Freemium: How It Works on Mobile for More Than Just Games

Hi, I’m Darya Trushkina. My official job title is SVP of business development, and I work with both Game Insight and NARR8. I’d like to weigh in on monetization in mobile apps: specifically, a few best practices for monetization, and more importantly, how these lessons can be applied to many different platforms and genres of apps, even outside of gaming.

We’re probably all familiar with what’s happening in mobile gaming—specifically, the shift from premium, for-pay game apps to free-to-play apps. As of late last year, our friends at App Annie pointed out that on iOS, freemium apps generate 69% of all iOS revenue, while they generate 75% of all revenue on Android. As it happens, the companies that I work with produce free-to-play apps, so I’ll be focusing on monetizing for free-to-play.

Having worked in mobile gaming for some time, I’m very familiar with both types of monetization models, and I strongly recommend freemium over premium. The advantages are crazy! To start with, free-to-play lowers the barrier to entry in an increasingly crowded mobile marketplace, where premium apps are often engaged in a "race to the bottom" style of price war. Many savvy app shoppers wait for sales or “this-app-is-free-for-one-day-only” promotions, but waiting constantly for the day when the one app you’re holding out for goes on sale, well, let’s just say this isn’t necessarily the best user experience. Free-to-play removes all this frustration, and properly structured IAP allows users to purchase content and features when they want for the sake of convenience, rather than being an obstacle to enjoyment and engagement.

As it turns out, this model can be applied successfully in other apps beyond games, if these other apps can provide the necessary ecosystem—an environment with a strong and constantly-updated body of content that continually keeps users engaged, a large and varied audience, and strong social sharing features that both encourage viral sharing to acquire new users while also encouraging users to share their experiences with (and show off their achievements to) each other. As you can imagine, this works best with an app designed holistically, from the ground up, that not only uses this business model, but also with this type of broad content offering and audience appeal. In other words, this type of business model will work best for apps that aren’t entirely (and cynically) about the business model, but rather, properly put the horse before the cart by including important concerns like user engagement, user experience, and content mix into planning the initial business as well.

Here’s a case study of a non-game app that’s doing very well for itself with a freemium business model. NARR8 is a free app for iPad, Android and most recently, Kindle Fire, and is a digital publisher of motion comics, interactive novels, and educational nonfiction series. At launch, its entire library was free to download, and free to read for the first five months on the market and accumulated more than 800,000 users. Recently, the app implemented a freemium monetization model by introducing a virtual currency of in-app tokens that users can then spend to unlock new episodes and features, such as continuous autoplay. Users actually unlock tokens on a regular basis simply by opening the app on a daily and weekly basis—much like the appointment-style daily login bonuses you see in popular free-to-play mobile games, based off the system clock on the user’s device. (And yes, like with other such games, there are times when users attempt to game the system by adjusting their device’s system clock, which is why we have our support staff trained to pick up on suspect tech support requests along these lines.) By giving users the option to earn tokens for free over time by simply opening and using the app regularly to read episodes versus purchasing them to unlock extras and features, NARR8's freemium monetization actually works in harmony with its content structure, because freemium monetization is all about acquiring, then keeping, a huge, varied audience from which you can monetize at least a small portion on a regular basis, so its goal, like the goal of most successful free-to-play mobile apps, is about acquiring that massive userbase and providing compelling reasons to monetize.

So how can you create this kind of environment with an app that’s not about gaming, but rather, about offering eReader content such as interactive comics and novels? For starters, acquiring and keeping that audience for your app is all about building up a regular pipeline of fresh, compelling content to deliver to users to keep them engaged long-term. In the case of games, this approach obviously takes the form of offering compelling “end-game” content for veteran players. In the case of non-game apps like NARR8, this means providing engrossing serial content that grabs and holds users’ attention with intriguing storylines that unfold in continuing content updates to keep them coming back to your app for more. More-engaged users who play your game—or use your non-game app—longer will generally be more engaged and more receptive to opening their wallets.

We’re probably all familiar with the concept of how freemium games typically embrace large, diverse audiences to whittle out a customer base that often ends up being a relatively small percentage of the total audience. Sort of like the 80/20 rule, but with numbers closer to 90/10 (on up). By offering a highly diverse product offering, we can reach wider, more-diverse, and ultimately larger audiences with a single app. Like all freemium customer bases, members of each audience will have their own preferences, many preferring to use the app free of charge and accrue virtual currency through regular use, while some will prefer to pay an optional fee to purchase more in-app currency to unlock content and features faster. This is especially true in a highly social environment in which some of these power users may feel more inclined to pursue faster advancement to show off their achievements to friends. More variety and more-engaged users in a more-social environment also means an environment that’s more conducive to users monetizing through freemium...after setting yourself up for success by building a content offering with varied, regularly updated content that will draw in and continuously engage a substantial audience, of course!

As you can see, the freemium model isn’t just for games—it can work well with other free-to-use apps that offer content that appeals to broad audiences, particularly those with strong user engagement, such as ebook and other reading apps.