{"id":782,"date":"2014-12-18T14:05:14","date_gmt":"2014-12-18T22:05:14","guid":{"rendered":"http:\/\/blog.thinkapps.com\/?p=782"},"modified":"2015-08-13T16:54:53","modified_gmt":"2015-08-13T23:54:53","slug":"paid-vs-freemium-app-monetization-statistics","status":"publish","type":"post","link":"https:\/\/thinkapps.com\/blog\/post-launch\/paid-vs-freemium-app-monetization-statistics\/","title":{"rendered":"App Monetization Statistics: Freemium vs Premium vs Paymium"},"content":{"rendered":"

In this post, we share app monetization statistics, including comparing\u00a0freemium vs premium. Also, we explain the newest monetization strategy: paymium.<\/em><\/p>\n

On November 5, 2014, Comedy Central<\/a> premiered the South Park<\/a> episode titled \u201cFreemium Isn\u2019t Free<\/a>,\u201d which lampoons the popularity of freemium apps and links them to addictive behaviors.<\/p>\n

\"App<\/a><\/p>\n

It makes sense that the comedy writers would choose this topic. After all,\u00a0freemium apps<\/a>\u00a0are the most popular of all the\u00a0monetization methods<\/a>\u00a0used by app creators nowadays, and mobile apps (especially games) need to be as addictive as possible in order to increase revenues.<\/p>\n

(For more on the principles of addictive behavior, check out “Hooked: How to Build Habit-Forming Products” by product psychology expert Nir Eyal<\/a>.)<\/p>\n

App Statistics: Freemium vs Premium<\/h2>\n

Let’s look at the numbers for two of the most popular types of apps. In the freemium vs. premium battle, it turns out there is a clear winner.<\/p>\n

According to\u00a0Distimo App Analytics<\/a>, freemium apps have\u00a0higher gross earnings in both the Apple iTunes App Store<\/a> and Google Play Store<\/a>.<\/strong><\/p>\n

In\u00a0October 2014, nine of the top 10 apps in the iTunes\u00a0App Store within the US were freemium games, with Clash of Clans<\/a>, Candy Crush Saga<\/a>, and Game of War: Fire Age<\/a> leading the ranking (followed by Pandora Radio<\/a>). You\u00a0have to go all the way down to the 27th place on the list to find a paid app, in this case Minecraft<\/a>.<\/p>\n

The numbers are similar on Google Play, with the same freemium apps filling\u00a0the top positions and Minecraft being the first paid app in the ranking \u2013 the only difference is that here it\u2019s in the 47th spot!<\/p>\n

When it comes to mobile apps, it seems clear that, although the traditional buy\/sell system is not disappearing altogether, it\u2019s becoming residual. Why? Mostly because users are not willing to buy apps they can\u2019t try in advance.<\/p>\n

The good news for app creators is that\u00a0users do seem prone to make in-app purchases in order to enhance their experience. In this sense, we can say that mobiles apps are behaving more like a service than a product.<\/p>\n

Subscriptions<\/h2>\n

There are several ways freemium apps can earn revenue. A popular one is subscriptions, where users\u00a0pay a recurring\u00a0amount (typically on a monthly or yearly basis)\u00a0in order\u00a0to access premium features or exclusive content during a certain time.<\/p>\n

Subscriptions are mostly used by music and video apps (e.g. Pandora, Spotify<\/a>, Hulu<\/a>), social\/communication networks (e.g.\u00a0LinkedIn<\/a> and WhatsApp<\/a>), and online media.<\/p>\n

To put things into perspective, during the month of October 2014, the iPad version of The New York Times<\/a> was among the top 25 iPad apps by gross earnings, while the iPhone version ranked 100th.<\/p>\n

Free-to-Play (with Optional In-App Purchases)<\/h2>\n

The free-to-play model<\/a> is without a doubt the most popular freemium method among mobile games. Free-to-play games are free to download and use, but once users\u00a0enter the game they\u00a0can purchase extra items or features. These\u00a0can be merely ornamental but enhance the game experience in some way, such as\u00a0giving access to extra screens, speeding up the player\u2019s progress, or conferring improved or extra abilities.<\/p>\n

When it comes to prices, many in-app purchases used to be micropayments,<\/a>\u00a0but that is not always the case. In fact, some really addictive games are anything but cheap.<\/p>\n

For example, in Game of War: Fire Age, the player can buy \u201cgold\u201d in packs valued from $4.49 to as much as $89.99. And it turns out that the app gets the bigger part of its gross earnings selling the most expensive gold packs, according to the statistics shown in the iTunes\u00a0App Store<\/a>.<\/p>\n

It is also worth noting that\u00a0Game of War:\u00a0Fire Age is promoted in the App Store with a big red banner with the word \u201cAddictive!\u201d in capital letters. Are we getting close to South Park\u2019s lampoon?<\/p>\n

\"App<\/a><\/p>\n

In some free-to-play games, in-app purchases of extra features can give\u00a0players a big advantage over others in the game. Many times players are tempted to buy those extra features if they want to have a chance to win. At a certain point, this so-called Pay-to-Win<\/a> system created a bad reputation around games offering in-app purchases, with\u00a0non-paying users leaving the game as soon as they noticed it\u2019s not really free.<\/p>\n

In an article published in the Harvard Business Review in May 2014<\/a>, Vineet Kumar points out the importance of non-paying players in the freemium ecosystem. He says\u00a0they can play the role of \u201cevangelists,\u201d making the game turn viral and bringing new players who may be willing to pay.<\/p>\n

According to Kumar, \u201ca free user is typically worth 15% to 25% as much as a premium subscriber.” So, game creators are now focusing on\u00a0the development of extra features that enhance the game experience without giving paying players too<\/em>\u00a0big of an advantage over the rest.<\/p>\n

In order to succeed, a free-to-play mobile game must be well balanced: it must truly be free to play (and to win), so it can attract non-paying players, but it also must offer extra features that are enticing enough to make people pay for them.<\/p>\n

Paymium<\/h2>\n

In recent times, some apps (especially games) have begun using\u00a0a new monetization method that has been named \u201cpaymium<\/a>.\u201d<\/p>\n

In a nutshell, a paymium app is a paid app that also charges for extra features via in-app purchases. As its name suggests, it is essentially a combination of the paid and freemium models.<\/p>\n

Paymium\u00a0is relatively new and still being experimented with,\u00a0but use of this monetization method is\u00a0expected to increase during the next year. In this category, you can find games such as some versions of Angry Birds<\/a>, Kingdom Rush Origins HD<\/a>, and Capcom\u2019s Mega Man X<\/a>, which are finding themselves among the iTunes App Store\u2019s top sellers in several countries.<\/p>\n

Choosing the Best Monetization Model<\/h2>\n

So, as an app creator, how\u00a0do you decide which monetization model to choose? After all, the debate is not just freemium vs premium anymore, now that new options like paymium have appeared on scene.<\/p>\n

For gaming expert Nicole Lazzaro, founder of XEODesign<\/a>, it all comes down to emotions. In\u00a0her presentation 4 Emotions that Monetize Free to Play Games<\/a>, she mentioned that fun needed to be driven by these four emotions:<\/p>\n