What's your usage of free vs. paid apps?

When I read reviews of free apps in tech publications, they often have a line to the effect, "There is paid advertising which is/is not intrusive. I would gladly pay a dollar to turn the ads off".

There is a line of thought that subscriber payment can support the app developer and also provides an alternate business model to ad-funded apps. It is an extension of the ad-free model of paid television - subscribe to the channel and we will turn off the ads.

In practice though, it does not work  that way for consumers, or for businesses. 

I presume that in the course of a customer life cycle, showing ads will earn more revenue than the $1 or 2 that I pay one time to remove  them. The scale increases exponentially when we talk of hugely popular free  apps with  millions of downloads. 

Also, strangely, I do not mind it if mobile apps display ads. I do not find them obtrusive, I don't worry about how much data they consume and I would not find it a value proposition to pay purely to turn them off. 

This time-scaled infographic of the iOS App Store published by Appsfire and featured on TUAW reveals that app developers and consumers seem to share this view. The report by Appsfire reveals that the percentage of paid apps has shrunk from 74% in 2008 to 34% in 2012. Simultaneously, as the number of apps has increased, gaining visibility and traction has become much more of a challenge. Few apps make it to the top ranks and the majority never gain traction, revealing that app discovery, let alone trial, is a huge problem for apps today.

There are several ways to subsidise apps - free trial of a basic version with paid upgrade for more features and functionality (the freemium model), in-app purchases, and of course, ads. 

I did a check of my app downloads on my iPad and Android phone and I discovered the following trend:

1. Currently, I have 180 apps across my phone and iPad of which 20 are paid apps - roughly 11%.
2. The first 50 or so apps on both devices were purely free ones as I was not prepared to experiment with paid apps initially. Thus in the first 6 months, I did not spend on any free apps.
3. The first apps I bought  were games (all of these were upgrades from a free to a paid version like Angry Birds Seasons HD, Shanghai, Cut The Rope and Rush Hour), demonstrating that the freemium model certainly worked for me where games were concerned. In all these cases, there was also a desire to support the developer because these games gave me a lot of enjoyment.
4. The most expensive apps I spent on were 'productivity/ tools' - like Quick Office, a Feed Reader, ROM tools etc.. Interestingly, I bought most of these based on reviews and 'sight blind' (without a free trial) and ratings/user recommendations played a very important role. In fact, in many cases, I was using a free solution which was not satisfactory and instead of upgrading to a paid solution from the same developer I went straight to a new, paid app. It seems that my purchase process for these was similar to that for gadgets - read, compare and select the best one based on my need. I did not purchase impulsively and it took me time to reach a stage where I was ready to buy expensive apps, although 'expensive' is a relative term - at most, these were a couple of dollars more than the games.  But it does present an interesting cycle of evolution - from when I started using my mobile devices as a toy - till when they became an integral and important tool. 

Sources : TUAWAppsfire blog

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