Accelerate Revenue with “Freemium” Apps

February 20, 2015 | Natasha Singh

Accelerate Revenue with "Freemium" Apps
Accelerate Revenue with Freemium Apps

The most important step in growing an app is user acquisition. Without users, an app is nothing. This is why marketing is so important for apps; you have to get the word out about the app in as many ways as possible. And once people know about the app, you need to present it in an appealing way that makes people happy to download it.

The number one best way to get people to download an app is to make it free. It’s just a fact of life that people are happier not spending money. It doesn’t even matter if the price is insignificantly small, any price at all will make it harder to convert downloads. However, giving things away for free is not really a great plan if you want to earn revenue, which is where the idea of “Freemium” comes into the picture.

What is Freemium?

Freemium is a pricing structure in which basic use of the app is free, with monetized options which enhance the experience. This usually comes in the form of a premium upgrade—hence the portmanteau of Free and Premium. Whether that’s a one-time payment to upgrade or a subscription, both systems can work.

It can be tricky to decide what goes behind the paywall and what remains free and to balance the cost for premium access, but if done properly, you get the best of both worlds: great user acquisition as well as steady monetization.

The concept is similar to many SaaS payment models, where limited functionality free versions are available, but serious users will want to upgrade.

Split Marketing Messages

When managing a freemium app, your marketing strategy will need to adapt if you want to take full advantage. Normally, when marketing a product you are trying to promote the product, make it seem worth a price, and convert a sale all in one go. The big hurdle is getting people to spend money, and your message is geared toward the sale.

With Freemium, you can take a different approach. Since you have two levels of conversion—first downloading and then upgrading—you can split up your messaging. Your main awareness campaigns will be designed to get people curious and lead them to the download. You don’t need to try too hard to sell them anything, because the product is free.

Your second phase of marketing is to convert those free downloads into paid accounts. The marketing message shifts and you narrow your audience; conveniently, you have fantastic access to your target audience, since it is all the free users on the app who haven’t upgraded!

This two-phase marketing funnel is much more gradual and effective than what would be needed to convert purchases up front.

Avoid Common Pitfalls

Overdoing the limitations of the free version is a common mistake. It is true, ideally, that good features should be worth paying for, but at the same time, if the app doesn’t work as a Free app then users will feel cheated and frustrated. Frustrated users don’t often stick around to upgrade.

It might feel like you are losing potential revenue, but in the end, you’re better off giving more functions away for free and capitalizing on all the happy customers that stick around. In the app business, users are everything. Snapchat didn’t have any monetization strategy at the time when it was valued at $10 Billion dollars last year! There are many such examples of iPhone and Android apps.

But falling on another side of the coin is also potentially harmful; we can’t all be Snapchats. Most apps need a way to earn money, and if the user has everything they need in the Free version, there’s no reason for them to upgrade. The answer lies in the balance. No matter what, the free version should be a useful, complete product on its own. The premium upgrade is just better!


Free is the new standard for app monetization. Occasionally apps will come along and charge up front, but they are a rare breed these days. Most often apps are either completely free and monetized through ads or business partnerships, or they are freemium—free to start, with payments for expanding the functionality.

Software Developers India is a fast growing app development company in California, building apps for startups, enterprise, large and small biz. We have built over 1000+ apps successfully.

For More info and ideas on app strategy, you can get in touch with an SDI mobility strategist at 408.805.0495 or via email at Is freemium right for your app idea? Let’s chat and find out!

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