Why is the opportunity for marketing free apps larger than paid apps? Analyzing user engagement trends, mobile app advertising trends, and details regarding the lack of attention being given to free apps compared to paid apps gives some strong indications. The explosive growth of mobile apps since Apple’s App Store launched on July 10, 2008, has led to increased competition as well as innovation. App store revenues are expected to grow from $4.2 billion in 2009 to $29.5 billion in 2013. Mobile advertising expenditures are predicted to increase 28 percent to $914 million in 2010.
The value of free mobile apps is not limited to advertising revenue; free mobile apps are also the leading influencer on paid downloads and support the rapidly booming virtual goods business through in-app purchasing. The importance of free apps is misunderstood by developers, as the number of paid apps is disproportionate to their demand and revenue contribution.
Free Mobile Apps Drive User Engagement
Android, iPhone, and iPod touch users are averaging 79 to 80 minutes per day engaged with apps. This is phenomenal usage.
Flixster, the leading online destination for movie enthusiasts, touts 30 million unique visitors per month and 2 billion movie ratings. Flixster found that mobile apps provided superior user engagement over their mobile Web page. Flixster apps offer an easy way to share movie choices and meet-ups with movie-going friends because it combines movie information with social networking. Flixster now has 11 apps built for various platforms including Facebook, MySpace, iPhone, BlackBerry, and Android. The “Movies” app is said to be installed on one in five iPhones in the United States. Eight million users engage with the apps, adding to the 20 million unique visitors Flixster attracts on the Internet. Using mobile apps, Flixster’s mobile user base more than doubled in 2009.
Demand for App Distribution Drives Mobile Ad Innovation
Publishers are using mobile advertising campaigns to propel their app to the top of app store lists. AdMob routinely sells burst campaigns to help marketers achieve prominence in the Apple App Store. Being on the top of app store lists fuels revenue, whereas not making it can plunge an application into the great abyss. Of course, the cost to buy your way into the top 25 free apps in the App Store is growing fast: $10,000 in October 2008, $11,000 in December 2008, and $20,000 in March 2009. The coveted number one spot can cost as much as $250,000. It’s tough to make these numbers work without a strong business model.
New promotional methods are leading to new, innovative distribution alternatives for mobile apps. Here are some examples:
- Rebates (paid apps)
- Free for a day (paid apps)
- Free for virtual goods (free apps)
- Cross-promotion in-app advertising
Free Apps Are Underserved
Apple knows it. Apple acquired mobile advertising firm Quattro Wireless in January 2010, investing $275 million. Apple launched in-app purchase support in October 2009, to support the monetization of free apps. Popular opinion is that Apple will feature app ads in the App Store similar to AdSense.
Google knows it. Google is investing in a mobile future by signing an agreement to acquire AdMob, a mobile display advertising company, for $750 million. It was reported in November 2009 that AdMob served over 10.2 billion ad impressions per month, up from 1.6 billion a year ago.
Game developers know it. Backflip Studios CEO Julian Farrior said he uses its free app (Paper Toss, now with 17 million downloads generating 400 million impressions per month) to cross-sell Backflip’s paid apps and generate ad revenue. “Free impressions give you a lot of flexibility in terms of how you run your business,” Farrior explained at the recent 2010 Game Developers Conference.
SGN, iPhone game publisher, CEO Randy Breen said, “The charter of this company is free apps with micro-transactions.” He predicts the mobile market will become larger than Facebook.
AdMob shows that 80 percent of Apple downloads are free compared to 20 percent paid, while 87 percent of Android downloads are free compared to 13 percent paid. Compare this to Distimo’s numbers showing the percent of apps, and you can see an interesting scenario – the number of free apps is far less proportionate to its share of downloads.
The power of free is driving the success of mobile app marketing. Users continue to demand apps with value – be it time-killers (entertainment) or time-savers (information) – and the companies that can figure out the way to leverage this monumental demand while promoting their mobile apps for free will be the long-term winners.
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