Tuesday, December 27, 2011

#ALGORITHMS: "Freemiums Spreading to All Apps"

The business model by which software and services are offered free-of-charge for basic features, but require a payment for advanced features, is predicted to become the norm in 2012.

The use of freemiums--in which applications are free for basic use, but payments are required for advanced features--will intensify in 2012, making it entirely possible that by this time next year all relevant iOS applications will be free in most categories. In 2011, the number of freemium applications in the top 250 at the Apple App Store topped 88 percent, according to Allied Business Intelligence (ABI Research). The freemium business model uses in-application advertising and purchases for income, a trend that ABI Research predicts will extend to 100 percent of the top iOS applications by the end of 2012.
"Freemium isn't just about monetizing anymore, it’s also about marketing," said ABI Research senior analyst Aapo Markkanen. "The threshold for consumers to download free apps is really low, so more people end up using and recommending them, which gives those apps a bump in distributors’ rankings that paid apps fail to draw."
Apple's App Store has a head start over Google's Android Market, since iOS started offering in-app purchases in 2009. Google's Android Market, on the other hand, is slated to convert to the freemium in-application purchase model in 2012.
To be sure, some categories of iOS application will continue to be paid, such as navigation applications because they require complex online databases for the street indices. Today, more than 25 percent of the top iOS navigation applications are still on the paid model. However, in some categories, such as lifestyle, entertainment and games, the freemium model has almost completely taken over the iOS application space, with only with 3, 5 and 6 percent of those applications still being paid, respectively.
Freemium cloud services are also spurring the whole mobile enterprise social-collaboration market, which ABI Research predicts will top $1 billion in 2011 and grow to $3.5 billion by 2016. Today, the number of social interactions over mobile devices is increasing exponentially, according to ABI Research, prompting cloud-based platforms to leverage their multi-modal capabilities of delivering the same content to different devices.
The popularity of these multi-modal social-media applications is fueling the expectation that cloud-based services should also offer user communication and collaboration tools. Likewise, expectation for freemium, rather than paid-based services, is also rising, allowing cloud-based services to offer their social-media tools for free to boost their ratings, and in-turn, paid subscriptions.
Further Reading