Free mobile game app revenues outpace pay-to-play

There’s a new measurement of success in the gaming world. Gone are the days of measuring it by the number of units sold. Today it’s about how many players a game can continue to engage and, perhaps more importantly, the amount of cash that can be extracted from those players on an ongoing basis via engaging spending opportunities.

To this end, many game apps today are given away but charge a premium for advanced features, functionality, or related products and services. This is referred to as the “freemium” model. The challenge for developers of freemium game apps is that they must hook in players and keep them engaged by constantly developing and adding new levels and characters to their games.

According to Flurry just 0.5% to 6% of mobile game app players spend money in free games, with the spend level dependent on the quality and dynamics of the game. So, while the vast number of players are currently not spending within free gaming apps, the small number that do can end up spending considerably more than those who bought the game upfront.

“Since you gave away the game for free, your ‘heavy spender’ group can be sizable,” writes Flurry’s Jeferson Valadares on the company’s blog. “With games often occupying more than 75% of all top 100 grossing apps in the App Store, [the freemium concept is] the single most dominating business model in the mobile apps industry today.”

Flurry’s analysis of the top 100 Apple App Store game downloads in June reveals that freemium games account for 65% of all revenues compared to 35% raked in from premium games.

Six months ago the reverse was true. In January 2011 premium games accounted for 61% of revenues and freemium 39%.