Free vs. Premium? How should one define app pricing strategy?
According to a recent report on Apple App Stores, free apps with in-app purchases (IAP) generate the majority of the revenue in the app stores.
China and Japan are leading when it comes to the largest revenue share from the freemium business model, with a record of 94% in January 2014. Larger revenue shares from the paid business models are mainly based on apps from categories like Productivity, Navigation, or Education, the report by Distimo said.
In January 2012, in-app purchases from free apps generated only 46% of revenue in the US Apple App Store. In January 2013, this share had increased to 66%, and in November it reached 81%.
This growing development is an indicator of the success of the freemium business model in the region. In January 2014, the revenue share of free apps with IAP was at 79%.
The average revenue per download (ARPD) is another important metric for developers when analyzing the performance and monetization of their apps. The ARPD is calculated by dividing the sum of all revenue generated by the sum of downloads of all apps.
The countries with the highest ARPD were mainly in the APAC region, with Japan emerging as the leader. On average, one download is worth $5.32 in Japan. China on the other hand seems to be an exception, with a relatively lower ARPD of $0.92.
When comparing the ARPD of the two iOS devices, the ARPD is relatively higher on iPad.
In all the ten countries surveyed, the ARPD for ‘Jewel Mania’ ranges between $1.44 in France and $6.65 in Australia in the same time period, Q4 2013. This trend shows that the ARPD can even differ largely for the same app among different countries.
In some countries though, the ARPD for the free in-app portion is pretty similar to the ARPD for the paid in-app portion, as seen in France or Russia. In China, the ARPD for the in-app portion from paid apps with IAP is even higher than the ARPD for free apps with IAP. This trend indicates that Chinese users are less opposed to purchasing further in-app features after they already paid for the initial purchase.
This shows that paid apps with IAP monetize overall better per download than free apps with IAP.
In Q4 2013, iOS CPI rates for the selected countries ranged between $0.90 in China and $2.59 in Australia. The average CPI among all countries was $1.31.
When comparing the ARPD with the average CPI data, the five markets that show the most revenue potential were Japan, Australia, South Korea, United Kingdom, and the United States.
Japan promises the largest revenue potential: analyzing this sample, an ARPD of $6.34 is possible. With an average CPI of $1.86, this results in a potential profit of $4.48 per download.