In this series of posts we will be investigating the reasons to use the freemium app model, how to earn money from your free apps and the obstacles you might face if you go free.
Part 1 – Monetize Your App – Free
Part 2 – Monetize Your App: Ad Supported
Part 3 – Monetize Your App: Sponsorships
Part 4 – Monetize Your App: Affiliate Sales
Part 5 – Monetize Your App – In-App Purchases
So you’ve picked your strategy, you’re going Freemium! The trick is to give people a robust enough free app to get them to download it in the first place – but still find a way to convince enough of those downloaders to part with their hard earned dollars? Do it wrong and you’ve just given away something for nothing. Do it right and it can be a lot more lucrative than charging everyone $.99 upfront.
There are three main strategies to using In-App Purchases in your app.
In-App Purchase UpgradesYou could offer the basic version free with the possibility of upgrading to a paid version with additional features. This might induce more customers to download and try the app, thereby earning a larger fan base and increasing its prospects of earning revenue. However, this strategy is more likely to work with social apps where word of mouth within friends circles result in single users upgrading to the paid group version. “Words with Friends”, is a good example of an app, which had a free version that sustained itself with ad revenue, while the paid version (where players compete with each other online) resulted in additional revenue from app sales.
In-App Purchase ConsumablesIAP can also be used to provide in app virtual (consumable) goods such as coins or gems, bullets, special powers, additional costumes and customizations for your characters etc. Games such as The Simpsons Tapped Out and Jetpack Joyride are common examples of this. This works really really well if it is acceptable for your app’s genre. While becoming more common in games, the use of IAP consumables has been limited in business and utility apps.
In-App Purchase SubscriptionsAuto-Renewable subscriptions are mainly used in Newsstand applications. They represent a product that grants the user access to dynamic content for a given period of time, which is configured in iTunes Connect (set periods ranging from 7 days to 1 year). Subscriptions renew automatically, charging the users Apple ID at the end of each subscription period, unless the user opts-out. This product type works well for magazine or news subscriptions, where the user gets access to each issue published while their subscription is valid
Flurry has released statistics that confirm in-app purchasers spend on average $14 per transaction, which is why freemium has become the dominant means of monetizing apps. That’s 14x the revenue that most developers get with a Lite + Premium strategy, and is based on an analysis of how 3.5 million consumers spend their money in games.