Commentary

Do Apps Want To Be Free?

TomTom

A recent report from ABI Research predicts mobile app downloads will hit 5 billion in 2014 (up from 2.9 billion this year) and that Android's share of the market will grow from 11% to 23%.

Despite the proliferation of apps, the firm expects sales to start declining in 2013 as free or ad-supported versions of "must-have" apps undercut the paid ones. It cites Google's free turn-by-turn navigation app as a early example of the trend.

The report doesn't seem to see much promise in the freemium model, by which developers can offer a free version of an app and charge for premium content or greater functionality. Apple encouraged that approach earlier this year when it began allowing iPhone developers to add e-commerce features within apps to help monetize their offerings.

The freemium model appears to be working for the iPhone's popular music-identifying Shazam app. After launching a paid version of Shazam in the App Store in November priced at $4.99 while limiting the free equivalent to five uses a month. PaidContent reported today that Shazam Encore had risen to No. 2 among paid music apps on iTunes and that sales had surpassed the company's expectations.

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Separately, iPhone app developer Tapulous--the startup behind the "Tap Tap Revenge" game series-- told Reuters Monday that sales are approaching $1 million and the company is profitable. Pricing on the Tap Tap apps ranges from free to $4.99 for custom versions featuring music from bands like Metallica and Dave Matthews Band. Tapulous makes money by charging for some games, ads and selling songs via games.

At least a couple of flagship iPhone apps are fending off free competitors with their own free versions, while upselling premium ones.

ABI might point out that GPS-maker TomTom recently cut the $100 price of its iPhone app in half as a result of Google launching its own free Android counterpart. GPS capability may eventually just be another commodity feature. But there aren't likely to be many perfect or near-perfect replacements for many popular apps, or companies like Google with the resources to give away technology to boost other parts of their business.

So with the continuing growth of mobile apps, and a variety of prices and business models evolving to support them, it's hard to imagine app-generated sales won't increase accordingly in the coming years.

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