iPhone app pricing model question?

Question

I have heard there has been some studies of the apple app store for the iphone. It was a comparison between having a free application supported by ad vs a .99 cent application. .99 cents seems to be the sweet spot for a lot of the smaller applications. Anyone know where those studies were done? Are people having better success with .99 cents or the free ad supported applications?

Answer 1

I personally hate when apps have ads in them.

I'd be more willing to pay a dollar than to deal with an ad every time I use it.

Answer 2

Have a look at this link:

The Pinch Media numbers show that free apps, as a category, tend to be used 6.6 times more often than paid apps (this figure incorporates both the increased download popularity of free apps and also the slightly decreased frequency-of-use of free apps versus paid apps). On average, free applications are used heavily at first but usage levels off quickly — the average app lifetime is 12 runs.

So compared to a single paid app, making an app free results in 6.6x more app uses and at an average lifetime of 12 runs/app = 80 sessions. Remember that the paid app makes 70c. So the question becomes “Can the average free application make up 70c in advertising revenue across 80 usage sessions?”

Greg’s answer: “Hell No.” Assuming one ad is shown per each session, this requires a CPM of $8.75. Unfortunately, typical CPMs are 50c – $2.00, far below the point required to match the paid app’s revenue. Unless your app can serve 18 ads per session (assuming a worst case 50c CPM), or there’s some especially ’sticky’ property that makes users reliably use your app repeatedly, Greg concludes that charging for your app is generally a good idea.

See link above for slides and additional info.

Answer 3

As is often the case, Jeff Atwood has the answer: Software Pricing: Are We Doing It Wrong?