Rene Ritchie Discusses The Freemium Trend On The App Store

10 March 2013

Rene Ritchie, iMore:

In this regard, Apple is failing in their stewardship of the App Store, and allowing the value of their platform to falter. Not the overall value — they’re still making and passing along more money than ever — but the value to well-intentioned developers and customers. And therein, as I’ve said before, lies the path to Atari-like irrelevance, and ET cartridges being buried in the desert.

Introducing real trial or demo modes, paid upgrades, and/or easy refunds — things that exist on other platforms — could go a long way towards influencing the App Store gaming economy away from the worst elements of free-to-play. Banning “games” with worthless IAPs, “games” akin to casinos if the player could never, ever win, would also help.

Sidestepping the assumption that the freemium model is toxic for the App Store, I want to address the proposed solutions. It isn’t clear-cut as to whether they would be better than the current situation.

Android has been the pioneer of consumer-friendly app refunds. Until November 2011, after downloading an app, the Market gave users 24 hours to request a refund. It seemed like a great idea, but the generous policy was abused. In particular, game developers complained that they were losing significant revenue from users who simply completed their games before the refund window was up. Google tried to combat this by reducing the trial period to fifteen minutes. Although it cut down on the ‘piracy’, it still isn’t perfect — the market for 99cent “one time use” utilities remains susceptible to losing out to exploitative free-riders.

Naturally, the reduction also minimised the benefits of the policy in the first place for users. It’s quite reasonable to argue that Fifteen minutes isn’t really enough time for users to test apps properly. In some cases, the refund window will have already expired by the time the app is ready for use. On Android, a lot of apps download additional data, but because the Play Store cannot differentiate this from use, the refund window may elapse before the app is even functional. A few unscrupulous developers have been found to artificially extend first-run startup times, to ensure that the time limit elapses before a user can come to a decision.

Therefore, a relaxed refund policy may encourage more downloads, but it doesn’t ensure more revenue. In fact, the effects could be more damaging, as shown by the problems the Android ecosystem is fraught by.

Another suggestion from Rene is the addition of paid upgrades, but I’m unclear on what he means by this. iOS’ In-App Purchase system already allows this to happen. Paper is a good example, offering additional features (‘brushes’) for additional fees. Looking at the App Store Games category, it is quite common to see In-App Purchase used to add extra levels. And yet, as demonstrated by the top-grossing chart, the highest earning games are not those who offer paid upgrades. Outside of design and technologically-passionate industries, I expect conversions to be quite low.

Finally, the last suggestion — which is bandied about constantly by bloggers — is the addition of trials to iOS.2 I think a lot of people have the impression that trials are a silver bullet. It is true that trials have existed on the Mac forever, but that doesn’t necessarily mean it is the right decision. iOS is Apple’s OS X done right, and like any change, there are repercussions. For one, trials complicate the App Store model considerably.

For instance, trials require a lot of usability decisions to be made that turn buying an app into a complex decision tree. For instance, does the app just get deleted when the time runs out? If so, what happens to user data? If I’m trialling a word processor, do my documents just disappear if I let the trial elapse? Also, from a buying standpoint how do app sales affect the final purchase price? If I start a trial during a sale and then want to buy at the end of the trial, do I pay the sale price or the current price? If I trial the app for 30 days, but then a big update happens six months down the line, am I allowed to trial that for 30 days too? Etcetera, etcetera.

Personally, I feel like trials would have a net benefit on ecosystem sustainability, but Apple has trained customers for five years on a much simpler model. The App Store is doing incredibly well already without any of these changes. Until the system is shown to have substantial benefits on another platform3, I think Apple’s conservatism will stop it from shaking up the boat — the tradeoffs and uncertainty involved just don’t make sense. One wrong move means a lot of unhappy developers, who rely on the platform to live. It’s serious business. There is no room for experimentation.

1 The process is automatic. There is a refund button in the Market. Tap to confirm and the app is uninstalled from your device. The cost of the app is credited back to your account moments later.

2 I think the necessity for trials is much greater on the Mac, where the real value of software is a lot more expensive.

3 I think the chances of seeing a trial system in the App Store depend highly on whether a major competitor does implements it successfully. Windows has trials, but its platform is too small to matter at the moment. I am interested in hearing from Windows developers to gauge their opinions on trials, however.