It may seem counter-intuitive that games that are given away free can generate more income that ones that have a purchase price - but that's what statistics from Flurry suggest.

A detailed analysis by Jeferson Valadares, Flurry's GM of Games, of recent analytics data shows that, while only 3% of consumers will spend money in iOS and Android freemium games those who do spend $14 per transaction on average.

This backs up a result reported earlier this month that more revenue is now generated by Freemium games than by Premium (i.e. pay-to download) games. 

As you can see from the above chart in June 2011 65% of the revenue from the hundred top grossing games from the iTunes app store came from free titles. This represented a big change from January when free games accounted for 39% of revenue and 61% came from paid-for games.

The chart below that shows the breakdown of in-app revenue for Freemium games isn't as immediately informative:

This chart shows how 3.5 million consumers spent their money across top iOS and Android freemium games but the price bands, under $10, $10-$20 and over $20 are too coarse and we need Valadares' analysis to discover how the figure of an average of $14 per transaction was arrived at. He writes:

There are two reasons the average settles here. First, within the “under $10” bucket, most transactions cluster at the $9.99 level, followed by $4.99, and finally $0.99. In fact, in total, consumers spent $0.99 less than 2% of the time...The second reason the $14 average seems high is because the high-end of the spending spectrum is very high. Among all purchase price points, over 5% of all purchases are for amounts greater than $50, which rivals the amount paid at retail for top console and PC games.

Valadares comes to the conclusion: 

If you’re a game designer, your main take away is that very few transactions—and consumers who complete those transactions—make up the bulk of your revenue.

While I agree with him that the data indicates that if you can appeal to these big spenders you can expect a good return from in-app purchases, given that Flurry predicts that by the end of 2011 iOS and Android game revenue will surpass $1 billion you can still generate a good income from smaller in-app transactions. What does seem clear is that giving away software free is a reasonable way to make money from them.

More information:

Consumers Spend Average of $14 per Transaction in iOS and Android Freemium Games

Free-to-play Revenue Overtakes Premium Revenue in the App Store

If you would like to be informed about new articles on I Programmer you can either follow us on Twitter or Facebook or you can subscribe to our weekly newsletter.