Mobile

Money for nothing: Free apps pay off for 1 out of 3 top iPhone developers

About a third of the top grossing apps in the Apple App Store are now making their money through the sale of virtual goods within the application after being free to download, according to research done by tech blog GigaOm.

The free-to-play model has so far served as a good way to entice users with free apps and then make money off the sale of virtual goods. Apple finally caved to developers and created a system to allow iPhone, iPod Touch and iPad users to make purchases from within apps last fall. The design allows developers to create a free app and then get the user to purchase a very cheap virtual good, such as a better weapon in a game. It then becomes much easier to convert a non-paying user into a paying one.

Freemium applications are making a good bit of money. In January, mobile analytics firm Flurry said that the freemium games it tracked generated revenues of $9 per user per year, on average. In June, that number had risen to $14.66 per user per year. Previously, these games were generating around 99 cents to $1.99 per user per year. 34 of the top 100 apps are free, but make their money through in-app purchases of mostly virtual currencies as well as other premium features, according to GigaOm’s report.

Apple takes a 30 percent cut of all purchases made within applications. That’s the same amount that Facebook, another large host of social games (including Zynga’s Farmville), charges its game partners.

Apple’s App Store now has around 300,000 apps for sale and for free download. And the App Store is growing by around 1,000 apps every day. The Android marketplace, which has applications for phones running on Google’s Android operating system, only has around 113,000 applications according to some metrics.

Score another one for social games developer Zynga, which first brought the freemium model to the forefront as a significant source of revenue for games and other applications. Its games have become insanely popular, and the company is now worth as much as Electronic Arts — one of the largest publishers in the world — by some metrics from its virtual good sales alone.

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