In spite of the fact that they’ve been taking a bit of undeserved (albeit hilarious) flak from the Daily Show, the freemium monetization model for mobile applications is only going to grow in popularity. According to a recent study conducted by ABI Research, nearly 90% of the top mobile apps on the market are “incrementally monetized” using either advertisements or in-app purchases. Distimo’s latest report added that freemium monetization generates about half of the total revenue in Apple’s app store and 65% of the total revenue in the Android marketplace.
ABI’s study is quick to note that the category in which a given app is classified plays an important role in the monetization model. Games and other entertainment apps, for example, continue to favor a paid model for their revenues. While many of these apps make use of in-app purchases for in-game currency (Tap Fish, Infinity Blade), these tend to require a considerably higher initial investment in development costs to allow for the sort of sophistication that will lead consumers to make such purchases in the first place.
However, one of the more important factors to consider in the freemium model is its inherent versatility. As the ABI study notes, “What many observers misunderstand about freemium is that it isn’t only about monetizing, but also about marketing. The threshold for consumers to download free apps is really low, so more people end up using and recommending them, which then also gives those apps a bump in distributors’ ranking systems. This means that paid apps fail to draw attention in the first place.”
In other words, for mobile app developers trying to make their product profitable in the app marketplace, apps using the freemium model are the ones that users are more likely to download and tell their friends about. This is especially true for first-time apps and first-time developers who cannot yet bank on their own name recognition to push sales of their own mobile app.
Of course, if you’re considering developing a mobile app, freemium or otherwise, drop us a line and we can set you up with three free quotes from our network of experienced developers.