You wouldn’t expect free applications to make a lot of money for developers, but it seems they are are GigaOM are reporting that one third of the top grossing iPhone apps are actually free applications.
Out of the to 100 grossing iPhone apps, 34 of those applications are free apps, so how do the developers make their money? Through in app purchases, and its seems this method is becoming a success for developers.
How this works is that developers give the initial application away free to iPhone users, whether it is a game or a social media or a utility app. Then those who have downloaded the free app, can enhance it by purchasing more features or add ons via in app purchases.
This sort of way of making money off applications is good for both developers and customers, as the customers get to try out the application, and if they like it they can purchase more features.
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