InApp Purchases

Freemium Apps: When Free Isn’t Really Free

June 11, 2014 - Written By Cory McNutt

Courtesy of: Infographic World

 

Freemium – a pricing strategy by which a product or service (typically a digital offering such as software, media, games or web services) is provided free of charge, but money (premium) is charged for proprietary features, functionality, or virtual goods.  The word “freemium” is a portmanteau neologism combining the two aspects of the business model: “free” and “premium” as described by Wikipedia.

The was a time when you either got an App for free or you paid for it, albeit only $.99 to a couple of bucks in most cases, although from the way customers whine, you might think the App set them back $20.  Way back then, free meant free, but that was a long time ago…maybe two years.  Now when you see ‘Free,’ it generally means your original download will cost you nothing, however, there is only one problem…you get what you pay for.  What you are actually downloading for free is really a shell of an App or the most basic version to entice you to buy more, and this is called an In-App Purchase.  The free App was merely a ‘vehicle’ with a small amount of gas in the tank and it will require a ‘fill-up’ real soon if you want to go anywhere and have some real fun.

The App business is BIG business – people think you download an App in a few seconds, it installs, and it is no big deal, but to the App developers, it is a very big deal.  They may not make much on each App they ‘sell,’ but they are estimating that there will be 139 BILLION App store downloads in 2014, jumping to 180 billion in 2015, 225 billion in 2016, and 269 billion in 2017…just three years away!

There are 1.75 billion worldwide smartphone users in 2014 – that is one out every 4 humans on earth…pretty amazing when you think about it.  The the average number of App downloads per type of device are 88 for the iPhone, followed by 68 on a Android device, 57 on a Windows Phone and dropping to 49 on BlackBerry. We love our smartphones, our Apps and our love of freemium Apps is rapidly growing – or possibly because as users we have no choice – Mobile App revenues from In-App purchases were 17-percent in 2013 and is projected to rise to 48-percent by 2017.

For obvious reasons, free Apps are the most popular, although we are finding out that ‘free’ doesn’t always mean free, however, at 92-percent of the downloads they are the dominate download. The percentage of people that have never paid more than a $1 for an app are 45-percent for iPhone, 62-percent for Android, 63-percent of BlackBerry owners and 58-percent for Windows Phone. The revenue from from all paid Apps is expected to be $35 billion in 2014 and the dollars from the ‘free’ Apps’ are unbelievable – in 2012 it was at $2.1 billion and in just two years, 2104 is expected to yield $7.9 billion and by 2017 it is expected to reach $36.9 billion.

How do you feel about getting a freemium App and then finding out you have to continually pay for in-app purchases – apparently it doesn’t bother you as much as it bothers me.  In the $5-$20 range, 84-percent felt they got their money’s worth…86-percent even thought that $20-$49 was worth their money…at $50-$99, 78-percent are happy…and even users that spent $100+ were 67-percent satisfied they got their money’s worth. Pretty amazing to me that so many people seemed happy to spend that much money.

There are ways to cut down on In-App spending if your child, partner, or spouse is spending way too much money for your tastes…or maybe even to help deter yourself from spending too much. Turn off In-App purchases and use a passcode that your child will never guess. Simply pay attention when you download an App and see if In-App purchases are a part of the App. Another easy way to curb spending is to wait – give yourself 30 minutes to think about whether you really need the App. Watch those special offers and don’t be fooled by them…remember that nothing is free, and what may seem like a great buy, may end up costing you some real money. Another good thing to do is to look over the reviews (which you should do anyway) and most users will let you know how much you will end up spending. To prevent others from spending on your device, a surefire way is to keep your Google Play password a secret.

Yes, we love our smartphones and we love our Apps – let’s just try and enjoy them without spending too much money. I would rather spend $5 for an App and pass on the ads and I am proud to say that I have only purchased two Apps with in-app options, and never a game like Candy Crush! Hookup with us on our Google+ Page and let us know how you feel about App purchases – do you always go for the free App and refuse to pay or are will willing to dole out a couple of bucks for an ad-free, In-App purchase free App…as always, we would love to hear from you.