72 Percent of iPhone App Revenue Comes from Apps Featuring In-App Purchases

Distimo, the app store market tracking service, continues to reveal the importance of the freemium model. Free app downloads have grown 34 percent since 2010 in contrast to paid app downloads which grew by 7 percent. In the past the firm also reported a 10x growth in freemium revenue from top releases on the App Stor. More after the jump.

Distimo, the app store market tracking service, continues to reveal the importance of the freemium model. Free app downloads have grown 34 percent since 2010 in contrast to paid app downloads which grew by 7 percent. In the past the firm also reported a 10x growth in freemium revenue from top releases on the App Store. 

72 percent of iPhone app revenue is now coming from apps with in-app purchases, even though only 4 percent of apps on the App Store use it. See the graphic below.

It’s no surprise that consumers are flocking to free. According to one of Distimo’s presentations, the average selling price of most popular paid games has begun to fall. Earlier in June of this year, 52 percent of revenues from top iOS grossing games were generated from freemium titles. Free-to-play has been the dominant business model on Facebook and we are seeing a large shift in game developers also employing a similar model on mobile.

The Guardian also released a report tracking the sales of top grossing iPhone games in the UK that showed about 50 percent of them are freemium releases. What else is interesting is that over half of paid releases also have IAPs. In all, 58 different companies have games in the top 100, with TeamLava coming out on top with five games in the line-up.

Many in the industry are arguing that the freemium model is killing the art of game design as the developers are optimizing game play for monetization vs the quality of play. Although there remains room for ‘premium’ experiences on devices, the price of free is too compelling to pass up.