When Freemium's Good, It's Very Good and When It's Bad, It's Horrid
Dec 19, 2013 5:00 AM PT
When I read a new report on app store trends for 2013 recently, my most irritating fear was confirmed: The freemium app business model has not only won the app sales model, it has handily crushed the paid app model -- squeezed it down into a tiny sliver of relative revenue.
The results are so tilted toward free apps with in-app purchases as a business model, in fact, that even more new apps will apparently be written entirely with the freemium model in mind. That's why I'm sitting under my desk and rocking back and forth as I type this sentence.
Who was the messenger with this lousy news? Distimo, a global app analytics company that tracks more than 280,000 apps and 3.2 billion downloads per quarter. Distimo's 2013 Year in Review report contains a variety of insights into downloads, app leaders and revenue volumes around the world, but the part that really caught my attention was the clear reign of the freemium model.
A Slim Slice of the Pie
Among the discouraging figures from the report are that revenue based on in-app purchases increased from 77 percent to 92 percent in the Apple App Store. Also, revenues based on in-app purchases increased from 89 percent to 98 percent for Android apps on Google Play.
When Distimo put this data into a pie chart, paid app and paid apps with in-app purchase options resulted in overall revenue that resembled a slim slice of pie compared to free apps with in-app purchases.
Namely, in the U.S. at the Apple App Store, paid apps brought in just 4 percent of all revenue, while paid apps with in-app purchase options brought in another 4 percent, for a total of 8 percent. In Japan, those figures each dropped to just 1 percent, and Distimo indicates that the freemium model is even more successful in Asian countries than in western markets.
I had no idea the numbers were this bad.
What's So Wrong With Freemium?
The great thing about free apps is that users can download them and start using them to really see how they look, feel and work. Freemium apps have functionality that works, and users can figure out if they want to really start using the apps for a long time -- or delete them and keep looking for something else, with no loss of money.
Isn't that cool?
Yes, yes it is.
The problem I have with freemium apps -- and in particular, freemium games -- is how nefarious the apps have become. Let's consider games, which bug me the most because they prey on the least savvy and weakest of us all: kids and people with highly addictive personalities.
All too often in freemium games, kids will download the game and then start playing. They are having fun and the game is fantastic. In all likelihood, the developer has worked in a series of minor challenges and rewards to start creating actions (cues) associated with rewards (pleasure response) that train a kid to not only enjoy and like a game ... but become addicted to it.
Like drugs, the initial pleasure response comes from minimal stimulation; also like drugs, however, if the games scale with bigger and better rewards and actions, that can only be satisfied with in-app purchases. Suddenly, kids (and addicted adults) are paying money to progress into the game and even "win" it. In effect, they are powerless to do otherwise.
Hyperbole? No way. What's the first step in the original 12 steps of the Alcoholics Anonymous program? Admit that you are powerless over alcohol and that your life has become unmanageable because of it.
Do you know people who waste an astonishing amount of time on their iPhones? Who have a hard time engaging with the world around them if they aren't holding their iPhone? People who have forgotten how to unplug and have fun without constantly looking at a screen?
Now imagine a world where small children and teenagers always have screens ... and most every app is free -- not just free, but programmed specifically and intentionally for maximum enticement where suddenly it's normal to string you along a series of purposely addictive steps until it seems natural to tap and pay, tap and pay, tap and pay ... in order to "win."
That pains me. It's bad enough that teenage girls are losing their ability to bend their necks up to look and see the sky. As freemium reigns supreme, it's just going to get worse.
Why Is Freemium Evil?
Freemium is not exactly evil -- it just throws open the closet door. The problem I see is that when game developers start purposely using the freemium business model to create apps, it trains their creative minds to think in a certain way. That way is all about inviting someone into the closet and keeping them there, feasting on their soul as long as there is an active credit card still connected to an iTunes account.
OK, that was a little hyperbole, but hey, it's not so far from the truth: The success of freemium will inexorably change how developers approach the features and functionality that they build into all apps, not just games. Instead of buying an app and using it, they'll be created in such a way that features will be offered and withheld in manners of dubious clarity and honesty.
If the app provides true value, if it's up front in what is free and what is not free, if it doesn't implement underhanded, confusing tactics that trick or bait-and-switch users into buying things they did not intend, then freemium is cool.
There Has to Be a Better Way
I wish I could say I had a better solution than the freemium app model. I don't. When it's done well -- when users get to really dive into an app and understand its value, if not get a constant small-but-free taste, then buy more when they really appreciate it -- that's good. I like that.
But the bad -- how can we deal with the bad?
Even if Apple elevated apps that were simply paid, I don't think that would change the freemium landslide. A brief full-access trial before purchase might be workable -- and preferable -- but I doubt developers are willing to turn it into a standard practice en masse. Subscription models, I fear, face an even bigger uphill battle these days.
The only thing I think we can do right now -- and teach our children to do -- is to be utterly ruthless with reviews on sneaky tactics and poorly implemented freemium tricks. Let others know. If buttons are placed to encourage accidental in-app buys, get ruthless. If apps imply one thing but deliver another when you actually buy, get ruthless. If apps start out fun but become obnoxious, say so. Get ruthless.
We have to train our game developers to take pride and care in the product every step of the way. Only then will a "market voice" matter. To me, the freemium business model is not a game. It has reach and consequences.
Personally, I rarely review apps through the App Store -- I tend to write only about the apps I appreciate most -- but now I'm thinking I should review them. Heck, it might even be my duty as an iPhone-toting citizen of the world.
If bad (but always honest) reviews hold power, then it's time for all of us to wield them whenever we can.