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What are «Freemium» applications and how do they work?

What are "Freemium" applications and how do they work?

Freemium applications are not new

Freemium software is a form of money generation that keeps certain features behind a payment screen, whether it’s a subscription or a one-time payment. While the use of this term has recently become commonplace, this business model as a way to monetize digital goods has existed for a long time.

The practice of pricing for additional features dates back to the growth of shareware and its variations. For example, test applications, such as older versions of Adobe Photoshop or Internet Download Manager, worked only 30 days without a paid license.

There were also crippleware software applications, which severely limited what you could do if you didn’t pay. Video editing tools would often block entire toolkits, impose time limits, or add huge watermarks to your videos.

However, with the growth of mobile applications, freemium applications have become more widespread than ever. In fact, these might be the most common type of smartphone applications.

Freemium applications are everywhere

A developer can generate money from a mobile application in several ways. The first option is to charge an initial fee. However, with the competition on the Play and App Store, it’s becoming increasingly difficult to persuade someone to buy an app they can’t try first.

Ads are another way to make money from an app, but most people get annoyed. They are also not the most reliable way to make a profit.

This is why many developers choose the third option: a freemium pricing strategy. Almost all types of applications, from productivity tools and weather widgets to dating applications, have a built-in freemium model. Even some photography applications such as popular VSCO camera app for iPhone, I charge a fee if you want to access special filters and styles.

Spotify subscription options.

Spotify also has levels free and premium. With the free version, you’ll get basic music streaming with ads. However, if you pay the monthly fee, you get things like offline music downloading, ad-free listening, and high-quality streaming.

most of them cloud storage services, such as Dropbox, OneDrive and Google Drive, they also follow the freemium model. You will get a basic amount of free storage that you can supplement with extra paid space.

The freemium model is not limited to consumer software – it is also used by top business services such as Slack, SurveyMonkey and Asana.

Increase in-app purchases and free play

Much of the growth in freemium applications can be attributed to in-app purchases. All Play and App Store mobile apps have the option to sell additional features. Most applications that use ads have an in-app purchase that allows you to completely remove ads.

Because they are connected to your Google or Apple account, you can complete an in-app purchase at the touch of a button. This is why many developers use something called a «dark model» to ask you to spend money. This strategy includes pop-ups that require you to unlock additional features the first time you open an incredibly (and deliberately) intrusive application or ad.

In-app purchases are especially prevalent in «free» video games, which often follow the most blatant money-making practices. Unlike apps that block specific features behind a pay wall, games often have microtransactions. They repeatedly try to make you spend money on certain items, characters, or coins in the game.

There have been several incidents in the news of parents who discovered that their child spent an incredible amount of money on items in the game. Some mobile games even limit the number of games you can play in a given period of time, unless you pay.

The future of Freemium

It is unlikely that the freemium model will be phased out soon. It allows developers to access a much wider audience for their applications and reduces the frequency of piracy. And some people are perfectly happy with the use of ad-supported versions of freemium applications. Others like to benefit from a free trial of some applications before purchasing additional features.

Either way, to be a demanding consumer, it’s important to know where your software comes from and how your developers make money.