Mobile applications, or apps, have become a staple in most people’s lives with statistic site Statista stating that there were 204 billion mobile app downloads globally in 2019. This figure is more than 26 times the estimated global population and 58 times higher than the estimated number of smartphone users worldwide. In terms of revenue, the Statista Research Department projects that apps will generate an estimated $257 billion (AUD) in 2020.
There are various ways developers can monetise their work with the most common being paid apps, where app users pay for their app once-off before they can use it; and freemium apps.
The freemium model is the second most popular model used by app developers with an estimated 54% of apps making use of this method. In this article, we will explore some of the pros and cons of this popular monetisation model.
We will begin by exploring some of the pros of developing freemium apps that incorporate in-app purchases.
People Love Things that are Free
The term “freemium”, a combination of the words “free” and “premium”, is used to describe a business model that, in the case of apps, give users access to both complementary content (often the base app itself) as well as extra-cost services (such as upgrades to complementary features or additional content).
Freemium apps often allow users to download and engage with an app before asking them to purchase a paid “upgrade” to give them access to all the features of the app, often through an in-app purchase. In the case of gaming apps, in-app purchases often centre around providing users with advantages over free-users or giving them access to content earlier than free-users.
One of the top games in the U.S., Fortnite, brought in a staggering $610 million in iOS revenue in 2018 alone. Other top-rated games that use the freemium model include Candy Crush Saga, Clash of Clans, and Game of War, all of which have generated more than $272 million solely through in-app purchases since their release.
High Download Rates
Freemium apps often see huge download numbers as users are more likely to download an app that they can try-out before they pay any money. In addition, free apps are also less likely to attract negative reviews should users encounter issues as there is a lower lead quality expectation for free apps in comparison to paid apps.
Many users are willing to give a free app more of a benefit of the doubt than they are with a paid app and are more likely to continue using and still supporting the app despite its flaws. This means that these apps often rank quite high on their respective mobile platform marketplaces as they frequently have huge download numbers and decent user scores. For these reasons, the freemium model has proven immensely popular with app developers in the gaming sector.
Provided that the freemium app can find the right balance between free and paid offerings, this increased audience size often results in higher revenue numbers than would be possible with a once-off paid app.
More Creative Marketing Options
The use of in-app purchases can provide a boon to the marketing aspect of a freemium title as marketing can be tailored to appeal to the right user at the right time. A well-timed offer to purchase an upgrade can make the difference between a free user and a paid user.
While there are several advantages to using in-app purchases in apps there are some disadvantages to this business model.
Extra Work Required on the Backend
Anything that involves the implementation of an in-game storefront requires a huge amount of coding to ensure that the systems run smoothly.
Code will need to be written not only for the storefront, items and/or upgrades but also for instances where an in-app purchase is declined, making the job of the developer that much more challenging. The additional code will also need to undergo strict testing to ensure that making an in-app purchase doesn’t affect the overall performance of the app.
More Customer Support is Required
In addition to making more work for the app coder, the freemium model also requires developers to be more active with their customer base as customer support is important if an app wishes to retain their users.
Unlike developers of paid apps, app developers who have apps that offer in-app purchases have a greater responsibility when it comes to ensuring delivery of their users’ purchases as well as ensuring that, should a user need to reinstall their app, that their purchases are available for use on their fresh installation.
Due to this additional workload, developers often need to reach out to experts in app development to assist with the app-making process. Developers such as Appetiser Apps, who specialise in building apps across multiple industries and technology platforms, can assist with the entire development process as well as advise on the right monetisation model for an app. To learn more about monetisation methods and other aspects of app development, check out this guide on how to make money from free apps.
With the mobile app marketplace continuing to grow, and revenue expected to increase dramatically as more and more users embrace the technological age, freemium apps are bound to see even more popularity and you can rest assured that in-app purchases are here to stay.
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