Just more than a third of the top-grossing apps in the iTunes App Store are -- wait for it -- free.
They’re called “Freemium” apps and chances are you’ve dealt with them. Freemium apps are those that start out free and provide a base level of content, but users can buy more features through in-app purchases, a feature Apple began allowing last year.
Some developers have really found ways to cash in on the freemium model, which could represent as much as one-third of all the revenue generated by the App Store, according to Remco van den Elzen, co-founder of the analytics firm Distmo, in this report from gigaom.com.
Indeed, it’s been reported that developer BackFlip Studios is pulling down $500,000 a month from in-app purchases on its free apps, Graffiti Ball, Buganoids and Paper Toss. And the development of freemium apps as revenue powerhouses is relatively new -- only two freemium apps appeared in the top-grossing 50 App Store apps back in January, according to analytics firm App Annie. That number had risen to 10 by October, and today sits at about 20.
In the iPhone top 10 grossing apps, five of them are free: Restaurant Story (no. 3), Tap Zoo (no. 4), NBA Game Time 2010-2011 (no. 7), Kingdoms at War (no. 8) and Haypi Kingdom (no. 9), GigaOM reports.
But success isn’t guaranteed with the freemium model. The trick is to make a good app that draws players in with the free model, then gives them the ability to purchase more content to extend the experience.
And freemium doesn’t work everywhere, for some reason. On the iPad, none of the top 100 highest-grossing apps are free, which is somewhat baffling. Analysts speculate it could be because of the fact that apps on the iPad generally come with a higher price point, so users are used to, and more willing to pay for, high-quality apps and get everything they need up front. The difference with a badly made freemium app is that it’s easy to make an app that feels like it’s ripping the end user off -- one that dupes people into downloading a half-realized free app in order to con them into paying more. There could be some psychology at play with iPad owners who want quality apps, and are willing to pay for them.
It always boils down to making a great app, however. Free can be a viable, even extremely profitable, business model when it comes to apps, but the app provided for free still has to be good, because iPhone users still react negatively when they feel they’re being manipulated. If a free game feels broken without paying for additional content, it’ll fail -- it has to stand alone on its free legs, and make users enjoy playing it -- before they’ll dish out for extra content.
But with freemium picking up speed, expect more apps offering in-app purchases, and with them, more apps that are great and cost nothing, as well as more apps that the end user can customize through purchases. The really great thing about the freemium model isn’t that you can start out with a free app and then get more great content for it, but rather that freemium app users get to choose which content they want by selectively paying for it. When more developers start pushing this idea, it could have a real impact on the iPhone app experience, as more users start getting exactly what they want.