Google Announces Freemium Victory at I/O. Now What?

Google Announces Freemium Victory at I/O. Now What?

Google I/O had its show floor cleanly stolen by Glass, but the real sales figures are in an unintended psychological phenomenon called upon by in-app purchases. Google reported an increase in revenue growth of 7x for in-app purchasing and 2x for subscription models. In-app purchases and subscription models are services that’re a recent invention. So, why are they increasing so quickly?

I’ve broken down some lessons to be learned from Google’s announcement below.

Evangelism Is a Process

The name ‘freemium’ was originally a derogatory term. It’s an idea based around ‘90s computing, in that a developer was already at work on their next piece of software right after releasing the final version of new software. With cloud computing, mobile devices, and automated updates — it’s better to create something and then iterate on it while you build your audience. If your app is impressive enough to share with friends, then your marketing budget is basically covered by the virality of happy customers. The idea, then, is to provide a version of your app that has most of the features that everyone wants with a small paywall/subscription fee that’ll keep fans of your product funding its next iteration.

Build a Platform, Not a One-off

Creating a solid app means that people are going to use it. That much is clear. The question, however, is how to increase the lifespan of your app within the top sales charts. Minecraft is the big-name exception to Google’s new rule. There are only two iterations of Minecraft: A free demo and the $6.99 full version of the app. Minecraft is one of the most popular games in the world, and one of its biggest competitors is a free game called Temple Run. The concept behind Temple Run is simple. You progress through the game and collect coins. Players are able to purchase coins to buy powerups, characters, and other unlockable features. Money spent in Temple Run is simply an easier way to progress the natural flow of the game. An interview with one of the developers indicates that the in-app purchases for Temple Run far exceed the amount they’d have made otherwise.

Make Purchasing a Subscription Reasonable

Internet radio apps like Pandora and Spotify are generally totally viable as free apps. They both function about the same without paying, but earn income from their free users through ad revenue. Pandora offers a $36 subscription fee that increases a user’s ability to skip songs they aren’t in the mood for, removes all ads, and offers the user higher quality audio. Build your app around usability, then develop systems that power users will find useful.

The freemium model is coming closer and closer to the norm. It fits the new and unique needs of mobile users while also offering creators the chance to develop divergent iterations of their products. Increasing the lifespan of your app is as easy as building something that most people will enjoy for free, but specific power users will be happy to pay for.

Have a freemium app that you love? Think that in-app purchases are the devil? Take your concerns to the comment section.

Matthew Toren
 

Matthew Toren is a serial entrepreneur, mentor, investor and co-founder of YoungEntrepreneur.com. He is co-author, with his brother Adam, of Kidpreneurs.org, BizWarriors.com and Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right (Wiley).