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Summary:

[qi:gigaom_icon_apple] As web-based companies struggle to monetize their content, mobile application developers face the same battle. Since so many popular web apps are free to use, people expect the same free access when it comes to mobile apps, said a panel of iPhone application developers during […]

[qi:gigaom_icon_apple] As web-based companies struggle to monetize their content, mobile application developers face the same battle. Since so many popular web apps are free to use, people expect the same free access when it comes to mobile apps, said a panel of iPhone application developers during a breakout session at VentureBeat’s MobileBeat conference today. As a result, they said, install rates are significantly higher for free apps than they are for those that cost money.

And if an application is free, it should stay that way. Tapulous COO and co-founder Andrew Lacy said install rates for one of its free gaming apps dropped 95 percent overnight when the company started charging 99 cents for it. On the other end of the spectrum, according to Epic Tilt’s Nikao Yang, there’s a small class of mobile users who will install paid applications regardless of the price. “The install rate doesn’t change dramatically from 99 cents to $4.99,” he said.

But if more often than not, the only price a mobile consumer wants to pay is no price at all, how can developers make money off mobile apps? The panelists, which also included OpenTable’s Scott Jampol, said advertising is a key way to monetize applications (see a related post on GigaOM Pro, subscription required). Indeed, with mobile ad spending forecast to hit $5.7 billion by 2014, mobile advertising startups such as Nexage and AdMob have been among those receiving funding despite the struggling economy.

  1. I am not disagreeing with the conclusion of this post, I agree that unfortunately a large number of people seem to expect everything free nowadays, but I believe the App that Andrew Lacy is talking about is Tap Tap Revenge 1 – which was raised to $0.99 after it was replaced by Tap Tap Revenge 2. So it makes sense that no one would have been willing to pay for the old version of the app.

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    1. Thanks Will. Actually I was answering a specific question about whether any panelist had seen companies be successful taking away features from a free app to introduce a premium version or whether repricing a free app to paid had been successful. My answer was that I hadn’t seen that. In the process of experimenting and understanding market dynamics we had repriced to $0.99 from free a minor application of ours, Photo Collage, and had seen a big dropoff in installs as you would expect when you charge for something that was previously free without adding more services.

      However, I think that the “freemium” model (a free application with a more feature-rich premium upsell) is very much alive and well in the App Store universe. In fact, we have seen evidence that free-to-paid conversion (where you DO offer additional features, game levels, etc) is higher than the typical conversion numbers often quoted for the web world.

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  2. I was really keen to know more but like to get my news for free – thus this link (http://pro.gigaom.com/2009/06/is-marketing-key-to-mobile-app-store-sales/) didnt work for me.

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  3. The Microsoft model of this is best!

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  4. The Model of making money exists – but the model for how developers will get more apps sale is lagging THIS is the real problem.

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  5. Most of the applications sold from Apple are for free and the ASP is declining fast for applications. Apple made just $80 million from application sales. Why is then the mad rush to launch application stores. I have analysed the application stores revenue and implications at
    http://www.telecomcircle.com/2009/05/the-economics-of-mobile-application-stores/
    It is clear that there are other benefits apart from direct revenues from sales of applications

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  6. [...] Mobile Devs: Install Rates of Free Apps Higher Than Paid Apps [...]

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