Posted January 27, 2012 10:14 am by with 4 comments

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Interested in building that killer app that will be your grand slam home run of your career? Convinced that you are absolutely certain that there are AT LEAST 5 million people out there that would give up $.99 in a heartbeat for your “awesome” app or mindless game? Well, that is great copy for someone trying to recruit developers but the reality of the app world plays out a bit differently.

That’s not to say that paid apps are dead. It’s just that they are going to be more like hitting the lottery rather than a solid business plan. According to a study by IHS Media Intelligence only about 4% of app downloads are paid for.

“Smartphone users overwhelmingly prefer free apps to paid apps, as we estimate that 96% of all smartphone apps were downloaded for free in 2011”, noted Jack Kent, senior analyst, mobile media for IHS. “In 2012, it will become increasingly difficult for app stores and developers to justify an upfront fee for their products when faced with the competition from a plethora of free content. Instead, the apps industry much fully embrace the freemium model and monetize content through in-app purchases.”

The chart below shows what IHS feels will happen as the shift of revenue from apps moves more and more toward the in-app purchase model.

Which side would you rather be on? The shrinking one or the growing one? Do you agree with this assessment?

  • Cynthia Boris

    Since there is no way to sample apps, I think it’s ridiculous to charge money upfront. I’ve passed on dozens of apps because I don’t want to risk the bucks. Now, if they let me try it, then charged me later or for an upgrade, that’s smart. Get me hooked, then go for the wallet. There’s no other way to make this work.

  • As an iPhone user I’ve found myself much more likely to spend when an app developer takes this “freemium” approach. In-app purchases / upgrades are the perfect try-before-you-buy solution.

    96% of all app downloads are free? Well the writing is on the wall then!

  • Listen Up

    Come one and come all.. Check out my new shinny app. It will never have adds and all all of the in app purchases are free of charge. That’s right, every in app purchase is FREE! Why play these other games that have you pay for in app purchases when you can now get them for FREE! My app is also only 75 cents, wait make that 50 cents , ah heck you can have it for the low low price of 1 penny. No other app is making this kind of offer anywhere. Come one and come all.

    See where this is leading? All apps should be made to have a base price. Then if they also want to have in app purchases that’s cool too. If not everyone will undercut you right into the poor house and no one will be making any money. End the free apps or find something else to do because you’re not going to be making a living making apps.

  • I prefer to applications which are properly made and like to pay them too.