Freemium Beats Premium in Revenue Earned, Says Flurry

Mobile analytics firm Flurry is out with a new report that examines the revenue generation capabilities of free-to-play (aka “freemium”) games versus paid ones. The conclusion was somewhat surprising: freemium games actually make more money. As of June, freemium games accounted for 65% of the revenue generated while premium games accounted for just 35%.

But this hasn’t always been the case.

To arrive at its conclusions, Flurry compared the revenue generated by pricing model among the top 100 grossing games out of the 90,000 + apps the company tracks on its service, during both January and June 2011.

“Premium” simply means the game download costs money, explains Flurry, while “freemium” games are free-to-play, but the user can purchase items in the games, like virtual currency and virtual goods.

What’s most surprising is that the shift to freemium as the biggest revenue generator has happened so fast. In fact, the two models have practically flip-flopped positions during the first six months of 2011. In January, for example, freemium games only accounted for 39% of the total revenue earned and premium games were at 61%. Now it’s 65% freemium versus 35% premium.

Flurry says this should remind developers that the distribution models for video games have shifted – success is no longer measured by units sold, it’s about engagement, and then how many “compelling spending opportunities” you can provide players.

The company also noted that the number of people who spend money in a free game ranges from 0.5% to 6%, depending on the game’s quality and its core mechanics. This shows that a small minority of a game’s most engaged players are worth more than a larger group of people who are willing to pay 99 cents for the download.

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