Let the Apps go free

With Steve Jobs IPhone, doing business to a consumer market has never been greater with the use of apps. The problem now is how to cover your costs when most of the apps are given free of charge.

Marketers warned customers less willing to pay for online content, apps

From StartUp Smart
Friday, 27 January 2012
By Patrick Stafford

Marketers and small businesses have been warned in a new KPMG report that consumers are no longer as willing as they once were to purchase online content, including apps, as free alternatives become more popular.

The timing coincides with several media industry businesses beginning to role out their own paywall models to transition into digital media.

“It’s certainly going to be a tough gig,” says KPMG national managing partner of digital economy, Malcolm Alder. “People have gotten used to things being free over a long period of time.”

The Consumers and Convergence report, which questioned respondents across the world – including 300 Australians – found the proportion of users willing to pay for content was dropping.

More than 90% of respondents said they did not currently pay to access website content, and of those who did, music and games were most popular, with 41% and 30% respectively.

But the real shock comes in the falling proportion of consumers willing to pay. Asked whether users would be willing to pay for content they had once received for free, only 1% said they would – falling from 11% when the previous report was filed 15 months ago. Seventy-nine per cent said they would not – up from 78% in the last report.

Alder says the report shows marketers now have to react to the way consumers are using content: free of charge, or extremely cheap.

“If you’re charging for content now, including apps, you have to be just better than everyone else, or introduce a more subtle way for introducing payment.”

Such a method has appeared in the apps sector, even though the survey indicates a majority of users download free apps. A significant 60% said they don’t pay for apps – up from 25% in 2010 – while 27% said they paid for between 1-25% of their apps.

Many companies now sell apps as a complement to their main business, often giving them away for free.

However, many developers are finding they’ve been able to garner success by giving away free apps, and then selling content within the apps themselves. Alder says it’s this type of marketing that needs to be transferred to other elements of businesses.

“The first time I saw a paywall on a UK site I used to visit, and it wasn’t a regular site I visited, but occasionally, I just clicked away and didn’t go back.

“You’ve got to have a subtle way of introducing payment.”

The finding comes even though the report shows Australians are extremely adept at online services, with 63% of respondents saying they spend more than one hour each day browsing, and 34% saying they do so for accessing news and other information.

Almost 70% said they spend up to an hour on banking and personal finance, and 53% said they do so for shopping.

Alder says it’s this realisation that will make businesses realise how they can market effectively.

“I think the ‘freemium’ business model, where you give a certain amount of content away for free, and then having users pay for the higher quality stuff – that can work.

“While the raw numbers would suggest the situation is bleak, I don’t think that. Marketers are just going to have to be smart about how they distribute digital content.”

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