App monetization – The attack of the free apps

The year 2012 has come to an end and it was one of the App superlatives in several respects!
Masses of new apps, a new iTunes design, etc., though what especially catches attention is the new trend towards free apps. According to a new Appsfire infographic, there was a clear development between paid and free apps.

Relations free and paid apps

paid and free apps
In the graphic, it is evident that in 2009 the majority still were paid apps whereas this ratio changed over the years fundamentally. In 2012 this development reached its peak with 34 % paid and 66 % free apps. With this, the question pops up why does this development towards free apps take place?

General information about the monetization of apps

For app developers, the question about if the app should be released on the market for free or if it should be a paid app is one of the most important ones. You can draw a distinction between these four ways of monetizing:

  • Sell apps in the App Store:
  • Free apps with subscription function (subscription-supported app)
  • Free apps with in-app purchases
  • Free apps with ad monetization

Therefore the vital question is: Can you fund the app by ads or the end-user.
We think if the app is rather mediocre in its features, it is recommended to apply a monetization model with advertisements. With meanwhile 750,000 apps in the App Store, the competition is rather high for paid apps. Meaning only the fewest paid apps really gain profits.
In contrast to the app users, which usually aren’t willing to pay for apps, advertisers pay a huge amount of money to promote their products. Herein lies the chance for app developers. The future likely is within the ad-supported model. There is an app marketing study that discovered that 73 % of android apps (Google Play) are for free and 80 % of them are ad-supported. Users can react very price-sensitive – though there is also a demand for ad-free apps.

Basic rule app monetization

Everything said up until now relatively easy formulates for an optimized monetization of an app: App developers should release 2 different apps on the market: On the one hand a free version and on the other hand a paid app with more functionality after buying the app which also doesn’t show ads.

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