The model could be considered in 2012 as the best way to monetize applications but also to market them : people are more willing to download a free app and to recommend it, even if they have to pay later to get more content.
Out of the 250 top-ranked applications in all iOS categories 88% are already using the “Freemium” approach. Apps are increasingly adopting this monetization model, and it is possible that by next year in certain categories all iOS applications will be free. In a study done by ABI Research, research shows that the shift in having the consumer pay afterwards is critical considering that in-app purchases are often impulse purchases, which in turn necessitate an easy payment experience.
“Freemium” is about monetization, but also about marketing
First launched on the application market by Apple in 2009, this model of being free to download initially and then monetized little by little through advertising and in-app purchases isn’t just about profitability. Aapo Markkanen, senior analyst at Consumer Mobility explains, “What many observers misunderstand about freemium is that it isn’t only about monetizing, but also about marketing. The threshold for consumers to download free apps is really low, so more people end up using and recommending them.” Without having to go back to the App Store or another platform to make a purchase, the customer remains interested in the product and is highly likely to make a subsequent purchase.
Differences in geographical and categorical uses
The “Freemium” phenomenon has been shown to vary from country to country. Amongst the top iOS applications in leading countries, 17% are paid for in Germany compared to only 5% in India and South Africa . This contrasts with the United States where 10% of the top applications are free. Revenue models also vary considerably between different application categories. In both navigation and weather, one-fourth of top applications are paid, whereas in segments such as lifestyle (3%), entertainment (5%), and games (6%), their share is beginning to wane.