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Summary:

2013 has been a banner year for freemium, and many “free to play” apps have hit the big time in popularity and revenue. Here’s why it might not happen again.

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photo: King

It’s amazing how mobile app stores can change in a single year, especially when a major trend like freemium finally makes its big move. Freemium, or “free-to-play,” apps have been around since 2009, when the iPhone initially allowed microtransactions in the iTunes App Store. But the trend has skyrocketed in the last year alone, with the help of successes like Candy Crush Saga and Clash of Clans leading developers to adopt microstransaction models to keep the money pouring in.

2013 was a banner year for this freemium strategy, but as mobile gamers get more sophisticated, 2014 might not be the same.

Freemium’s precipitous rise

Games are the cash cow of mobile, and have been for quite some time. According to Distimo, 63 percent of iOS app revenue comes from games. What’s more, this year, all ten of the apps to grace Apple’s Top 10 Grossing Apps list were games, as well as nine out of ten Top Google Play Android apps. But revenue is accelerating faster than ever before — a feature largely attributed to the widespread use of microtransactions.

All of the games that hit both Apple and Google’s Top Grossing charts are free to download, meaning that their gross revenue came entirely from microtransactions. To put it in perspective, Apple’s Top Paid app this year was Minecraft, an open-world MMO available to play for $6.99. Even with that high purchase price and the coveted top spot in Paid, Minecraft only made it to the 18th spot in Apple’s Top Grossing List.

Actual revenue numbers for the top games, Clash of Clans and Candy Crush Saga, aren’t readily available — but one need only look at the games’ developers to see the success: Clash of Clans‘ Softcell sold 51 percent of its stake to Japanese company Softbank for a whopping $1.5 billion in October, and Candy Crush‘s King is prepping a massive IPO.

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What makes Candy Crush and Clash of Clans effective money makers isn’t the presence of microtransactions, it’s how deeply they are integrated into their respective formulas. Both practice the tactic of deprivation: users only have a finite number of moves or actions to take before waiting a period of time (sometimes hours) to be able to play again. Users are tempted to keep the fun going, or satisfy their frustration with a particular level, by paying $0.99. This tactic has led to a major revenue stream, and also to plenty of addicts who are surprised when their credit card bill comes in.

But those blockbuster games did more than skyrocket the profits of a few select companies — they also pushed other developers to turn to freemium for their games as well. According to Distimo, the freemium model rose precipitously on both the iTunes App Store and Google Play. In the beginning of 2013, 77 percent of apps in the iTunes App Store had in-app purchases; by November, it had shot up to 92 percent. The Google Play store had a similar experience, jumping from 89 percent to 98 percent this year alone.

Why 2014 might not love it

With the success of Candy Crush and Clash of Clans, it’s easy to see a world where freemium becomes the new normal: a sort of superficial win-win situation where users get to access the games that they want to play for free, and developers kick back to rake in the dough for the extra bells and whistles (new lives, more time, new characters, etc.). But I believe the big freemium rush of 2013 is an anomaly that will give way to a different payment landscape in the years to come.

There are signs that the model is already shifting in two games already available: Plants vs. Zombies 2: It’s About Time and Angry Birds Go!. They represent both sides of the freemium coin — one nearer to the future, and one that should be shoved in the past.

PvZ 2, released by Popcap Games this summer, followed tradition in having a freemium model — but critics praised the game for how it executed that model. Instead of relying on deprivation tactics to motivate users to pay money, the game offered power-packs and downloadable content that offered new plants and modes for users to play with. The core of the game remained playable completely for free, with no waiting and no paying. Apple even awarded PvZ 2 with an honorable mention for Game of 2013.

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Meanwhile, Angry Birds Go!, developed by Rovio, is a standard kart racer with various stages that also has freemium its forefront — a new tactic for the Angry Birds developers. However, the game’s very standard deprivation model — in this case urging gamers to pay once their driver had gotten “tired” — made many bristle.For example, IGN’s Kallie Plagge said in her review of the game, “I often felt that Angry Birds Go! was trying to frustrate me just enough to get me to pay up, but not so much that I would stop playing altogether.”

While critics derided it for its clear money-grabbing microtransaction prompts, there is a sign that the general public is also fatigued by these techniques: while it is number one downloaded app on Top Free Apps in iTunes, Angry Birds Go! is just 27th on Top Grossing, indicating that users are not convinced enough by the model to pay for it.

Going into 2014, developers must keep in mind that their audience is now educated in the subtleties of freemium — executing it correctly can make the difference between a Game of the Year and an obvious cash grab. Users won’t be as easily duped or soothed into parting with their money, so models that utilize freemium will need to pass a more rigorous test than Candy Crush if success is expected. Unfortunately, this might also disappoint developers looking at the bottom line: because freemium will slowly lose its effectiveness, its profits will drop, too.

That said, freemium certainly wasn’t the first blockbuster mobile gaming model, and it won’t be the last. The next year will bring something new and exciting in the world of mobile gaming, and freemium will be better tailored to thoughtful gaming experiences.

  1. You are crazy if you think that premium games are going to take back the market and that the top 100 grossing titles won’t be dominated by freemium games again.

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  2. Cynthia & Bunny Friday, December 20, 2013

    The problem is most apps don’t make any significant revenue, no matter if they are freemium or premium. The app business is not sustainable unless there is a business model where all valued apps make sufficient revenue to survive.

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  3. You seem to be equating the freemium business architecture with the particular business rules used to implement the architecture.

    Both models you describe here are freemium, but one uses manipulative rules, the other co-optive rules. There are many ways to skin the Freemium model, some users will like and some they won’t – they are all still Freemium.

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  4. Any apps requiring micro transaction is automatically off my list. I’m not even bothering to try it out. Tricking the customer is never a smart idea, doing it openly is just plainly insulting.

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  5. Good article- very thoughtful and interesting insights. For those reviewers throwing rocks at the fremium concept because a developer dares to try to make money, go build your own app. It’s not cheap and it’s not easy. If you want to stay in business, you have to have a way to make money somehow. Offering a micro-transaction in a free app is not “tricking the customer.”

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