The intense competition between apps and the surge of the try-before-you-buy trend has resulted in a large number of apps to be free-to-download.  The top two monetization strategies for most app publishers include in-app purchases and in-app advertising.

In-app purchases are based on the premise that if users like an app they may be willing to purchase additional in-app purchases.  In-App purchases are either upgrades, consumables or virtual currency or credits.  In-app advertising is the second largest mobile revenue generator after In-app purchases and growing steadily with app usage.  Examples include, banner ads, full screen ads and video ads.

Free-to-download apps

The free-to-download apps potentially lessens app’s retention rate.  Further, the app install-rate, uninstall-rate and competition is the highest in this category.

78% percent of the apps listed on the Apple app store are free-to-download, which compares to almost 10% of the apps listed for $0.99.  The demand for free-to-download apps is quite high at slightly over 94% of all downloads, which compares to an estimated demand of 2.5% for $0.99 apps.

Pay-to-download apps

The gap between people willing to download a free app and willing to pay $0.99 — the minimum in US iOS App Store for paid apps — is a significant hurdle for most publishers.   This is in line with what Josh Kopelman’s wrote in the penny gap, about how hard it is to get customers to pay even a penny.

However, pricing your app at this price point may be a viable solution as some mobile users are willing to fork out for higher quality apps.  440,000 apps out of the 2 million on the Apple app store are listed as paid.

Premium and niche apps

App publishers can price paid apps between $0.99 and $999.99.  The popular price points are $0.99 with almost 10% of apps, $1.99 with 4.31%, $2.99 with 2.9% of the apps.

In the chart below, notice $9.99 and $19.99 are popular sweet spots. One of our customers priced their niche market dictionary apps at $19.99 and $9.99 after considerable A|B testing focussed on maximizing revenue.

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Popular price points on the Apple app store

Niche apps are priced for consumers who need specific apps and are willing to pay.  Over a 100 apps on the Apple app store are priced at $999.99, and over 700 apps are priced at $99.99.   These are significantly small compared to 2 millions apps on the Apple App store.

Are paid apps an option?

App publishers should consider charging for apps for a number of reasons.

  • There is far less competition compared to free to download apps.  Paid apps have been downloaded over 5 billion times.
  • Every paid app download generates revenue.  Paid apps can be returned but rarely.
  • Paid apps are free from ads and have higher loyalty and retention.
  • You are not ruling out In app purchases or even in-app advertising.
  • The perceived value of paid apps is higher that those of free or free-to-download apps.
  • If you are not sure, consider offering a paid ad-free version of your app alongside a free or ad-supported version.  You may be surprised.
  • A|B test your app’s pricing to maximize revenue. |

Posted by Dickey Singh

Dickey Singh is the CEO and co-founder at Pyze and has over two decades of experience in mobile, Big Data and SaaS. He started Pyze to help app publishers engage, retain and grow their mobile users using automation. Get Pyze:

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