Switching to Freemium

Lessons learned from changing iOctocat's price model

A few weeks ago - on November 7th - I changed the price model of iOctocat to freemium. The initial download became free and it offers most of the features the full pro version has, but limited to public repositories. The pro upgrade is available as an in-app purchase and gives access to private repositories, adds support for multiple accounts and Gitub Enterprise, as well as push notifications. The upgrade costs $9.99 (or 8,99 EUR), which is just as much as before the switch.

There were four reasons for deciding to change the price model:

  1. A potentially bigger market: Seeing GitHub’s growth compared to the low number of sales I am making (more on that later), the assumption is that there is a bigger market to tackle, which I am currently not reaching.
  2. Stagnating sales: This is the main reason to face the fact something might need improvement. Of course this could be related to other things as well, but my impression from conversations was that a good percentage of people were put off by the high price (at least in App Store terms) of the app and they had no good way to find out, whether or not the investment would be worth it.
  3. The ever present lack of demo versions: I do not want to bemoan the fact that Apple does not seem to care and leaves it to each developer to find the right way to approach this*, but from the users perspective I can totally understand that trying apps is kind of the only way to verify whether or not it is worth its price.
  4. Kick it like GitHub: I just like the fact, that the new price model fits very well with GitHub offering its functionality for free for open source projects. This makes it a natural fit and was the final trigger to make me want to do the switch.

So let’s get to the interesting part: Sales figures and actual numbers.

Before

First off, the last 30 days before the switch, which can be considered a good baseline of how v2 was selling in general up to then:

  • 266 paid sales/downloads
  • 1397 EUR revenue

iOctocat paid sales before the freemium switch

As you can see this is a bumpy mixture of sales varying from 5 to 14, averaging at around 9 sales per day. It seems that deviations like that are pretty normal for apps in that range, at least that is the impression I got from talking to some fellow developers.

After

Here are the first 30 days after after the switch:

  • 217 paid sales
  • 6261 downloads
  • 1110 EUR revenue

iOctocat paid sales after the freemium switch

iOctocat paid sales after the freemium switch

The first chart shows the number of paid sales, the second one the number of downloads. On freemium launch day the app got 2009 downloads and went hockey stick from there - unfortunately in the wrong direction ;)

However, it still has about 100 downloads per day, which shows that there is a bigger market than the app was reaching before. Nevertheless the 10x growth in download numbers did not result in more sales yet - the conversion rate of the first 30 days is ~3.5%. Of course you cannot expect people that download the app just to try it to buy the pro version immediately, even if they think the app is useful to them. That is why I think of this switch as some kind of long-term investment.

Improving conversions

Right now the app now is missing out on what would have been potential customers before: People who just use public repositories and do not need any of the pro features do not have to pay anymore which might be crazy indeed. This is the point I thought about most when I tried to come up with a good pricing model. I could have charged a low amount for public repository access, but I decided that this approach would have more cons than pros…

Pros

  • I think the app is definitely valuable to people even if they are using it in an open source context.
  • This would have also prevented some frustrating one star reviews that seem to be unavoidable when you are offering stuff for free: There will always be someone who does not appreciate your work or just likes to rant in App Store reviews.

Cons

  • Even if I would have charged only 79 cents I do not think the app would have gotten a fifth of the downloads it got the free way. You just cannot beat the magic price tag “free” and giving people a no brainer opportunity to try the app outweighs the income of some potential sales in this case imho.
  • I personally prefer to pay for an app upfront and get full access immediately, maybe that is why the model of letting customers pay twice (once for basic access, then again for the pro features) just does not seem right to me.
  • With a userbase of people who are developers themselves, I know that at least some users are buying the pro upgrade even if they do not need the addtional features. This might sound romantic, but sometimes I get feedback from customers who know that their “donation” helps to ensure the future development of the app <3
  • As I mentioned before I just like the way this fits with GitHubs pricing.

However, I am still thinking about how to make an upgrade more desirable for heavy users of the free version. The features it offers without paying go far beyond a demo version and even though I do not really like to artificially limit the functionality I might cut off some features worth paying for, so that the app does not miss out on too many people who would also be willing to pay for what they get - especially with the things in mind I still want to tackle, like the iPad interface.

One more point I will definitely change: Right now the app is not really trying to upsell anyone. Once you added your account you do not get to see any possibility to upgrade, besides a shy little button on the repository lists. The only place I advertise it prominently is the accounts list, but users of the free version rarely return to that, because they can only have a single account. That was an oversight on my part or maybe just me being naive…

Conclusion

Unfortunately changing the pricing model did not turn out to be a quick win for iOctocat, but as I said I consider the move to freemium as a long-term investment and already have some ideas on how to improve the current situation. I am curious to see what kind of results the upcoming months will yield, but I do not think I will switch back to an upfront payment model whatever happens, because of the reasons I outlined in the introduction of this article.

From a users perspective I can totally see the benefit of the freemium model and with more and more apps on the App Store taking this route I can imagine the rate of people that are willing to pay upfront go down. Nevertheless I might consider cutting off some more features from the free version to give more non-pro users a reason to upgrade. I would not really like to do this and I can imagine some push back from users of the free version, but I still want to work on the app and improve it - and making some more revenue would give me better options to do just that.

Last but not least…

* Technical sidenote: Along with iOS 7 Apple gave developers a new/better way for utilizing App Store receipts (see WWDC 2013 Session 308), which makes it possible to implement various ways of demo functionality. iOctocat uses the App Store receipt to check the version the user bought initially so that customers who bought the app prior to the switch do not have to pay again. Likewise one could implement a limited period of time with full access to give the users a trial version (which I might cover in another blog post sometime…)

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iOctocat

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