Monday, July 11, 2011

Apps - "Free" generates more revenue than "Paid" - Updated

Recently, Apple announced that more than 15 billion apps have been downloaded, generating more than $2.5 billion in revenues for app developers.  Until recently, about 60% of the revenues have come from "paid" apps, especially games.  The other 40% came from "free" apps - or at least apps that didn't charge for initial download.  Most of that other 40% was a result of a revenue model termed "freemium" apps - and a quiet validation of Chris Anderson's Free model.  In a "freemium" app, users can download the basic app for free, and the developer gets revenues from a smaller proportion of users who might pay for higher-level access or make in-app purchases.
A new study by Flurry shows that in the last six months, revenue from free-to-play game apps has overtaken the revenues generated by paid game apps.  Last month, the split was 65% of revenues from "free" game apps, and 35% from paid game apps.  Considering that over 90% of free game users don't contribute anything towards revenues, that's pretty impressive.And a reminder that when thinking about the millions of potential users online, it may make more sense to seek to exploit a small segment willing and able to pay for additional value, than to seek revenues from simple access from the general public by putting a price on content or basic subscriptions.

Source: "'Free' Apps Drive More Revenue Than Paid", Online Media Daily

Another article suggests there's even more value in games. Analysts at Gartner predict online gaming revenues to rise to more than $28 billion in 2015 (from an estimated $12 billion this year). including a significant increase in revenues from in-game ads and sponsored content.  Total consumer spending on hardware, software, and videogame play is expected to reach $75 billion this year.
Source: "In-Game Advertising On Rise, Consumer Spend to Hit $75B", Online Media Daily

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