Why Free Apps Earn More Than Paid Apps

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It may sound like the world’s largest contradiction, but it’s a stone cold fact that free apps earn more than paid apps. The app business is this era’s gold rush. Every developer and their mother knows there’s money in them there hills, but the question is how best to access it. Some of the most successful apps are given away for free. Others, equally successful, are not. When you’re brainstorming your app ideas, how much you intend to sell your creation for is a critical decision that you’re better off making in the early stages of development. It’s not a case of slapping a price on your baby minutes before throwing it up on the App Store or Google Play. Compounding the dilemma is the fact that, with so many great apps already out there for free, people are going to have to be pretty convinced to shell out for something.

Given that it’s hard enough to reach these consumers in the first place, as you throw your proverbial hat in the digital ring (a burgeoning app market that’s only getting larger), deciding what to charge is a decision not to take lightly. But here’s the good news, as the Sherlocks among you might have already gleaned from the title of the article; free apps earn more. Let’s look at why that is first, and then look at some ways to capitalise (and monetise) on people using and engaging with your app once you’ve given it to them gratis.

Freemiume vs paid apps

 

The reason why free is king in the app world is due to an economic strategy known as the freemium model. Don’t panic, we’re not going on a jaunt up Wall Street here; it’s a very simple concept to understand. The word freemium, which doesn’t exist in any dictionary just yet, is a wombination (a word-combination, which is itself a wombination, ain’t life funny) made up of the key words ‘free’ and ‘premium’.  Freemium describes a business model where you give away the core product for nothing (the ‘free’) and then sell additional elements of that core product (the ‘premium’). A simple example of an effective use of the freemium model is Skype. Have you ever wondered how Skype makes money? It gives a globally utilised service with consistent quality yet never charges a dime. Well, actually, it does. It sells voicemail, landline calls and other products, and with such a wide consumer base, earns a tidy sum doing it.

Contrary to what it might seem, the freemium model is not some sort of socialism-in-action. Make no mistake; the optimum goal is to make money. Adopting this contemporary business model is a method of adapting to the changing, largely digital market and the conditions of production. Sure enough, the model was introduced as a reaction to the digitisation of the market, and has its roots in the IT world. Software companies and Internet providers have used this model with increasing success over the last twenty years or so. Against the backdrop of the international financial crisis, the freemium model proved even more popular and even spread into several other stuttering industries. An example would be the music industry. Hozier, the internationally successful Irish singer, scaled the heights of the charts all over the world with his breakthrough single ‘Take Me To Church’. The initial E.P. that the song was included on was released over the Internet for free, which was key to its blazing success. Even as it gained traction, the record was still available online for nothing, while revenue was generated by concerts, paid downloads, and eventually, physical CDs. More than that, the wide availability of the song led to the gathering of a huge fan-base, who are now more than happy to pay for new material.  Without that initial giveaway of the song, it’s doubtful that Hozier would be as successful as he is (although he would still be a damn good singer with a damn good bassist).

Enough blues, back to apps. So, as you can hopefully see, the freemium model has great potential for app developers. Off the back of that explanation, there are a few simple guidelines you can follow, which, while not specifically applicable to apps (or appslicable, if we’re following the freemium theme), will provide a good foundation before we get into the nitty-gritty.  The most important thing to have is a quality product that people will want. This might sound so obvious it doesn’t need to be said, but here it is anyway. If you don’t have something people want, that is of the quality people expect (at least what they expect, hopefully beyond it), then you are stuck from square one. Make certain your idea is bulletproof. Run it past friends, family, enemies even, and test, test, test it until you’re blue in the face. Despite it being free, if the free product does not have inherent value, your freemium model will never get off the ground.

Secondly, make sure you have as large a reach as possible, i.e. focus heavily on your marketing. It’s where your app and your freemium model will live or die. Remember, only a small percentage of people who download the app for free will buy something. This isn’t a problem, as long as that small percentage is in fact a large number. Get the word out there as much as possible. The App Store and Google Play remove any cost associated with distribution; that’s taken off from revenue earned, leaving you free to concentrate your resources on marketing. The generous nature of the freemium model works very well with the continuously emerging field of social media, and social media marketing has proved to be a great way of promoting apps. Getting a lot of people downloading your app will also rank it higher in the App Store and make it more easily searchable through engines, thereby exposing more potential paying customers. You want to remove as many barriers as possible so people can access your baby.

 

 

So, to date, there are three basic ways to make money with your free app while conforming to the freemium model. The first is one that most app users, even those who’ve given the App Store a cursory glance, will be familiar with. It’s an upsell of an existing free app. Essentially, an app will come in two forms; the basic free one, or ‘regular’ (which sounds a little more palatable than ‘basic’), with the option to upgrade to the ‘HD’ version for a little cash (because apparently everyone needs HD, even if very few people understand the concept in the first place). The strategy here is obvious; hook ‘em with a good concept, leave them wanting more, exit stage left to rapturous applause and direct your audience to the nearest App Store to hand over the cash for the full version. It’s a solid model that works more often than not; again, it goes back to the core conceit of having a great quality product that people will value and engage with.

The next strategy to capitalise on the freemium model is though in-App purchases, which again, shouldn’t be too unfamiliar to smartphone users. The idea here is that the app allows users to purchase upgrades or unlock certain features. Sometimes these features can be gained by commitment to the game (a nice little hook in and off itself) but as the world of the smartphone is a sporadically engaged one, odds are that users will opt to purchase if they’re enjoying the app. When you’re building your app, you can set in-app purchases to be a one-time deal or an ongoing option. Combining an addictive game fitted with the latter can potentially gather huge amounts of revenue. In-app purchases are traditionally associated with games, but that doesn’t always have to be the case. Developers should think outside the box and find ways to incorporate this into their initially free app, whatever its purpose.

inapppurchases

 

The third way to make money through the freemium model is through advertising. Of course, this is a double-edged sword. Ads work, and have done since the dawn of commerce. However, you need a good lot of traffic to make it worth your while. When you start getting traffic, ads can develop into a lucrative and (most importantly) consistent revenue source. Historically, advertisers have been more inclined to give money to app developers than users. In fact, it’s been proven that users will do almost anything to avoid paying for an app, hence why the freemium model is your best bet. If you can get your head around this concept, that these days users expect free apps, you can see why those free apps will always make more money than paid apps, and hopefully implement a few of the strategies I’ve listed above to strike digital gold.

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  • For my password management app (aMemoryJog: http://www.aMemoryJog.com), I use both the freemium model and the paid model. Creating the paid edition takes very little extra coding and it does bring in additional revenue and gives you the ability to experiment with SEO with 2 distinct products.