Mobile Devs: Install Rates of Free Apps Higher Than Paid Apps

[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.