Case Study: Revolutionizing the Mobile Shopping Experience
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Our series exploring Free vs. Paid apps continues (check out the Pros and Cons and our 5 Questions Checklist) this week as we delve more deeply into the details of pricing and profitably to maximize your app’s success in the hands of users and the app stores.
To see which app strategy (free or paid) is the better fit for you, this post addresses how monetization differs between the App Store and Google Play – including how industry trends play out between the two.
To start, iOS users are slightly more inclined to pay for apps than Android users. According to industry data, 23% of iPhone users have made a mobile purchase vs. 17% of Android users. Additionally, paid apps make up 35% of the App Store while Google Play has a slightly percentage at 31%.
Industry trends in general show that free wins over paid in both the number of apps with the model and the revenue they generate.
1. Over 80% of apps on both the App Store and Google Play are free
2. Over 90% of app revenue is driven by free apps (money is made through in-app purchases, advertising and premium features)
3. From 2012 to 2013, overall app revenue from free apps increased by 211% while revenue from paid apps decreased by 29%.
4. Revenue from in-app advertising grew by 56% from 2012 to 2013.
Additionally, as this chart by Distimo shows, the free app model rules in most app categories on the App Store. However, Productivity, Education and Navigation apps have more paid than free apps.
Based on the above industry trends, free apps (with in-app purchases or advertisements) are usually the best monetization approach. But, there can be a few exceptions where a paid app is preferable and more profitable than a free app. If your app has niche functionality and is offered to a specific set of people, then it would be suitable to offer it as a paid download. An example of this would be an app which caters to doctors and helps them with treatments.
Going with the paid app model means you need to analyze the correct value of your app. To do this, take a look at the functionality and pricing of other apps in your industry to correctly identify the real value of your app.
About 90% of paid apps on the App Store are in the price range of $0.99 to $4.99
Source: App Store data taken from 148Apps.biz
When it comes to average app prices, this graph shows that Android apps are the cheapest while iPad apps are the most expensive.
If you’re unsure, A/B testing on different price points is a great option to check which works best for your app. You can also A/B test different monetization strategies on the App Store and Google Play since monetization results may vary based on the platform.
The bottom line – whether you pick a free app or a paid app, making money from apps is not easy. A paid app needs to offer enough value to get past people’s aversion to paying for downloads, while a free app needs a large enough user base and a strong offering of in-app purchases and/or advertising to make money. In upcoming posts, we’ll discuss the different methods to make money from a free app.
Have questions about the finer details of pricing your app in the App Store or Google Play?