Freemium Apps Predicted to be the Biggest Market in the App Store

Market research and analysis firm IHS iSuppli recently released a statistical report regarding the future of free-to-download apps. It has probably become obvious that free apps are dominating the App Store these days and, according to IHS iSuppli, the trend will continue to grow through 2015.

A quick glance of new apps in the App Store and it is clear that the biggest trend is free-to-download, or “freemium” apps.

As of writing this, 29 out of 40 of the newest apps are free, that is about 73 percent. According to IHS, the majority of apps downloaded in 2011 were free. “Smarphone users overwhelmingly prefer free apps to paid apps, as we estimate 96 percent of all smartphone apps were downloaded for free in 2011,” said senior analyst of mobile media, Jack Kent.

IHS believes that the trend will last for so long that it will be more difficult for app developers to make money on apps that require an upfront purchase. According to the report, in-app purchases, which are the way developers make money on freemium apps, accounted for 39 percent of total market revenue in 2011 with a dollar amount of $970 million. Those numbers are predicted to increase to 64 percent and $5.6 billion by 2015.

Freemium apps are free to download with offers to upgrade an item, buy game coins or points, or unlock additional levels by paying for them through in-app purchases. Only a few years ago, App Store reviews from users were lambasting the in-app purchase model as a sneaky way of getting money. Plenty of reviews stating, “Free to download, but you have to buy stuff if you want to get anywhere in the game. No thanks, I’m deleting this app.” can be seen in older review comments for the first wave of “freemium” apps. Now, it looks like it is so common that it will be difficult to find apps that aren’t a free-to-download model.

Even non-gaming apps have to compete in the freemium market. “Games pioneered the in-app business model,” said Kent. “Now, the approach has proven so successful, companies building other types of smartphone apps must adopt this strategy if they are to maximize their mobile app revenues.”

The most popular in-app purchase was for specific in-game functions like unlocking weapons or changing outfits, which accounted for 22 percent of the most popular in-app purchases. Time limited navigation services, dating and premium social networking access, photography and video apps were also on the list of popular in-app purchase money makers.

Developers have discovered the way to maximize revenue and it is all about the freemium app. As time goes by, we will see just how popular the trend becomes before something new and more creative replaces it.

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About Lory: Writer of all things app related, traveler of the space-time continuum, baker of really great cookies. Follow me @appaholik