This is exactly the reason why Spotify wants to add a free streaming tier to its mobile app. And, why they’re willing to pay a very handsome price for the privilege. According to a recently-released study from Canalsys, a majority of the top-grossing apps now employ a freemium model, and that number is likely to grow. “There is a tangible shift from the pay-per-download to the freemium model for app monetization,” the report affirmed.
“The freemium model will become the most widely employed app monetization model… over the next 12 to 18 months.”
Specifically, Canalsys analyzed the top 300 iOS apps in the App Store, ranked by revenues earned. Not only were a majority freemium, but a very large number were also solely financed by volunteer, in-app purchases. “The top 300 free iPhone apps included, on average, 38 percent that were monetized solely or in part through in-app purchases,” the report relayed. “Of the top 300 grossing iPhone apps, 58 percent on average were freemium apps, while a further 13 percent were paid-for apps offering additional in-app purchases.”
Right now, the largest categories employing freemium were games, news, and social networking, though this is quickly bleeding into related areas like, e-hem… music. In fact, Canalsys noted that traditionally paid-for categories like video and photos were increasingly considering freemium plays.
Unfortunately, paid-only mobile platforms from Spotify, Rhapsody, and Rdio probably have little choice but to embrace freemium. The reason is that despite all the advantages of freemium — customer choice, try-before-you-buy, endless buying options — most fans now expect free access, whether or not they plan to upgrade. And it’s entirely unclear if that will ever hold water financially — for Spotify, Pandora, or anyone else.
Written while listening to Frou Frou. Image from Kevin Krejci, licensed under Creative Commons Attribution 2.0 Generic.