Freemium Revenue Surpasses Paid App Revenue Among Top 100 Grossing Games, Flurry Says

Free-to-play games that earn revenue through in-app purchases have made a distinctive rise up iOS grossing charts over the past half year.

Now the free-to-play revenue model is earning more than the paid app model — at least among the U.S.’s top 100 grossing iOS games — according to mobile analytics and monetization company Flurry.

Jeferson Valadares, who became Flurry’s general manager of games after leaving Playfish, looked at the top 100 grossing games last month and in January. He analyzed each app’s revenue model (e.g. whether the game was given away for free and whether consumers could purchase virtual currency in the app.). Then, because Flurry tracks about 90,000 apps, the company can estimate revenue by chart ranking.

Using those two pieces combined, Valadares estimates that nearly two-thirds of the revenue earned by the U.S.’s top 100 grossing iOS games came through the freemium model, up from just under 40 percent six months ago.

The most prominent developers using this model include companies like Sequoia-backed Pocket Gems, Capcom’s studio Beeline Interactive, Storm8, Andreessen Horowitz-backed TinyCo, Playforge, and Glu Mobile. EA has mostly stuck to a paid app approach, although rumors of a PopCap acquisition might move the company into freemium mobile gaming in a serious way. Even Rovio Mobile, which catapulted to success by charging $0.99 for Angry Birds, has been using virtual goods like the Mighty Eagle, which helps players pass levels. The biggest social gaming companies like Zynga and Crowdstar are also starting to make headway into the grossing charts through free-to-play games.

Like in the social gaming world, only a small number of players — between 0.5 and 6 percent — will actually pay for virtual currency in a game.

“In the old paid world of video games, success was measured by multiplying the number of units sold by the unit price, the traditional retail model,” he wrote. “In the new world of digital games distribution, it’s all about how many players you can keep engaged with your free game, followed by how many compelling spending opportunities you can provide them.”