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Freemium games are 34 of the top 100 grossing iPhone apps, but only 1.34% of all apps

By on November 23, 2010
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Dear iPhone developers,

If you are developing an iPhone game that does not have an in-app purchase model, stop now. You are making a big mistake.

Restaurant City screenshot

GigaOm has analysed the top 100 apps by gross revenue and found that 34 of them are free, monetised by in-app purchases. Analytics firm Distimo estimate that in-app purchases now represent 30% of all app store revenue.

Which is staggering when you realise that the percentage of free apps with IAP is only 1.34% (again according to Distimo).

Let me repeat that: 1.34% of free apps are generating 30% of the revenue of the ENTIRE App Store.

(OK, the data is not quite as clear as that. It is possible to have IAP attached to paid-for games as well as free games. But even if the situation is not as extreme as I have said in the preceding paragraph, it is still directionally correct).

It’s about the whales

Regular readers of GAMESbrief should not be surprised about this data. You should be shouting at the screen “Of course you should be freemium. It’s about the whales, stupid.”

You see, if you give people two price points – free and $0.99 – you are leaving a lot of money on the table. Even if someone *loves* your game, they can only ever spend a dollar on it. (Read more about the 0-1-100 rule)

Pocket Frog has in-app purchases costing $29.99. One purchaser of that is worth 30 times the standard $0.99 price point for a traditional paid-for app. In-app purchases can stack up too, so your biggest fans could end up spending tens, or even hundreds of dollars with you.

The iPhone, like the web, is about offering free content to attract users and allowing your biggest fans to spend a lot of money with you. ngMoco understood this, which is why it pivoted to a 100% freemium model last year, and was bought for $400 million last month.

They know freemium works. I know freemium works, I think you know freemium works.

So if you are working on a game that does not have an In-App Purchase model, stop now. You are wasting your time.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com