Paid apps monetization model is not a panacea any more

Are app users abandoning the classic buy/sell concept of paid model? Are paid apps on life support? Why do most top titles on app stores, follow the freemium rather than the paid model?

Paid apps have been one of the most popular and  traditional approaches since the first rise of app stores. This model has thrived for years especially on stores like AppStore where users were more willing to pay for apps. However, for years, app developers had the feeling that users would pay for apps like they were doing for desktop, nintendo, psp game titles and other consoles. That concept faded out through the years.

Developers devote a lot of time on the development, design and marketing of an app and they believe that this effort should be rewarded straight away. Unfortunately this is not how the system works. At least not any more for most of the cases.

When developers choose to go with the paid option approach, many things should be taken under consideration. Higher pricing does not mean higher revenue. Visibility on store and  users purchase intent are not granted, nor easily achieved. Yes, of course if 100 thousand people download an app and the developer sells it for $2.99 he can be rich. Unfortunately in real life this is wishful thinking..or a misconception on how the ecosystem works. Gaining attention on the app stores and seeing a paid app in the top grossing category is more than a painful road nowadays.

Asking users to pay upfront for an app means that users will have high expectations. Bug free operation, quality of app experience, rich content and updates frequency, play a key role here. Moreover, developers usually overlook the effort and costs needed in the process of maintaining and improving a paid app in the long run. Users can get disappointed easily and this can affect the app’s reputation and eventually app’s revenue.

Indie developers or even small game houses struggle to be successful on that model. App Stores out there have millions of mobile apps. It is not easy to differentiate. Paid apps can work quite good for brands or big established developers since users are more willing to trust them and pay their app experience upfront (however we have seen top tiles moving away form paid model recently). For small developers though, a major thing is the ability to properly market an app. Why should a user trust their paid app? There are tons of free apps out there with similar functionality. Being able to show off the value of an app and why it worths spending money for it upfront, without trying it, is one of the “make or brake” skills for the developer that chooses to go down that road.

Paid version of an app free of ads! Another common misconception in the developers world. A lot of developers believe that offering a paid version of an app, without ads could become popular in current app’s user base. This approach makes sense since it capitalises upon the perception that users are willing to pay of an ad-free version of an app. This is usually wrong. Some users may like an app and some times get frustrated by ads, but however, are they willing to pay for that enhancement? Does this app deserve that kind of sacrifice form a user that is already using it for free? Usually, only a small proportion of the app’s user base can be converted into that “paid version without ads” concept and this also depends on the quality and engagement of the app.

But why big players have moved away from the paid model? Is it more profitable to them? One picture worths a thousand words:

To conclude, paid model does exist out there and it can be successful and quite profitable for publishers (there are lots of examples out there). However,  following this model should be a conscious choice of the implications involved. Ensuring that this app monetization model fits for an app is very important. Latest statistic trends  show that more than ninety percent of revenue from different stores come from the freemium model.

I remember a developer in a forum stating that paid app model has been used for years on app stores, and its a proven successful model. Paid apps model is not a panacea. This brings on my mind the words of Nelson Jackson that said once  “I do not believe you can do today’s job with yesterday’s methods and expect to be in business tomorrow”. The ecosystem has evolved. The users behaviour, as consumers, has also changed. Developers should be able to understand the latest trends and find the model that best suits for their apps.