Whether a game is free (with ad-based monetization), free-to-play (while offering in-app purchases) or paid is a matter of publisher or developer choice and should be based on your business model. Will you go down the F2P route of creating an amazingly addictive game that’s free to download but relies on in-app purchases to make a player more competitive and enhance the user experience?
Or push the risk to the user by charging for the install itself? The most profitable business model for games, and (surprise, surprise) the most popular one amongst publishers, has always been free-to-play (F2P). Mobile games publishers and developers tend to follow the money, after all. Toe the line of being addictive and enjoyable, rather than frustrating players, and the free-to-play model has big potential.
Free-to-play games are plentiful and high-performing
As we presented in our App Store Stats Bonanza post, when PocketGamer released their data on on App Store price distribution in August 2014, they reported that two-thirds (66.81 percent) of all apps available in the iOS App Store were free.
On top of this, according to Distimo data from November 2013, around 92 percent of all revenue from the iOS App Store originates from free-to-play apps with in-app purchases, or ‘freemium’ apps. According to App Annie’s Portable Gaming Spotlight from September 2014, games account for 40 percent of all downloads in both the iOS App Store and Google Play. Games is also the highest-earning app category, due to their addictive and social nature. Even though only 2.2 percent of free-to-play users actually pay, games constitute the largest part of this revenue.
Free-to-play model is an effective games marketing tool
Why are free-to-play games so successful? Because they draw users in. The low entry barrier entices players to check a game out, since they have nothing to lose. It’s risky for the publisher, in a way, because the success of the game relies on how engaging and entertaining it is to play. But once they know they like a game, a percentage of users will become hooked enough to want to unlock more features or get ahead in the game; that’s when they will make their first purchase. Typically, free-to-play games offer low conversion rates, with a minority of highly engaged users, but the total addressable market is huge. Free-to-play and free games tend to attract more downloads. The top 10 apps of 2013 worldwide in terms of downloads are all games, and all of them except one, Pou, are also free to download. In terms of the top 10 grossing apps worldwide, every single one is a free-to-play game.
Free-to-play games and LTV optimization
Free-to-play and paid apps should be considered as two completely different products. Free-to-play games have multiple pricing points (such as unlocking levels, purchasing objects and weapons and so on), less abrasive advertising and shift the focus to high LTV user acquisition, calculated over a mid-term period (180 days) by analyzing early behavior and demographic characteristics. An effective, LTV-optimized user acquisition strategy will increase conversion rates, with the first job of publishers and developers being to make a great game in terms of content, user experience and design.
The freemium business model works
Most of the revenue made in the App Store comes from freemium apps, especially the Games category, which, from January to November 2013, saw 90 percent of revenue generated by free-to-play apps offering in-app purchases. It probably works both ways; the revenue is high because there’s a large amount of free apps available, and there are a large amount of free apps because the potential revenue is high.
What do you see as the benefits to publishing and playing free-to-play games?