By Olga Orda

If you are a leader in your sector and offer a service that gets users ‘hooked’ (read: potential for viral adoption) through the need for more data, time or even entertainment, you are lucky: the freemium model may be right for you.

This is the ‘mothership’ of all app models and for a good reason: according to Distimo’s report, in-app revenue from free apps brought in the most revenue at 71 percent with paid revenues following at 24 percent and in-app revenues from paid apps at 5 percent.

If that is not convincing enough, freemium apps generate 69 percent of the worldwide iOS app revenue and 75 percent of global Android app revenues, according to a study by App Annie.

However, truly nailing the freemium model and making revenue from it is another story. I like to call the freemium model the ‘addictive’ mobile app model. The idea is to offer a free basic version of your app to consumers to get a quick buy-in with the least resistance and let users buy additional features for a fixed price or a monthly subscription once they are hooked and find value in your app.

A freemium app or game is offered free-of-charge to the user with limited features, content or virtual goods. Examples include Audi’s A4 Driving Challenge, which has least 3.5 million users and allows car enthusiasts to enjoy steering virtual cars (by tilting the phone like a steering wheel) and race against their own best times. Pandora Radio is another great example and it offers additional content, updated every month for a subscription fee.

Your business can offer premium or additional content or offer basic features for free that require the user to pay to use the complete functionality of the application.

However, the freemium model comes with its own risks. In a Wall Street Journal article, Vineet Kumar, a professor at Harvard Business School, shares that:

The problem is, it’s not always obvious what features should be free and which should be paid…[And] offering too many features in the free version risks “cannibalizing your paid customers,” while not offering enough might generate little interest all around.

Is the freemium model not right for your businesses? There are three other models to consider.

I previously wrote a guide on how to identify which one of the four most popular app business models is best for your business – and the potential upsides and downsides of each monetization model – in “Four Strategies to Make Your App Highly Profitable”.

If you are trying to determine which app model is right for your business, this helpful guide is for you.

Infinium Systems is an award-winning web and mobile app development company based in Vancouver, BC. We create high performance web and mobile apps for organizations that are making life better.