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Freemium games are the ticket to app profits -- study

A new study released by NPD finds that 40 percent of those who have played an upgradable freemium game have made in-app payments.


App developers looking to make some cash might want to ditch paid titles for free offerings that include in-app purchases, according to a new study.

After downloading an upgradable freemium game in a mobile app store, 40 percent of consumers decided to make an in-game purchase, according to research firm NPD. Most, however, were men. The analysts found that while women are more likely to have played freemium games, they're "among the least likely to pay for an upgrade."

Freemium games have become increasingly popular in the mobile marketplace. The titles are free to download and play, but in order to take advantage of advanced features or functionality, developers charge gamers for access.

Several studies over the last several months have highlighted the value of in-app purchases. Research firm IHS said back in January that in-app purchases accounted for $970 million in sales last year, representing 39 percent of all spending. By 2015, that figure could grow to $5.6 billion, or 64 percent of the market.

"In 2012, it will become increasingly difficult for app stores and developers to justify charging an upfront fee for their products when faced with competition from a plethora of free content," said Jack Kent, an analyst at IHS. "Instead, the apps industry must fully embrace the freemium model and monetize content through in-app purchases."

Earlier this month, Amazon announced in-app purchasing support for its Appstore, seeming to follow Kent's advice. Apple's App Store and the Google Android Market both already offer in-app purchasing.

NPD found that in-app purchasing tends to drop off after a person plays a game for more than a month, making it imperative for developers to target users with purchases as soon as possible after downloading, NPD analyst Anita Frazier said in a statement today.

Still, freemium games are wildly popular, with 85 percent of those who are aware of the app category downloading such titles. All told, 38 percent of the U.S. population aged 2 years or older is currently playing some type of freemium game, NPD says.

NPD conducted its freemium game study between February 27 and March 7, and surveyed over 6,400 individuals aged 2 years and up.