Why The Freemium App Business Model Is Irresistible

Why The Freemium App Business Model Is Irresistible

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The freemium business model is a mixture of free and premium services, latest research shows that it is the most profitable model in mobile.

The creation of the internet made is possible, since it now costs so little for creative people to make new copies of their work and distribute them. Mobile technology has made it even more prominent, and now many businesses are using it within their models.

FreemiumFreemium Business Model

The idea behind the model is relatively simple. Someone will get access to a product for free, whether it is an app, software, an eBook, or even a video. That user will then need to pay a premium to gain access to the advanced features of the product. It could be access to an online forum or access to better features within the mobile app. Not all customers will decide to pay the premium and will be happy with the basic features.

However, a number will want to know more about the extras and that increases the chance of them paying. It is related to the tiered services, where people gain something extra for the more they pay on a monthly basis. LinkedIn is just one example of this type of tiered system, and many web hosts will have something similar. The following picture on the right is the classic description of the freemium business model.

 

Why the Freemium Model Is Popular with Mobile Apps

Free AppsMobile apps are among the most common places you will see the freemium business model being used. With many apps, there are free and paid for services, with the free usually being a ‘lite’ version. This free option will give the basics for a user, and is a great way for someone to try it out. That user can then decide whether it is worth paying the extra to get their hands on the more advanced system. It is relatively easy to set this model up with mobile apps, compared to other products. Many businesses will choose to create two separate apps. The first is for those who want the free option and will limit the functions and features. The second is the paid option. It helps to limit any issues between those who have and have not paid. Having a free app is a great way to promote a business. Many love something for free, especially when it comes to mobile technology. App developers can then promote their premium version and increase the chances of someone purchasing it.

 

Most Profitable

Statista provided data to Mashable on December 20th, showing that the freemium business model is working well and it is the most profitable business model out of all the mobile apps business models. The most profitable mobile applications are mobile games, the freemium model is very popular with the gaming industry. In the year 2012, freemium games combined together roughly 80% of the mobile market. If you are looking to monetize your app, I recommend you check out AdMob by Google, just make sure that you check more than one alternative before you commit to a monetization strategy.

 

Should You Build Your Own Freemium App?

Freemium Mobile App

The question is whether this is the best model for all businesses. Could you gain freemium app revenue? While there are benefits, there are also downsides. It is worth considering them to determine whether this is best for you. Before opting for a freemium business model, it is worth checking the market to see if people already pay for such a thing. If they can already get everything you offer for free, they are not likely to pay a premium to unlock a few features that you offer. There also needs to be a gap in the market for the type of mobile app that you offer. Too many businesses go in believing that they can compete with the competition, or customers will spend the money out of loyalty. This is not always the case.

However, a freemium app could be a great way to gain exposure. Most people will search for something generally and then get a list of apps. Most of the time, unless they have tried a specific app in the past, they are going to look for something free to try out. If you have a lite version available, they are more likely to choose your app and download it. They can then make the decision whether to pay for the extra features if they’re necessary. It only works if there is a reason to get your premium version. Not all customers will see a value, but you want the majority of them to. There are many options for premium features, including extra support, exporting or syncing, or even access to some member-only forums.

 

Who Already Have Freemium Apps

There are already a number of freemium apps out there. Some are simple games, like the Despicable Me Minion game, where you can pay to unlock different characters and special weapons. Apple has a range of freemium apps, which are currently under fire due to children being able to pay for things without parents realizing. Some apps currently don’t have many barriers to prevent an unwanted or unrealized purchase.

 

How Do You Build And Market A Freemium App?

My personal advice is to build your mobile app and market it in the following order.

  1. Build a beta which is considered by the lean startup book an MVP (Minimum viable product).
  2. Take to the early adapters under a alternative brand name and not the main one you are planning to use.
  3. Gather the important feedback of at least 100 users, try to have people only from your targeted market in this test.
  4. Build your app to be better and have the first users join you on your journey to build a great app.
  5. Try to reach a point where your users actually like you and your app, if they like you they won’t want you to fail.
  6. Take advantage of your better app and small community that you built around it and go to market.
  7. Make an effort to distinguish yourselves from other, choosing between guerrilla marketing or conventional marketing, that is really up to you, but whatever you do, be different.

Where and with who can you build mobile apps? I promise to write a full post about it in the near future, for now please feel free to pick for yourself on of the following service providers: Conduit (my personal recommendation!), ShoutEm, appmakr and appypie.

There are so many mobile applications in the mobile stores and they usually all do the similar thing, most app publishers look for large online publishers to review them, when in my opinion app creators should start off with the small niche blogs, there they can gain more popularity with actual users and they even might get more people to join their fan-base or community.

 

Freemium Or Premium?

Should you opt for a freemium business model? It will depend on a number of factors, but you could benefit. It all depends on your business needs and whether you offer value for your customers with unlocking features. Take some time to consider whether you will benefit from freemium app revenue.

Do you have any experience with building mobile apps? Do you prefer Premium, Free or Freemium? Tell us in the comments section bellow.


2 COMMENTS

  1. my two cents: freemium or premium depends on your market size since they say the conversion rate is about 2-3%. If your app or service is designed for a niche, forget freemium.

    • Thanks for the insight, I agree that a niche inside a niche app can not build a business while using anything but a premium model.

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