Freemium apps: Enticing fees in 'free' online games quickly add up

Clash of Clans reportedly makes $1.2 million each day by giving away its app for free.

There’s a lot of money to be made in giving away mobile applications for free. Rather than charge customers 99 cents to download an app, many programmers have found greater fortunes in the so-called freemium model: Attract as wide an audience as possible by setting the admission price at $0, then, once people are in the door, offer to sell them improved features.

Among the 30 highest-grossing apps in the Apple online store, all but one are free to download. The single holdout is Minecraft – Pocket Edition, the mobile version of a blockbuster game on computers and consoles. The app pulls in about $75,000 per day, according to Think Gaming, a consulting firm in New York. 

Compare that with the current freemium king, Clash of Clans, which earns more than $1,200,000 every day through the sale of virtual gems that players can cash in for power-ups and speed boosts. Clash of Clans players spend on average $5.32 over the course of their time with the game, according to Think Gaming, significantly more than the traditional 99 cents.

But with options like being able to drop $99.99 on a single “chest of gems” in Clash of Clans, critics say these games and the app stores that support them have made it too easy for children to run up huge bills without their parents’ consent. 

“Just weeks after Amazon began billing for in-app charges, consumer complaints about unauthorized charges by children on Amazon’s mobile devices reached levels an Amazon Appstore manager described as ‘near house on fire,’ ” says a legal complaint filed by the US Federal Trade Commission (FTC) against Amazon in July.

Amazon says that it has already addressed these concerns, in part by requiring people to enter a password before every in-app purchase of $20 or more.

The FTC already went after Apple, leading to a $32 million refund and to a revamp of its payment system. After talks with European regulators, Google agreed to stop allowing games with in-app purchases to be advertised as “free.”