I yell every time I come across an article touting the miracles of making your app free. Sure, free apps work for some app developers. But the numbers show a different picture for most.
Here are the stats I see used as “proof” that FREE app works:
90% of apps in use are free (as any mom would ask…would you jump off a bridge if everyone else was doing it?)
Many developers who ran pricing experiments concluded that charging even $.99 significantly reduced demand for their apps
In-app purchases will drive 41% of the store revenue in 2016
Average App Price: $1.39, Game Price: $0.75, Overall Price: $1.29
Freemium, or free-to-play games generated 65% of all revenue from the top 100 grossing games in June
Here are some things that aren’t considered when we read these stats:
The VOLUME of downloads it takes to make your free app profitable
The top 100 charts are dominated by apps made by big publishers
The marketing power the big boys have to get immediate downloads quickly, help them rank higher
Most apps are actually in the app store to extend brand recognition and brand awareness
So what does it really look like in the App Store for indie developers?
According to Gigaom, the average developer makes less than $500/month
1/3 of those developers make less than $100 a month in ad revenue
80% of App Store revenue is from 20% of the app store developers
Games are downloaded 5-10x higher than other categories. So having a free game may work out better than having a free app
Gartner projects that by 2018, less than 0.01% of consumer mobile apps will be considered financial successes by their own developers
Freemium apps generally convert at a very low rate – usually less than 5% (0.5% to 6% to be specific) of total users directly contribute revenues through in-app purchases
Let’s do some math to answer the question “Should I make my app free?”.
To make $500 per month from a free app, you would have to get over 10,000 downloads per month or about 334 downloads per day with 5% of your users paying at least $0.99 per in-app purchase.
As any app developer that’s launched an app can tell you, this is no easy feat.
But what if you charged only $0.99 for your mobile app? You would only need 500 downloads per month or about 17 downloads per day to make that same $500. This is much easier for the indie developer to pull off.
But…
Who really wants to spend months developing a mobile app just to make $500 per month?
According to AppVee, the average cost to develop a small mobile app is $6,453. Which I personally think is on the low side of things. It took us about $9,000 after everything was said and done to make our game Goop a few years ago (if you’re interested you can read the post mortem on Game Career Guide here). That included doing all the programming ourselves, paying for a game artist, music composer, and marketing that didn’t work (even though we got about 700,000 downloads).
Even if you earn $500 per month it would take you over a year just to recoup your costs.
I’m not convinced indie developers are making apps to simply break even in the app store. Which is why I never understand why people encourage so many DEVELOPERS to go free.
So what should developers do? Let’s start with why I think indie app developers will continue to lose with the free model:
1. Mobile users EXPECT free
I’m pretty sure the race to the bottom was supposed to be temporary when the app store opened. But obviously, it’s here to stay with rewards only for a lucky few. The problem is, users almost riot when an app developer chooses to charge for their app. What’s worse is, these users expect beautiful, simple to use, full featured apps that cost thousands to produce the right way.
This is just bad for most indie developers.
The only developers that can afford to do this are:
Developers using the mobile app as an extension of their web apps
Developers with numerous successful launch titles beforehand
Developers with funding from deep pocketed investors worried only about “growth”
2. Your ads are annoying
No matter how intrusive ads have become over time, customers learn how to avoid them. And this is no different in the mobile space. I don’t care if you launch your ads pre-roll, post roll, pause the game for them, whatever. Unless they are actually well placed AND helpful to the user (check this article out for app advertising users may enjoy). Your users will spend more time trying to game the system than enjoying the game.
3. Customers ignore your revenue generators
Mobile app users are really hip to what makes you money. They’re ignoring your push notifications, hate your nickle and dime in-app purchase techniques, and they know exactly where to tap to press the small “X” in the corner of your ad to close it. Heck, some users even jailbreak their mobile devices just to get around ads like yours.
So how do you win with a free app when users do everything it takes to get around seeing your ads or avoid buying in-app purchases? You don’t, unless you adopt a hybrid revenue model (but more on that later).
4. You don’t have the BI and marketing to pull it off (and you don’t want it)
If you knew what the big guys did to not only get their apps to the top but keep them there, you’d probably quit now (but don’t).
Large publishers like Disney, Zynga, Twitter, and Airbnb know everything about their users, the app store, and their app. And they have internal business intelligence and marketing teams with lots of employees using expensive monitoring tools to pull it all off.
No. You won’t be able to match that and why would you want to.
This anything it takes to “move the needle” mentality:
Slows “real” app improvements down
Makes you a chart watcher. And you don’t want to be a chart watcher do you
and…Shifts your focus to making changes only for numbers sake.
Running your app business this way is no fun. And the good news is, your app development costs are so low as an indie, that this isn’t what it takes for you to get a serious return on your investment.
Of course, many indie developers have had success without all of this, but you have to realize what you are competing against and find a way to succeed without it.
5. Free apps get worse ratings
It’s just true. Free apps get worse ratings and it’s simply because they usually aren’t downloaded strictly by their target market. And that can be OK for the big guys, but a disaster for the indie developer.
Here’s why:
Lets say you’re getting an average of 10 downloads a day (sadly, this is about right for a lot of developers).
And let’s say only 1% of these users leave ratings.
Over a month you’ve totaled 300 downloads and 3 ratings.
Ok, now…
Lets say two of your ratings are 4 out of 5 stars and one is a 1 out of 5 stars.
Your rating will be 3 stars and with the new app store algorithm changes that factor in user ratings this will push you even further down the charts.
And it’s all because a dude that likes RPGs didn’t prefer your casual game.
Even if a big publisher got the same breakdown of ratings, they can handle that drop better than you. Their download volume alone helps keep them higher in the charts, which offset their poor ratings.
Unfortunately, it seems that indie developers need that paywall to keep out the users that just want an app because it’s free.
Plain and simple. You can’t afford average ratings AND low download counts if you expect to earn more than $500/month.
Last but not least…
6. Even big publishers lose with free
I won’t name names. But I can tell you firsthand that there are top tier publishers, with very high downloads, many App Store Features, and awesome ratings that are LOSING real money with free apps.
And it’s because of two things: Their high app development and maintenance costs AND the monetization schemes they are using are becoming less effective.
So how can indie developers make real money in the app stores?
1. Take advantage of the big migration to free
Since every developer that believes the hype is moving to the free category, the paid category seems to be getting less crowded. And that’s a major win for you. Remember for every position you move up in the App Store you could earn more downloads. And you can achieve this by doing nothing more than sitting in a less competitive category (the paid category) to increase your downloads.
This can help you start what I refer to as the “cycle of success”. Cycle of success = higher rankings, more downloads, more sales, and repeat.
As more developers fall for the “free is fun” game, you can win just by dominating the less crowded paid charts.
2. Adopt all the revenue models
Why have a free app or paid app when you can have the best of both worlds? It’s just silly to pick one side or the other on this.
Wait a minute, how do you have a free app and paid app silly?
Charge for your app (please charge more than $0.99, it’s worth more than that, trust me).
Include ads in your paid app. WHOOOOOAAA…Didn’t you just say ads don’t work and why would my paid users want to see ads. Just make your ads useful, here’s how.
Make sure you find a way to sell MEANINGFUL in-app purchases without making the customer feel like you’re nickel and diming them. I think Paper is one of a handful of apps doing this right.
Go free RARELY. And enjoy the surge of downloads that come from the free app of the day websites. Don’t worry, they’ll automatically find your app.
Develop some unique way to make money from your app. Try creating a subscription, a higher level of customer support, anything to make more money from your app that users get value from.
OK…let’s redo the math from above using the “hybrid” revenue model:
Let’s say again that you charged only $0.99 for your mobile app.
And again, only got 500 downloads per month (17 downloads per day).
You will earn at least $500/month from your paid downloads, recurring income from your ads and in-app purchases, and get the surge of new users you need from the rare times you discount your app or make it free.
This is much easier for the indie developer to pull off. And much more lucrative.
3. Now, quit what doesn’t work
Once you’ve released your app with these different business models, take note of what brings in the most cash. Eliminate what doesn’t work and find a way to enhance what does.
For instance, see if you could raise the price of your app an additional $0.99 without completely obliterating your app sales. Find out if instead of making your app free for a day, if cutting the price 25-50% could have the same effect (a lot of websites also watch price drops and could bring the same traffic.)
4. Make sure your current paid users are given VIP status
As the old saying goes, it’s easier and cheaper to keep the users you have than acquiring new ones. And this definitely applies in the app store. It actually costs about $1.90 to get just one user to download your app. And there is no guarantee that they will even keep your app.
So you need to focus on making current users happy
Give great customer support
The people that actually purchase your app expect customer support and you better give it to them. Remember, no matter what app you make there is another app they could have downloaded instead of yours. Don’t make them regret their purchase.
If they have a problem, make sure to answer correctly and quickly. Make your app user feel like they can count on you whenever they need your help. This is another reason you must charge for your app, because providing amazing customer support is not free and takes time.
Make sure your app is in tip top shape
Your app will have bugs. Unfortunately, this is just a part of the app development process. But please make sure you test your app to eliminate most of them. Your app users aren’t your beta testers. Once it hits the app stores, your app should be in tip top shape.
Run your app through the simulator. Click around on weird things. Press the back button really fast. Use feature switching. Whatever it takes. Just make sure you do everything it takes to make your app virtually perfect. You want your app users to feel like they made the right choice and nothing gets you a one-star rating faster than an app that crashes.
Send out frequent app updates
Here’s another reason why you can’t afford to offer your app for free. Users expect updates and they expect them frequently. Now, unless you have a team full of developers I don’t see how you could release feature updates frequently.
But you could always send your users new content. Send out a new video showing them how to use your mobile app a different way. Dress up your characters for the holidays. Change the color of the intro screen. Just make sure you find a way to make your app feel fresh so your users don’t have the incentive to delete your app.
So is there any proof that indie developers are winning without going free…Sure..here are just a few.
Tap Tap Tap
Simogo
Cultured Code
and lots more…
Just do the math before taking the advice of someone from a big company with apps in the app store. What works for them does not work for indie developers and that’s ok.
The next time a fellow developer asks, “Should my app be free or paid”? If they are an indie, save them the headache.
So what do you think, am I just horribly mistaken about indie developers and free apps? Do you have facts and proof that could easily prove me wrong? I would love to know your thoughts and any additional ideas you can share with us on how to make more money with your apps.
If you find this article interesting check out Dan Counsell’s post on the topic: Paid, Paymium or Freemium?