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Premium Freemium

At GetJar, we’re obviously huge fans of the freemium model for apps. We’ve seen that it works for users and developers, that free apps receive 10-20x the downloads that paid apps do, and that freemium/microtransactions lead to higher user engagement. All of this can mean extra revenue for you.  Let’s take a look at some numbers that came out this week.

Flurry released a reporting showing that users spend an average of $14 when making in-app transactions. That’s per transaction, a large increase over the couple of bucks you might charge for your app. In-app purchases in freemium apps drive the bulk of revenue generation in the iOS and Android app economy. This report, based on 57 million in-app purchases, looked at consumable purchases (virtual currency), durable items (changes gameplay permanently), and personalization. A full 68% was spent on consumable items, or virtual currency.

This means that users are spending millions on virtual items (which don’t ‘exist’ in the first place) on items they don’t even get to keep. There is a ton of interesting psychology taking place here, but it comes back to engagement. Durable goods and personalization don’t get into what’s called sunk costs. Users find themselves saying, “Well, I already spent $10 on this, what’s $2 more?” This study is a good read for any developer. Read the rest of the results here.

Need more reasons to go freemium. Let’s take a look at a case study. Future Games of London saw revenues of their game Hungry Shark increase by five times overnight.  Future Games Managing Director says that the average transaction is now up to $3.26. He’s so happy with the results that he’s thinking about moving away from the paid model entirely. They say downloads of Hungry Shark on iOS increased to an average of 200,000 after it went free. The experiment was so successful that they’re now looking at switching all of their apps to this model. Read the rest at Mobile Entertainment.

It becomes increasingly clear that engagement and the freemium model go hand in hand. Developers are following this trend, according to a study by Appcelerator. Apps “are becoming vehicles for constant engagement, cloud connectivity and reusable utilities,” Scott Schwarzhoff, vice president of marketing for Appcelerator, told GigaOm. Their study shows that developers are seeing this same trend and aligning their business models to it.

So far, I’ve focused on Android and iOS, but this is a mobile trend that takes place across the entire ecosystem. Freemium and in-app purchases are so important to mobile that Microsoft has taken the time to add the feature into Windows Phone 7. Even though Microsoft has a significant amount of catching up to do to compete seriously, they’ve taken the time to make the feature, and let developers know about it. Any mobile OS lives and dies by the developer community that supports it, and what Microsoft is saying here is that freemium is becoming the method of success.

These numbers show that people like freemium, they’re spending money on freemium, and developers are following them there. Don’t get left in app price race to the bottom, go freemium today!

P.S. As we’re an app store that only distributes free apps, we obviously have a vested interest in the freemium model. So, all of the above said, make sure that you do what works for you. If the idea of freemium just isn’t for you, here’s a good article from Mashable about how to price your app.

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  • Bhesseler

    Freemium is great – if there weren’t companies like Lordsys who are claiming developers in-app purchases as their property!