More Mobile App Marketers Expected to Move to ‘Freemium’ Model

As smartphone adoption continues to soar in the U.S., with approximately 60 million users, more marketers are developing and producing apps. The app market is evolving as it grows. Consumers are showing preferences for some apps over others. And while the amount consumers are willing to pay for an app is falling, marketers are finding other ways to make money from their development efforts. These changes will impact the way marketers promote their apps as well.

At the end of last year, over 300,000 apps were available at Apple’s App Store. Google Android Market boasts about 130,000. BlackBerry App World (18,000) and Nokia Ovi Store (25,00) are also competitors in this market.  Analysts at Distimo note that on a typical December day, 300 popular free apps on Apple resulted in 3 million downloads. By comparison, 350,000 paid apps were downloaded in the same time period. Between June and December 2010, the percentage of revenue from paid apps in the iPhone market dropped from 64% to 51%. But revenue from free apps which prompt consumers to make an in-​app purchase jumped from 14% to 34% of total revenue. The remaining revenue stems from paid apps with in-​app purchases. At the same time, the percentage of apps which cost over $2.00 dropped between June and January while the percentage of apps which cost up to $1.99 increased. This shift suggests that consumers are price sensitive to apps and marketers would do well to keep their prices below the $2.00 mark.

Top growth categories for iPhone apps are:

  • Business
  • Medical
  • Lifestyle
  • Finance
  • Music

Analysts point to a new interest on the part of iPhone users to download business apps and suggest that the device is becoming a productivity tool. If that is the case, more marketers may be launching free apps to capture business users and then prompt them to pay additional fees to access more data. This ‘freemium’ model is being used by more content providers as they move to a digital model. Marketing campaigns to promote apps, especially those based on the 'freemium' model, should continue to do well through 2011 for the many platforms that are now available in this space.

[Sources: Revenue streams shift as app market matures. eMarketer​.com. 18 Jan. 2011. Web. 1 Feb. 2011; Distimo Report Full Year 2010. 2011. Web. 1 Feb. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.