'Free' iPhone games make the most money

Posted by Raven Lovecraft

You might want to read the fine print the next time you download a so-called 'free' iPhone game.

In the long run, chances are it will end up costing you more than a game that has a price attached to it.

In fact, according to analytics firm Flurry, iPhone games that use what's referred to as the "freemium" model rake in a whopping two times as much money as those that charge a price on the outset.

So far in 2011, Apple's list of "top grossing apps" has been dominated by games that are free to download but nickel-and-dime users once they start playing.

Games like Tap Pet Hotel and Zynga Poker made the list, and the infamous Smurf Village - which critics have accused of targeting young users into unknowingly raking up charges on their parents' iTunes account - is also at the top.

In Smurf Village, users could easily initiate a purchase for $99 in virtual 'smufberries' currency with a couple screen taps, without even needing to authenticate an iTunes log-in. The story was that parents would download the game for their children, hand it off, and then find ridiculous charges on their credit card statements. Apple has since changed this and now requires users to log in every time they want to make an in-app purchase.

But those are just the stories that make the news. According to Flurry, no more than 6% of people who download a freemium game actually spend money on them, but the top purchasers spend so much that it makes up for the 94% who just play it for free.

Those users may end up spending hundreds or, yes, even thousands of dollars over the life of the app. Compare that to a game where 100% of the people who download it pay a nominal $1 or $2, and the results make sense.

It wasn't that long ago that those cheap games, like Angry Birds, topped Apple's highest-grossing app list. The economics of mobile games are indeed changing.