Davide Di Cillo

Christmasfy Me: case history of the freemium model on the iPhone

Wednesday, January 6th, 2010

As many of you may have noticed, in the last forty days or so I promoted all over the place a simple Christmas application we published called Christmasfy Me. Not only was it a fun application that we wanted to build, but it was also our first experiment with in-app purchasing. Not too long ago, Apple opened the in-app purchase feature to free applications. I personally think this is a great tool for a lot of people to monetize their apps, and at the same time, somehow solve the problem of not being able to release demo and trial versions of their apps.

As promised, I’m going to fully disclose the results I gathered with Christmasfy Me in hopes of helping others to better understand this business model.

The application
Christmasfy Me is an iPhone application that lets you take a picture, or select an existing one from your library, and apply Christmas elements to it. You can then save or share these pictures via email, Twitter, or Facebook. You can view a video of how this application works at www.ChristmasfyMe.com. The application originally came with three unlocked items, we then unlocked an additional three items for a total of six. To unlock the remaining 20 items, the user had to pay $0.99.

Some factors we need to keep in mind
This iPhone application was built and released as a seasonal application; this means that the same kind of application (not necessarily with the same theme) may have totally different results and numbers during other periods of the year. The application was released in a period that is usually notorious for having more downloads that any other period throughout the year: between Thanksgiving and Christmas. Considering that after Christmas the sales dropped considerably, I will only take into account the sales from 11/26/2009 to 12/31/2009.

The numbers
Over a period of 37 days, Christmasfy Me was downloaded a total of 66,623 times. Of those downloads, 32,189 happened in the US while the other 34,434 account for world-wide downloads, mainly in the UK and Italy. In Italy, the application even ranked as the second most downloaded free application in the photography category and about 120th in the overall Top Free chart for a few days. I can’t hide that I was expecting to do better than this. Of course, I’m not unhappy with the results, but everything was timed in order to be included by Apple in their holidays selection and that never happened. Even on its better days, as far as downloads go, the app never ranked better than 500th in the Top Free Apps chart. This says a lot about how many downloads you need to be in the top 100, especially considering the fact that rank and number of downloads don’t usually grow proportionally.

As far as in-app purchases go, we sold a total of 2,193 “upgrades” over the same period. This is actually better than I expected, considering that this was an average conversion rate of 3.29% and, based on the results published by Riptide of their in-app purchase experience, I was expecting something closer to 2.5%. The regional results demonstrate how US customers are more likely to buy in-app content, with an average conversion rate of 4.11%, and accounting for 60.37% of the total of in-app purchases. So, if you decide to build your business on in-app purchases, forget markets like Italy, where the conversion rate was well below 1%, and focus on the US and the UK. Also, If you look at the chart, you’ll notice that conversion rate dropped after December 16th, the day we released a new version where, among other updates, the number of free elements went from three to six.

Conclusions
It might not be the most profitable business model since you need a high number of downloads to make a decent profit, but definitely less than what you would need with ads. More and more powerhouses like ngimoco, Gameloft, and Tapulous are switching to this model with many of their apps. Also, this may allow you to create complex and expensive apps while allowing your customers to pay only for the features they really need (Boxcar docet). The biggest con I found is that a lot of people expect everything to be free to download. I’ve even been accused of “stealing” money because there were only three free elements in the first version. That cost me a bunch of one star ratings in the App store.

I will definitely explore and use this model more in the future. I think there is more that can be done to improve performance and revenue. I’ll be sure to keep you all updated with our results.

Tags: Analytics, Business, Christmasfy Me, iPhone application, Monetization
Posted in Apple | 13 Comments »