You wouldn’t expect free applications to make a lot of money for developers, but it seems they are reporting that one third of the top grossing iPhone apps are actually free applications.
Out of the top 100 grossing iPhone apps, 34 of those applications are free apps. So, how do the developers make their money? Through in-app purchases, and it seems this method is becoming a success for developers.
How In-App Purchases Work
How this works is that developers give the initial application away free to iPhone users, whether it is a game, a social media app, 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 model is often referred to as the “freemium” model, combining the words “free” and “premium.”
For example, in a free game app, users might be able to buy virtual currency, extra lives, or special items that enhance their gaming experience. In a social media app, users might pay for premium features like additional filters, ad-free experiences, or advanced analytics. Utility apps might offer advanced functionalities or additional storage space for a fee.
Benefits for Developers and Users
This sort of way of making money off applications is good for both developers and customers. For developers, it provides a steady stream of revenue as users make purchases over time. This can be more lucrative than a one-time purchase fee, especially if the app is engaging and keeps users coming back. For customers, the freemium model allows them to try out the application without any initial cost. If they like it, they can choose to purchase more features, making it a win-win situation.
Moreover, this model encourages developers to continually update and improve their apps to keep users engaged and willing to make in-app purchases. It also allows for a broader user base since the barrier to entry is low—anyone can download and try the app for free.
Have a look at our article on the difference between the iPhone 4 and iPhone 4S, and also make sure you check out our iPhone 4S review.
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