Free-to-play overtakes premium games revenue in the App Store
The latest blog post from Flurry reports that free-to-play revenue has overtaken premium revenue in Apple's App Store. I think this was pretty much a guarantee at some point in the future, though it's happening probably a little sooner than most expected.
Free-to-play gaming, where a game download is free and users spend money on extra content or convenience items using in-app purchases, has been growing on the App Store in a big way. Traditionally, premium app sales (in which a one-time purchase up front pays for the app download and any included content) have been the real money-makers. That's no longer true, however: in Flurry's analysis of the top 100 grossing apps, 35 percent of the revenue is now coming from premium games, with free-to-play titles making up 65 percent. Note that this analysis is for games only, but considering games make up most of the App Store's business nowadays, it's easy to expand these numbers out to the Store in general.
What does this mean overall? It's not a new direction; we've already seen free-to-play titles get hugely popular on Apple's App Store and other mobile platforms, and that trend will definitely continue. But even with the success we've seen on free-to-play, developers are still only monetizing a small percentage (usually even less than a full percentage point) of their audience, with small amounts of customers basically paying for everyone. The next big advancement in this business model will be a game that figures out how to monetize a larger audience while still keeping that gigantic group of players that dives in on F2P titles.
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