Mobile Games Generate More Revenue if Given Away for Free

Freemium is one of those made-up terms that might be here to stay.

As it turns out, game developers are finding it is easier to make money on the iPhone if they give their applications away for free and sell virtual goods inside the game, instead of expecting users to plop down 99 cents on a game they’ve never played.

According to Flurry, which tracks the performance of more than 90,000 apps that use its analytics service, more than half of the top performing games on Apple’s iOS are making money by using a free-to-play model, up from only 39 percent in January.

In a blog post, Flurry’s general manager of games, Jeferson Valadares, who worked previously at EA’s Playfish and Digital Chocolate, writes that when the game is free, two things can happen: “First, more people will likely try your game … and second, you will likely take more total money since different players can now spend different amounts depending on their engagement and preferences.”

In other words, if a user really likes your game, he or she may end up spending more than 99 cents.

Flurry said that can represent a lot more money, even though more than 90 percent of players never spend a dime.

Valadares writes that the number of people willing to spend money in a free game ranges from 0.5 to 6 percent.

The freemium model has been well demonstrated on Facebook, where game companies like Zynga are making millions of dollars from users willing to pay for small items inside of games, such as crops for the farm or energy boosts to continue playing.

Zynga has disclosed that a majority of its revenues come from a very small percentage of users.

While many independent game studios have embraced freemium models, it’s been more difficult for other companies. Nintendo is perhaps the most vocal company speaking out against the trend.


Latest Video

View all videos »

Search »

I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik