Freemium – is it the only way to go for mobile apps? What do you think?

About a year ago, I spoke to the CEO of an app making platform, a very good one, and said that we had about 18 months until the paid for app market started to dip.

It looks like I was wrong…. we only had 12!

As the average revenue of paid applications generated in 2012 is 27 percent lower than in 2011.

So as I predicted the only real way forward is freemium with a twist… just like with the web some 15 years before. As despite significant differences in average revenue per paid app between the top five storehouses, the downward revenue trend is consistent across all platforms, so this is an industry / cultural moment rather than a trend in just one appstore.

So with paid app revenues declining, developers and publishers are embracing a host of alternative business models, most notably in-app advertisements, in-app purchases (my personal favourite especially in gaming) m-commerce (for example, selling pizza via an app), bundles with hardware or services (like a free app bundled to a health-tracking sensor), efficiency gains for internal and external processes (e.g., a service technician app) and cost reduction (like personal health record apps enabling patients and doctors to record medical treatments, eliminating double-examination costs).

“The shift in revenue models also means that mobile applications will resemble more and more traditional applications that we know from the enterprise application market with common business models,” research2guidance adds.

The average selling price of all downloaded smartphone applications (both free and paid) will fall to just 8 cents by 2017, according to a Strategy Analytics forecast issued late last year. Paid apps in Apple’s App Store currently average $1.60, reported app store analytics firm 148Apps.biz. But with advertising and virtual goods sales driving a greater percentage of mobile app revenues, Strategy Analytics stated free apps are on pace to represent more than 91 percent of all downloads by 2017.

Ahh we are back to sanity – even in mobile marketing – where you give away a free part of something and get a relationship with the customer who then buys more 😉

I was out by 6 months – but it’s good to know that I was right 😉

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