pro-freemium, but I actually would prefer to release under a lite/full model like The Game Bakers or Ravenous Games. I am just hesitant because of the piracy that several developers reference. Do you think this a case of a few loud voices changing the discourse, or is it a legitimate issue? I’d really like to hear your take. Thanks!