Freemium App Model
-A deeper look into monetising your app through the Freemium Model
Utilising In app purchases through the Freemium model is one of the most effective ways to monetise your app. Our previous blog outlined the best ways to monetise your app in 2022, today we aim to delve a bit deeper on the Freemium model and explore the different types of in-app purchases.
Freemium Model
The freemium model (a combination of “free” and “premium”) is one of the most popular models amongst app developers. Users get the basic features at no cost and then are offered premium features, increased functionality or additional content at a fee. The freemium model allows users to use the app for free and are then offered in-app purchases (IAPs) for additional content, premium features, digital goods etc.
One of the main appeals of the freemium model is that the free features can be used as a great marketing tool and a means to increase your user base. New users can be attracted to your app without the need for expensive advertising. The freemium model has been shown to be more successful than free trials or other short term offers – many users have become skeptical of cancellation processes and find free access more appealing.
Once you have a user base which enjoys your app, you offer them In-App-Purchases (IAPs).
The Three Types of In-App Purchases
In-app purchases are digital goods, such as additional content, premium features or subscriptions that users can purchase through the app.
Consumables
Consumable IAPs are basically a feature which will be used up and can be purchased over and over again.
These are popular in gaming apps, for example, users can buy extra lives, currencies to speed up certain game mechanics or purchase special items that will give them an edge over other players. Other examples include consumables which act like a refillable credit, such as the “Superlike” in Tinder. This item gives the user a higher chance of appearing on the other users stack.
Even though many developers are opting for subscriptions, there still is a place for consumable IAPs and they can be very lucrative if they suit your app and audience.
Non-consumable
Non-consumable are features that only need to be purchased once and allow permanent access to digital goods. Usually, each product will be attached to an entitlement which will present the user with offerings so they can take full advantage of their newly unlocked features.
Some common types of non-consumables include:
- Information packs i.e. a collection of exercise tutorials for a fitness app or recipes.
- A large one-time payment providing lifetime access to a subscription.
- Game packs with exclusive characters, items and levels.
Apple will provide non-consumable products as part of their offering of IAP products, whereas google will call them managed in-app products. These non-consumable IAPs work similarly to subscriptions, but without the requirement to track expiration dates, renewals or cancellations.
Subscription
This product will charge your user on a recurring basis. These are one of the newest IAP types in mobile platforms, although they have become a very popular model. The subscription based model can provide a consistent stream of revenue which can allow for ongoing development and scaling.
Subscriptions are supported on the App Store and Play Store. To implement this type of model, you will need to add your products to entitlements to track a user’s subscription status, which will allow you to present different products for purchase.
You can create auto-renewable subscriptions, which provide continued access to the features, content or premium features. These will automatically renew until the user chooses to cancel their subscription. If you can provide ongoing value through your app, you can justify the recurring payments. If you plan choose the subscription based model, it is recommended that you regularly update the app with enhancements or additional content.
Apps that can optimise the subscription model often include software as a service, cloud support, episodic content and gaming apps.
Analytics
Built in analytics are utilised with freemium apps to allow developers to improve the apps based on the users preferences. Utilising analytics will allow you to hone in on users preferences and provide a better user experience – increasing your success rate when scaling.
You can use this data to determine what should be free and what should be an IAP. Setting KPIs and using engagement metrics to measure user engagement and performance will allow you to really fine tune your app.
Set KPIs on things such as retention, long-term retention, funnels and revenue. For more details on KPIs and which ones are the most useful for measuring performance click here.
At Spritely, we have leaned heavily on analytics to optimize apps. This has allowed us to find exactly where users are spending their time and fine tune the app to increase overall time spent on the app. This allows a feedback loop to occur and it all comes back to user experience, engagement and monetisation.
Ongoing Innovation and Value
The freemium model is not just a monetisation strategy, but a commitment to ongoing innovation.You see, engaged users can move quickly through content and you need to ensure you have plenty on the horizon.
The freemium model will work perfectly for an app that can continue to update content, features or provide new value to users.
For example, when Dropbox launched, it was primarily a service for backing up files. As the years went on, it became a a collaboration tool, as it offered shared folders. It also provided additional features for automatic syncing and upload of photos from smartphones.
The revenue from the freemium model will allow for continuous improvement through content creation and services to provide ongoing value to users.
