Why Pay When You Can Get it For Free? Paid Apps Falling

Published On August 19, 2013 | Tech Business

According to a recent study by Flurry, a company dedicated to tracking mobile application data, nearly 90 percent of apps are now free – a sharp increase from last year’s recorded numbers of 80 to 84 percent.

Are app developers so excited to share their products that they’re doing so without trying to create revenue? That’s hardly the case. The drop in the number of paid apps is actually the result of years of consumer research and price testing, which has overwhelmingly led to the same conclusion: users are willing to listen to and view advertisements in exchange for free content. Much more willing, in fact, than they are to pay for an ad-free experience that comes with a fee. While consumers may not enjoy ads in between their videos, music or games, many have come to view them as a necessary evil in the mobile world, much like commercials before the invention of TiVo.

Study Finds Free Apps on the Rise

Basing its study on more than 350,000 apps, Flurry found that 80 percent of apps that underwent price testing in the past several years are now free, compared with 65 percent in 2010. When testing even small fluctuations in app prices, for example from $0 to $0.99 or from $0.99 to $1.99, developers saw significant changes in the number of their subscribers. Based on this information, many apps have become free in the past several years so that companies can grow and maintain their consumer base.

“People want free content more than they want to avoid ads or to have the absolute highest quality content possible,” Mary Ellen Gordon, Director, Industry Insights and Analysis at Flurry, noted in the report.

Pandora Leads Drive to Free Content

Take for example, Pandora, the largest Internet and radio service in the world, which offers 40 hours per week of free listening, but entices users to pay $3.99 per month for ad-free listening. After instituting the 40-hour-per-week limit, the company saw a 700,000 increase in their paid subscribers, bringing the number of Pandora One users to 2.5 million in early 2013. And while that number may be impressive, it pales in comparison to Pandora’s 200 million registered users, and even their estimated 30 million active users.

Like Pandora, many companies now offer free and paid versions of their apps in an effort to net some revenue from those who use their applications frequently enough that they are willing to pay a one-time or monthly fee. Some of the perks of the paid versions of apps may not only include ad-free listening, but other perks such as additional features, extra listening and usage time per month and more.

According to Portio Research, more than 1.2 billion people worldwide use mobile apps, and that number is expected to reach nearly 44 billion by the end of 2017. Without consumers who are willing to pay for services, the challenge of creating useful and profitable mobile applications will continue to be an uphill battle. Moving forward, app developers will have to focus not only on creating a unique and popular product, but on creating an ad structure that strikes the right balance between profitable and non-intrusive. The race is on to see who gets there first.

— By Tim Alan

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