Free vs Paid Apps – Which Works?

Free vs Paid Apps – Which Makes More Money?

One of the largest parts of iPhone app marketing is the pricing strategy. Do you move in at $0.99? $1.99? Free? The decision can be a tough one, especially when you are launching. My app has been in the store for about 11 days now and I’ve banked about $400 off the app (after Apple’s 30% cut) and about $400 off of my Playhaven integration (partnership program that sells cost per install). This is only the very beginning of my findings, but am starting to see some trends that hold value.

I launched with a $0.99 and let that run for about 9 days with the intention of having it paid and then marketing the absolute hell out to of it, selling quality and sizzle. It wasn’t going to be a volume move, but it would maintain the value. I figured this would be longer term strategy so that I could increase the value of my marketing.

Well, I was wrong. At least as far as I can tell from the first two weeks. Here’s why.

Volume Buries Price

This means that the bottom line of my app being free is dwarfing the results I got from having it be paid. Assumptions:

1. Your app has a strong in-app purchase functionality
2. Your app has a monetization program beyond in-apps and cost of app (Playhaven, iAds, etc)
3. You value things like reviews as much as price (typically true during a launch period of 3 months)

Here are two snapshots of the life cycle of the app. First is my Sales data chart:

And here is my PlayHaven account:

The Playhaven chart is a more accurate representation of download numbers (about 8,000 a day when free) but is measured by Clicks which follow the same trend. The dip at the end is because that’s real time data and it’s only half way through today.

Reviews = Value = Money

Do not underestimate the power of positive reviews. The rankings climbed because I hit top 50 in Free Games for a few days, but the biggest difference is that I added about 10 five star reviews. The download numbers on the 29th and the 30th were about the same, but I made about 70% more money on the second day. The only variable that changed was the number of positive reviews.

This shows people that the game is credible and makes them more likely to engage. That usually means more in-app purchasing. As I add more reviews and the download numbers even out, I will find out what my average income will be.

My Recommendation

If you are looking to get in the app game to make money, here are my recommendations:

1. Create a fun and engaging game (the download numbers on games are 5-10x higher than other categories)
2. Create a easy and viable in-app purchasing model
3. Integrate various paths to make money on the user, not just through Apple
4. Cycle your pricing to understand where your sweet spot is (but know the Free is where you want to be)

Sidenote – a lot of people are tempted to leverage the Free app download numbers with iAds to create revenue. I suggest against this. Most people find the ads very annoying and the payout is really, really low. It’s kind of a chicken and egg too bc you need users to use the app multiple times, but if they find the ads annoying they won’t. I don’t have proof for this, just my two cents from talking to lots of developers and their experience. If you want to read about my #1 experience with how to make money with apps click here.

I need to do more testing with promotions vs Free release vs price cycling, but I am creating a theory that the best way to market an app is not over the long term, but to put all your eggs in one basket a few times a year. Timing 5-10 promotions and your free release all at the same time could potentially get you into the top 10 of your category, which will then feed you 100K organic users, etc. I’m going to test all this and report back with proof.

If you have any questions about pricing and how to make more money on an app, let me know!

Hear more on my Facebook Page or Follow me on Twitter.

Carter

 

COMMENTS

  • Tim February 26, 2012

    hello carter.
    3. Integrate various paths to make money on the user, not just through Apple

    by that, do you mean through android? please explain? is there any other way to make money by your apps?

  • Carter Thomas Carter February 27, 2012

    Hey Tim,

    Good question. What I mean by that is that there are other ways to make money in apps other than making it paid or having in-app purchases. In my experience, it has been Playhaven, but there are many different platforms to use. This can be third party advertising, cost per install networks, or anything else that can be monetized. A popular one was TapJoy, which I believe has been blacklisted, and Flurry is another good one to check out.

    Most of these deal with games, so advertising is probably the other way to to go if you have another app.

    Carter

  • Robert March 15, 2012

    Carter,
    I have my app idea, do I need to get this pateneted before I have it developed? Or do I get it developed first and the patent it? Very new at all this.

    Thank you for any informatio you can provide.

  • Carter Thomas Carter March 15, 2012

    Hey Robert,

    Try downloading my ebook – there is a section on protecting your idea. You can get the ebook by signing up for the newsletter.

    The short answer is that you should concern yourself with developing the app first, then thinking about the patent. In my experience, no matter how many copies of an idea there are, only the best win. So – just focus on being the best.

    Hope that helps,

    Carter

  • Dennis November 20, 2012

    Hi Carter,

    My company has a game that has been designated as an Editor’s Choice, a Game of the Week and has now made it to Electric Playground, reviewed on syndicated television yet we are seeing almost $0 sales.

    I don’t completely believe in the IAP trap that most apps seem to be switching to where the design sense is about screwing the customer over and frustrating them until they pay you to move out of the way so they can continue playing.

    We have an amazing application, and the reviews are staggering in terms of positivity but we can’t seem to get people to take the MASSIVE chance of spending A WHOLE DOLLAR on it. So I’m looking for opportunity to get the word out, expose the game and make it known that it is in fact a great piece of software. Again, we’ve had articles written and reviews written that are saying things such as Game of the Year. Whether or not the rest of the world would agree with that is entirely opinion. However if we have that type of response would you not think it would garner sales?

    So what would you suggest in terms of marketing an app like this. Design wise it is not built and was never built to have IAPs. In fact I really have to state that I despise that entire paradigm as I find it gets in the way of the actual design portion of the title.

    Do you have any suggestions? The company is failing and is looking like it might close shop, meanwhile we just hit television with a review… I don’t understand it and it makes me furious with the rest of the economy on the mobile store fronts as basically they’ve ruined what business is with their inability to sell to people without giving away the Farm first.

    Any insight would be great, cheers!
    Dennis

  • Carter Thomas Carter Thomas November 20, 2012

    Hey Dennis,

    I download both Polara and Kunundrum and played them a fair amount. You’re right – the apps are well designed and have a nice flow to them. Clearly you put the effort in and have a solid team behind them.

    I think the reason you’re not making any money is because you’re looking at this as a idealist, not a marketer – like you think that PEOPLE are stupid for not loving what you’ve made and shelling out dollars for it, instead of realizing that maybe your app isn’t as great as you think and you need to adapt to what people want if you want to survive.

    If you think, even for a second, that an in-app purchase is a “rip off” then it probably is. The thing is, most IAP are NOT rip offs. They make the game better for the user. People like paying for enhancements and better weapons and powerups, etc. If you think you’re scamming someone by giving them the option to give you money, I’m not sure what to tell you.

    My advice to you is to stop all marketing efforts and focus on conversion efforts. How can you get the average user, who is obviously thrilled with the experience, to have the ability to make their experience even better. Why not have multiple characters in the Polara game? Get coins that allow you to make your character faster, jump higher, or new weapons? In Kunundrum, I should be able to buy 10 hints for $0.99 as often as I like and unlock 20 new levels for $1.99. There should be “Bonus games” ever 3rd level where I solve a word scramble and get a prize for doing so.

    Look at the reviews for the top grossing apps – it’s not people saying how much of a rip off it is (some people do), it’s people saying how much they love playing the game, irregardless of their spending $500 on coins.

    Your other option is to focus on the marketing and sell your users to bigger games that will pay a lot for them (because they can monetize like crazy). Revmob is your best bet.

    I can understand your frustration about the economics of the app store, but you also have to realize what the app store is – it’s a place to make money. It’s not an art gallery and it’s not a showcase of wonderful apps even though Apple wants us all to believe that. People get into the app store to make money, plain and simple. You can be as pissed as you want about it, but that’s how it is.

    Good luck to you.

    Carter

  • Jason January 31, 2013

    Carter,

    If you make your app free, and your downloads go up, way up, does this increase your ios keyword ranking? for your specific keywords.

    Thanks,
    Jason

  • Carter Thomas Carter Thomas January 31, 2013

    Not directly, but you’ll rank on a new set of charts (Paid and Free are different). So, you will have a change.

  • Matt February 10, 2013

    Carter,

    I am getting close to create my own app and am leaning towards the free section but with IAP’s, but i was wondering what is the most common way of getting the money from the IAP? Is it set up when I have the programmer make the app or is it something I take care of after the programer is done and add it in under my developer account and do it through Apple?

    Thank you,
    Matt

  • Carter Thomas Carter Thomas February 15, 2013

    Matt,

    The programmer sets it up in the code then he or you sets up the corresponding entry in iTunes Connect. He’ll probably do it for you though.

    Carter

  • Brandon February 21, 2013

    How do i get reviews and get the app out there for people to see?

  • Carter Thomas Carter Thomas February 22, 2013

    Well, you have two options.

    1. You prompt users in your game to review the game more. Use something like Appirator.

    2. Go out and buy reviews (which is flirting with the Apple Terms of Service, so watch out).

    Good luck!

    Carter

  • Dany March 5, 2013

    Hello dear , I need to learn how I will use your product to make money

  • Tim March 11, 2013

    I am in the process of developing a app that isn’t even in the app market! Would you like to talk? Lmk Please email if you are interested! Thanks you!

  • franco April 30, 2013

    hello, my name is franco, i have a few questions for you; first of all i’m finishing my 2D game for android, it’s going to be free, but with IAP, were you can buy some extra fun weapons. Can i put my game in google store and in amazon store at the same time? what i’ve to do?
    do i have to make to versions of the game?one for each store? because google and amazon has their api’s code…do i make my self clear?

  • Namrata May 22, 2013

    Hi Carter,

    Thanks for the knowledge shared!

    Need you opinion!
    We had developed a FREE app, and it’s about a month now, since then it’s displaying an overwhelming response at the App Store. (Fairly Good Reviews & downloads)
    Presently NO in-app feature is included.

    Now, we want to make money out of it…and we could think of 2 following options
    1. convert it into a paid version.
    What shall be the entire procedure,(whether app has to be submitted again to App store)
    What about the existing reviews & ratings? will they continue or a fresh start?

    2. To continue with free & create a PAID version too.
    In FREE version- in-app purchase will be integrated. Ads will be integrated.
    Whereas Paid will be without ads.
    What will happen to the existing reviews & ratings? will it still continue with the Free version or it will also start afresh as the BUILD will be updated n resubmitted.

    Thanks
    Namrata

  • vlad June 27, 2013

    Many people want mobile apps but think it is too hard to create them. Fortunately now there are quite a lot of useful online services which allow building apps without programming skills and in hours. I am using SnAPPii at the moment and really glad I can feel like a mobile app developer and make apps on my own.

  • javad July 7, 2013

    Hi, Thanks for this great article…
    I have a question…
    If i create a great game and add good and different in-app purchases and items and the game get +100,000 installs, how much almost i can earn daily?
    Whether ads better or in-app purchases better?

  • dave July 23, 2013

    is it just me or does @vlad seem like he’s trying to advertise that software in these comments? It has nothing to do with iphone app sales (what this article was about)
    I think he’s trying to advertise because just think about it, who goes onto someone’s website and talks about some software not related to the article… hmmm….
    (not counting this comment of course)

    On another note, I like this article and it’s really helping me in my own iphone app creation, I’m doing my research before I publish an app so thanks for the info! :)

  • andrew August 15, 2013

    I am an app that is NOT a game but is something that is NOT out there yet. It has to do with fishing but don’t want to say too much. I am curious how to go about this? Free or fee? I am tempted to do fee because this app will be around a loooooong time and since it’s not a game there won’t be a 2nd or 3rd. Just curious what you think I should do?

  • jack September 25, 2013

    How much dollar does Developer get for one downloaded free app without “IN APP PURCHASE”&”AD”?

  • Abraham September 26, 2013

    me and my friend are creating a school app but have minimum experience. we want to add like a news feed of events that happened(sports results, etc.) how do you create an app that can be edited like that(like changing events in a integrated calendar) plus i would like to add a instagram feed from a specific shout out page.Help please.

  • gohan October 13, 2013

    hello carter .
    what is the Proportion of money with android free apps ?

  • karthick October 26, 2013

    Hi friends,
    I am android developer and i am doing what i know and i am improving myself to create some good apps.Right now i created three apps with my minute knowledge,now i want to go for how to get money from my apps,what are the things i want to do.where i am missing to get revenue in my apps.Kindly share your knowledge to improve myself.

    https://play.google.com/store/apps/details?id=com.ibetter.Ginfy&hl=en

  • Ehsan October 30, 2013

    A worth reading articles, good effort.

    Off the topic: Can you please share links of some app store optimization tools. I found iOS ASO tool few days back but i forget to bookmark tool.

    That tool allows us to find competitor keyword analysis and some other things.

    Thanks

  • nirmal kumar November 7, 2013

    Hi carter,
    i am nirmal having an idea for an app.is it good to develop in ios or in android ?
    posting our app as an free one on android market will gain us some money or not??

  • Pao January 3, 2014

    Great read! now considering making free apps!

  • Morgan J Kerr March 5, 2014

    Please Respond,

    I was talking to an app developer called BrandCrux last night and he said that he would definetly enjoy making my game idea but I would have to pay him $70,000.00 to publish my game idea. I could not afford that in 8 life times for fuck sakes, I wish there was someone that I could share my idea with to have it published, not to make money for myself but just the joy of directing a playable story to share with the world in hope that it would be promoted to an XBOX 360 game so I could sit back with a fucking root beer and maybe a dark chocolate bar and play the game. Why does this short biological life have to be so complicated folks? I will share my idea with anyone who is willing to listen and I don’t care about royalties or copyright, I just want to make to story come to life and entertain people.

  • David March 28, 2014

    Hi Carter,

    I just started my app business and launched my first app last Friday. Downloads are coming in very slow but increasing daily. I reskinned a slot app for my first one and I need some marketing strategies to help kick my downloads into high gear – not sure how to start.

    Please pass along any ideas – I read Chad’s 8 day plan and I’m no ninja marketer…help!

  • Omar May 16, 2014

    Hello Carter,

    Im a 17 year old boy who wants to start his own programming business someday, although im not THAT interested in actually developing the apps, if i were to hire someone to make an app for me, how should i split the pay up? Do i just pay the developer a said amount of money upfront or give the developer a percentage of my total revenue?

    Please reply, we might millionaires together someday!

  • Anonymous May 28, 2014

    Hello carter. I am an 8th grade student going to high school and i have a great idea for a game and the technological support. I’ve done a lot of research on psychiatry and even talked with my uncle who has a degree in psychiatry (or so he says). My only problem is getting it published. I’d also like to know how i should set up the contract with the people who give me technological support. Should i set up a partnership or give them a payroll or give them a percentage of the company. I’m leaning on a percentage of the company because i know ill be able to convince them to take a certain percent. also, how can i protect my idea from being stolen from the people who are supporting me. Please repond as soon as possible. Thanks a bunch

  • Anonymous May 28, 2014

    hello carter, i just wanted to say that i mentioned pshychiatry because the game is very addicting

  • Jose July 10, 2014

    Hi,
    I think that high quality paid games with a great graphics design can have a real opportunity to generate some money for the developers. Of course the amount will not be as high as a successful freemium game but doing this kind of games for small group of developers is almost impossible. It requires a lot more time investment and usually a promotion that the developer can’t pay for.

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