Ngmoco’s $100M+ Valuation Is Just The Beginning For Freemium Mobile Apps
Ngmoco made headlines last week when Jason Kincaid at TechCrunch reported that Google Ventures made an investment valuing them well above $100 million. It’s amazing, considering that August 15th marks only the ten month anniversary of Apple supporting in-app purchases through free apps. In this post, I’ll brief you on key market information relating to the business of freemium mobile app publishing.
The Challenge
There are now over 244,000 apps in the App Store. Getting your app noticed is no small feat. It is even more difficult for paid iPhone apps since they comprise 72% of this total while contributing a far less proportionate number of downloads.
The Opportunity
Free apps are getting more than four times the number of installs as paid apps (source: Admob ‘09). A few developers, like Ngmoco, are earning more money from free installs than most earn on paid installs.
According to data provided to VentureBeat from 21 companies, iOS freemium game apps are generating $14.66 per user per year. Neil Young, CEO of Ngmoco, said in an interview hosted by Jason Calacanis on 6/29, that WeRule had received 2.5M unique installs leading to high hundreds of thousands of daily active users. WeRule was only released in the U.S. on March 20, 2010. Let’s assume that WeRule averages 800,000 active users for an entire year with no additional installs. This would lead to revenue of $11.7M per year and $4.68 per install. The average cost of a paid app ($2.98) is less than the revenue generated for a free install of WeRule.
How does Ngmoco make so much money per user?
Inside Social Games reported that Jason Oberfest, VP of Social Applications at Ngmoco, told them that they were earning 40% of their revenue from in-app virtual goods purchases and the rest from other revenue sources including brand and app-install advertising.
Distimo reported in July that just 2% of iPhone apps leverage in-app purchasing. The freemium model is working for more than just games too. Distimo reported that a significant number of apps from a range of app categories are leveraging in-app purchases including top performers.
Freemium Mobile App Publishing Costs
Global app store revenue is expected to grow at 60%+ CAGR for the next few years according to many analysts. Freemium mobile app revenues will grow even faster. A market as ripe as this one is going to attract a boom of competition. However, the costs to develop and market a freemium mobile app are modest. The following is a high level breakdown of freemium iOS app publishing expenses.
The most basic freemium mobile apps require native iOS development as well as a web application backend. The costs vary greatly depending on the complexity of the app. A couple of established for hire custom game development studios have shared quotes with me ranging from $30,000 to $300,000.
There is plenty of organic installs being generated for freemium mobile apps. To accelerate the growth of your user-base I recommend that you also spend some money advertising your app. Incented app advertising ranked the most effective method according to a few dozen developers we surveyed. You can buy incented app distribution from W3i and others. Create a campaign that drives around 50,000 installs daily for a couple days to achieve a top 50 ranking in the App Store. 100,000 incented app installs will cost you around $35,000.
Are you looking for a strategic partner and/or investor for a freemium mobile app? Contact me (ryan.weber at W3i.com) regarding an opportunity to raise $10,000 without giving up any equity for funding your freemium mobile app.
Ryan Weber, Vice President of Corporate Strategy & Co-Founder, W3i, LLC
Entrepreneur and pioneer of internet and mobile marketing, focusing on increasing revenue and distribution for mobile applications.
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October 24th, 2010 at 2:24 pm
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October 6th, 2011 at 3:34 am
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