A brief history of app pricing, and why most apps are free

July 19, 2013
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We might not like advertisements, but, according research conducted by Flurry Analytics, we supposedly hate paying for apps even more.

    Google Play Store 645px

    We had a look at some of the app purchasing habits and statistics regarding the Google Play Store and Apple’s Appstore the other day, so to continuing in that vein, Flurry Analytics has done a little more digging into just why mobile apps are priced so low, often to the point of being free.

    For this research, Flurry Analytics looked at preferences for free content verses ad subsidized apps over a four year period, reviewing nearly 350,000 different apps. Interestingly, as much as we may hate seeing ads take up our valuable screen space, Flurry found that even when faced with the choice of ads or paying just $0.99, consumers overwhelming chose the free apps.

    Sadly, the research didn’t focus solely on Android, but the company’s insight into the iOS market place, which has been around a little longer, reveals a fascinating trend. Apps are becoming cheaper, and more apps than ever are now free to install without an upfront purchase. Between 2010 and 2012, the percentage of free apps fluctuated slightly, but there’s been a big jump up to 90% this year.

    Chart_1-resized-600

    On top of that, the ratio of the most expensive apps, priced $3.99 or above, has shrunk since 2010, suggesting that there’s little appetite for even moderately expensive apps in the mobile market. The research also found that in instances where paid and ad supported apps were available, most people would opt for the ad versions. Furthermore, consumers were also willing to settle for different apps, in order to avoid paying an upfront cost.

    Looking at us Android users, Flurry’s research supports the often made assumption that we’re a little more reluctant to open our wallets. As of April 2013, the average price of an Android app, including those which were free, is significantly lower than that paid by iPhone and iPad owners.

    chart_21-resized-600

    You could look this two ways I suppose, either we’re just highly frugal, or simply have a higher tolerance for in app advertisements than our Apple friends are. Flurry also tries to put this down to Apple product owners typically being more affluent, which might hold some truth when you look at the range of budget Android products on offer, but it’s certainly not a hard fact.

    So how did we come to this arrangement, surely app developers have something to gain by charging up front prices?

    Flurry Analystics also managed to get its hands on the varying prices of apps over time, and the data shows that there’s been lots of price experimentation going on over the past few years.

    FLR130701-PricingExperiment_Increases_v4

    Rather than simply setting their prices to match or undercut the competition, an increasingly large number of developers have been testing to elasticity of their prices, and have found, through experimentation, that their apps sell best when they are cheap or free.

    There’s certainly overwhelming evidence to suggest that as much as we dislike ads, the vast majority of users would rather suffer them than stump up the cash in advance, regardless of whether they own an iPhone or Android handset. Flurry also makes an excellent comparison with television and radio, where advertising is almost universally used to remote, or at least subsidize, the costs of content.

    Free apps are certainly here to stay, and we may well see even more of them in the future, perhaps with advertising being used in more ingenious ways to help keeps costs down for the consumer.

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    Comments

    • Grman Rodriguez

      I’m one of those who rather ads (specially since I don’t have a credit card)

    • Deo Reyes

      The time for refunding the app is too short. 15minutes. Most people would experience that an app is great/BS by at least using it for more than 15minutes. Based on my experience and a lot of others.

      • eolly

        Oh god I just had a similar discussion on G+. I agree the 15 minute window is not enough time to evaluate the app. However there is another 48 hour window that requires you to request a refund. The amount of fake apps is why people do not want to spend the money on apps. That is something always left out of these type of articles.

    • Misti curia

      IOS has so many better apps :( I really think Google needs to role out easily accessible global gift cards. I feel this would have a massive impact on apo piracy

      • Bjajjull

        iOS misses so many apps. Tasker, Nova Launcher, UCCW… do I have to continue?

        • Misti curia

          OK well mostly games as utility apps and such on iOS are very limited

        • Piyush

          yup there is alternative to tasker , ifft its awesome , and for nova lanucher ios dosent need it

          • Bjajjull

            I think it needs it. I want to decide how my homescreen should be, not apple.

            SwiftKey, where is SwiftKey? I love SwiftKey, I’m so used to it I have problems with almost any other phone keyboard.
            Holo Icons or DCikonZ? I want them ikonz!
            Where’s my Trickster Mod? Goo Manager? Where’s my freedom?!?!?!?

            As you see, I’m not jealous at all at App Store.

            • Piyush

              same can be said about playstore store where are TweetBot, Haze, Paper,Iwork apps where is ILIFE app , apple even has microsoft office, etc. they are both different operating system, one doesn’t let you mod because it want to be simple to use , thats why swiftkey cannot be implemented , apple is closed ecosystem its advantages are different than open.

            • Bjajjull

              I don’t need Office I use Google Drive. I don’t use twitter but I know there are hundreds of twitter clients for Android.
              Haze? Don’t need it, there are so many good weather apps in Google Play Store. If i wanted it as a widget I could just make it with UCCW. Paper, lol, I could find at least 10 apps like that one. Lol, don’t need iWork, got Google Drive. iLife? I can use the Gallery app or just download something from Play Store.

              Well, App Store has some apps great that would be nice to have on Play Store, but I would miss more apps if I used iOS than other way around.

              Btw, do you want to know why iOS is losing? It’s closed.

            • Piyush

              lol , i proved my point about ios apps , if you dont need it thats not my problem , and saying open is awesome , i will give you best example linux , android is famous because of google services and apps.

            • Bjajjull

              Andorid is the largest mobile operating system because of openess. Without other manufacturers there would just be Nexus models and those are sadly not selling so well. Samsung is the largest phone company because of Android, and they couldn’t have done that without Android being open.

      • monkeypox69

        I came from iOS to Android and I don’t see that at all.

        • Misti curia

          So did I, and I was just looking through my iOS app purchases and there’s so many apps and games not on android :(

    • MasterMuffin

      News flash: people rather get stuff for free than pay for it! That’s just weird! :P

      • nishantsirohi123

        apple makes you pay for stuff that can come as obviously free

    • monkeypox69

      Another interesting thing I read is that the majority of iOS app purchases are games, while the majority of Android app purchases are more productivity oriented apps.

      • Bjajjull

        More games are free and Android and iOS isn’t made for productivity ;)

    • abazigal

      What the article fails to mention, IMO, is the impact of piracy on app pricing model.

      Like it or not, software piracy is more prevalent on Android, all the moreso with users being able to sideload 3rd party apps. And if developers try to price an app higher to break even from a smaller pool of paying consumers, it would just encourage more people to pirate. The most feasible option is simply to flood their apps with ads, despite their deleterious impact on battery life and system resources.

      Conversely, IOS has just one extensively curated app store (with the jailbreak community remaining a minority for most part). Because it is so difficult to pirate apps, developers can safely assume that most people who access their app have legitimately paid for it. This also allows them to price their apps more cheaply, and still make a profit despite getting only 30% of the sales proceeds, precisely because there are way more paying customers. In the end, everyone wins (consumers get a great app for cheap sans ads or irritating IAPs), developers get paid more, and Apple recoups their costs for maintaining the app store.

      I thought nothing of spending $30 for iWork’s, $20 for 1password or $10 for airdisplay. To me, my ipad is an investment, and what I get out of it depends on what I put into it. I have already spent so much on my ipad and a case, what a few more dollars?

      Personally, I think this “race to the bottom” phenomenon has to stop, because it limits the quality of apps we get to see.

    • nishantsirohi123

      Lets not forget that most android apps have two versions in the market. one free with ads and second paid, with no ads and often added features.

      the whole business model of ad revenue works on the sheer number of people accessing the apps, and with nearly 80% smartphones of the world being android, the numbers are there.
      Apple’s business model is to make money with people who use their services, while google’s model is to get more people online, to have more people view their ads. as an end user, which approach shall work for u.
      Apple’s approach works in USA where people live on plastic money(now how the credit card lifestyle has its downsides is not something i should discuss on a tech forum) but in rest of the world, primarily the BRIC(brazil, russia india and china) people still are not fully into the app payment thing.
      I can say for India, the majority of the part of society that has disposable income are not the kind that shall pay for games or apps
      the section of society that care about this are students, without credit cards.
      and no matter how much an Apple user may call ads as “annoying”, the truth is unless you really get those pushing ads in notification type apps, for most part the apps from good developers(aka recommended) have ads showing up during settings and pause screen and not the gameplay

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