When the Apple App Store launched, what seems like forever ago, many developers scrambled to create the most useful application which they could sell and make a boatload of money. One of the major considerations in marketing apps is setting a price point that will both attract users to purchase your application as well as generate revenue. Personally, I am hard pressed to spend more than $1.99 on any application without at least watching and/or reading a few reviews on it.
Who would have though that the price point of “0”, yes FREE would yield the most profitable returns. As backwards as this sounds, there is a reason why just about 33 percent of the top grossing app in the app store are offered at no cost.
“How can this be?” you ask, then you say, “oh, of course the advertising must pay a lot of the bills.” I won’t disagree that advertising does play a roll in some of these free applications, but the bigger money makers are in-app purchases.
It’s just not in the games category either, although that is a big segment, GPS and social networking applications account for a considerable amount of revenue also. Users can purchase anything from additional “mojo” and other gaming advantages to Live traffic updates in various GPS applications.
Remco van den Elzen, co-founder of analytics firm Distimo, said he believes in app purchases represent about 30 percent of all iPhone App Store revenue.“We’re seeing more developers implement more in app-purchases especially with games,” he said. “Freemium Apps are also picking up significantly. A lot of developers realize it’s a successful model.”
I think that the big benefit of of in-app purchases is that once the consumer has been using the application for a period of time they feel invested in that application, therefore have less hesitation about spending dollars for in app add on services.
When you are considering the next great idea for an application and are wondering how to get rich off the app craze make sure you consider strategic price points and that price may very well be zero. In app purchases are skyrocketing and seems like that is where the money is made.
What is your price limit on a single application purchase? Have you spent in app dollars and if so how much and how often?