An Empirical Study of the Freemium Strategy for Mobile Apps: Evidence from the Google Play Market

This paper examines the effect of the freemium strategy on Google Play, an online marketplace for Android mobile apps. By analyzing a large panel dataset consisting of 1,597 ranked mobile apps, we found that the freemium strategy is positively associated with increased sales volume and revenue of the paid apps. Higher sales rank and review rating of the free version of a mobile app both lead to higher sales rank of its paid version. However, only higher review rating of the free app contributes to higher revenue from the paid version, suggesting that although offering a free version is a viable way to improve the visibility of a mobile app, revenue is largely determined by product quality, not product visibility. Moreover, we found that the impact of review rating is not significant when the free version is offered, or when the mobile app is a hedonic app.