How I killed app sales by going freemium
To scratch my own itch of being able to send web articles to my Kindle from my iPhone or iPad, I wrote an iOS app, Comfy Read. With iOS 8 supporting app extensions, Apple had made it possible to acquire little bits of structured information from pretty much any app with the magical box-and-arrow “share” button. It was sufficiently powerful for my purposes. All I needed was the article URL, which I would send to a server. The server would then fetch the article, format it, package it into a .mobi file the Kindle can deal with and send it to Amazon for delivery to the device.
One reason I was doing this was to learn what new features iOS 8 had from a developer’s perspective, and and other to solve a real problem I was having. I wondered if other people were looking for an app like this. I usually read myself to sleep every night and through the day, I’ve usually sent some article over to my Kindle from my iPhone, iPad or browser. I was more interested in releasing my first iOS app to the App Store to experience first hand what the real deal is. I did not expect to market this at all, since I simply didn’t have the time. But it would be an experiment in seeing how an app would fare with no marketing at all — just depending on downloads via searches in the App Store.
Comfy Read went on sale on the 21st of January this year. I priced it at $ 1.99, up-front. Although I did not have the time to do any real marketing for the app, I did create a very simple website for it. It has a home page, a help documentation page and a contact page. I got a mail from Apple saying that the app was “ready for sale”, meaning that it now had hit the App Store. Amazingly, people were finding Comfy Read solely via the App Store search without me having to do anything. I cannot overstate it’s importance. Apparently many were having the same itch as me. If you are building an app, you most certainly have to come up with a good list of keywords and include them in your app submission form. Comfy Read has one advantage, though. It has a singular purpose. It’s features do not overlap with those of other apps in the App Store. It was fairly easy to accurately predict the search process prospective users will go through and come up with keywords for it. It was easy and it seemed to be working. Plus there are millions of Kindles and millions of iOS devices out there. This would have happened anyway.
Search and find
I had read many times that the majority of apps just rot in the App Store never acquiring users or making any real money at all. I had little interest in the money that Comfy Read would make. I was more interested in solving a problem for fellow readers. If it could sustain itself in the process, it was a bonus. I also knew that it could never be a really big app, since it solved a niche problem. And yet, with a developer with no real app development experience behind it, Comfy Read was making a small amount of money without any marketing effort at all. The money Comfy Read makes is super tiny, but it has encouraged me to look for ideas that solve real problems. Learnings apart, what do the numbers look for a utility oriented, paid up-front app when no marketing is done?
I pulled the app from the App Store on May 17th. Let me explain why. Since I wasn't interested in the few hundred dollars that Comfy Read was making every month, I wanted to use it to experiment with various revenue models on the App Store. Having a real app with real users, although a small number — what was far more interesting to me was the opportunity to play around with different business models. In the 5 months that Comfy Read was on the app store, users had sent close to 10,000 articles to their Kindle devices. It was very amusing to see all this. Plus it was heartwarming to see good reviews.
And one guy from Canada totally killed it. He/she went so much overboard that it actually looks like a paid review! I assure you that it is not.
With Apple making analytics available on iTunes Connect, I was amazed to see that Comfy Read was having conversion rates of anywhere between 6 and 9%. Pretty amazing for an up-front paid app, I thought. For example, from the analytics screenshot above, you can see that for 1,080 Comfy Read’s App Store page visits, there were 97 units sold in April. That’s a 8.98% conversion rate. Same for other months for which data is available as well.
Comfy Read the app was just the tiny front-end. It was shipping off URLs it obtained from Safari or other apps to it’s backend server to process and send the article to user’s Kindle readers. I had quickly put together a backend that could achieve this over a couple of weekends using Python and Redis. The server costs me $20 a month to run. I had bought a VM from Linode for this purpose. Although Comfy Read was making a few hundred dollars per month and was consistent at it, it was OK to have this monthly cost. But I was thinking if a free app with in-app purchases was made available, rather than an up-front paid app, users who are hesitant to download a paid app in spite of decent reviews might shed the inhibition and give the app a shot.
I added a few other features to Comfy Read and Comfy Read 2 was born. But before that, I had to come up with a freemium model will work. This is what I came up with: A free app that allowed 10 free articles initially, enough for users to get a taste of the service. After these “article credits” ran out, users would still be able to send one article everyday for free. To overcome the one article per day restriction and send articles anytime, users could buy “article credits” from via in-app purchases and send articles anytime.
Actually, one article per day was enough for most users. There was this small risk that most people would never need to buy credits and so the app would not make any money. But it was worth the learning. On May 16th, Comfy Read 2 hit the App Store. and this is how the numbers look. Again, still no marketing. Users are still finding the app via the App Store search.
The conversion rate for people who visit the App Store page? 27.83% Again, very nice numbers. Almost one among three people visiting the App Store listing page for Comfy Read 2 are actually installing the app. This is a 300% improvement over the upfront paid app scenario. To keep the experiment fair, I pulled the first version of Comfy Read from the App Store the next day Comfy Read 2 was released.
So, what happens now? Will v2.0, the freemium app that a lot more users are downloading beat v1.0, the older version, financially? Not by a long shot.
In the past 20 days, Comfy Read 2 has seen just 5 in-app purchases. May be it is too early to say that for some apps, free with in-app purchases won’t work. But the current trend I am seeing with v2 points to just that. Sometimes, less is more.
Freemium is not a panacea
There are many rules of thumb or axioms in the app business. One of them is that “freemium” is always better than paid up-front. The learning I now have is that freemium can certainly drive better downloads. But each app is different. Some app ideas simply don't lend themselves to a freemium model, financially speaking. One thing freemium compensates for is the lack of a free trial system in the App Store. But that is not a business model problem. Both these are often confused for the other. There is an interplay between them, but apps still need to balance free downloads and sales conversions with a balance of free and freemium features. Creating a freemium model that works is something that a lot of thought needs to go into. After all, even if many users end up using the free bit of your app, it will still be worth all the word of mouth marketing for your app.