3 Reasons Why Free Mobile Apps End up Costing You

Whether you bank, tweet, or steam music on your smartphone, chances are you’ve downloaded at least one of these apps for free. Thirty million mobile apps are downloaded each day, and more than 90 percent of them are advertised at no cost. If these apps are truly free, then why is it that the mobile app market hits over $50 billion in annual revenue and mobile app designers bring home $90k per year on average (Laird, 2012)? Here are the reasons why free apps end up costing you more than you think:

privacy goneLoss of Privacy
When was the last time you read through the terms and conditions before downloading a free app? Chances are, not for a while. Although the app is downloaded for free, the fine lines in its terms and conditions state that your personal information will be used and sold to advertisers and third party companies. Free apps are 401 percent more likely to collect your personal information than paid ads (Tynman, 2012). Some of the most common information collected from your smartphone includes your location, unique serial-number-like identifiers for the phone, and personal details such as age, sex, etc. Some free apps even take it a step further and are allowed access to your address books, photos, and social media accounts (Whitman, 2012).

dataData Spikes and Battery Drains
Free apps cost you big on data and battery without you even realizing it. Researchers at USC and two other universities found that compared to apps without ads, apps with ads are a big drain on your battery, take up more processing time, and also increase data usage by 79 percent on average (Pinola, 2015). Apps even use data in the background when its not being used so that it can continuously track and record your personal information such as your GPS location (Dachis, 2012).

Your Purchasing Decisions Are Influenced

 Location-Based_In-App_Product_PlacementFree apps significantly rely on advertising revenue in comparison to paid apps. According to a survey of more than 1,400 mobile users, about 2 in 3 people would be likely to add a product to their shopping list if were to see it on a mobile advertisement (Pew Research, 2015). In addition, respondents also indicated that the following types of advertisements on their smartphone would most likely influence their purchasing decisions: a coupon for a product in-store (28%); sale item notification (20%); and seeing an ad for a product (15%) (MarketingCharts.com, 2013). In addition, many companies today use a feature called “geo-targeting” to track their target audiences. For example, if I was a company that wanted to sell a product to 18-24 year olds, I could use geo-targeted marketing to find out where the audience frequents and push ads to them when they enter or exit that specific location. The location of these audiences are tracked and sold by free apps that are downloaded on their smartphones (Murphy, 2011).

References

Dachis, A. (2012). How to Stop Your Smartphone from Secretly Wasting Data in the Background. Retrieved from http://lifehacker.com/5957947/how-to-figure-out-which-apps-are-using-your-smartphones-cellular-data-without-your-knowledge

Laird, S. (2012). So You Want to Be an App Developer? Here’s How . Retrieved from http://mashable.com/2012/08/27/app-developer-infographic/

 MarketingCharts.com. (2013). Mobile Ads Seen Impacting CPG Purchase Decisions. Retrieved from http://www.marketingcharts.com/online/mobile-ads-seen-impacting-cpg-purchase-decisions-38286/

 Murphy, D. (2011). The Geo-Targeting Revolution. Retrieved from http://mobilemarketingmagazine.com/geo-targeting-revolution/

Pew Research. (2015). U.S. Smartphone Use in 2015. Retrieved from http://www.pewinternet.org/2015/04/01/us-smartphone-use-in-2015/

 Pinola, M. (2015). The Real Cost Of Free Mobile Apps: 79% More Data Use, 16% Battery Hit. Retrieved from http://www.lifehacker.com.au/2015/04/the-real-cost-of-free-mobile-apps-79-more-data-use-16-battery-hit/

 Tynman, D. (2012). Those free apps can cost you big. Retrieved from http://www.itworld.com/article/2717594/it-management/those-free-apps-can-cost-you-big.html

Whitman, R. (2012). The horror: Android allows apps access to your pictures. Retrieved from http://www.extremetech.com/computing/120969-the-horror-android-allows-apps-access-to-your-pictures

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7 Responses to 3 Reasons Why Free Mobile Apps End up Costing You

  1. Lauren says:

    Eric,

    Wow, this makes me feel a bit uncomfortable knowing how many “free” apps I’ve downloaded in the past. You’re right that not many of us are concerned with the fine print as long as we get the app or product we want for our phone. We may not realize how much we’re being followed or looked at on a daily basis by various companies wanting to know who we are and where we live. What can they sell us and who could use this information? This is not only an interesting article but I feel very eye opening. As consumers we should consider what exactly we’re getting ourselves into when downloading these apps…as it’s been said before: “there ain’t no such thing as a free lunch.” This article justifies this saying quite well.

  2. Steven says:

    This article is very timely. I think the biggest concern that you hit upon was the loss of privacy associated with downloading apps on your smartphone. Since so much personal information is stored on our phones (or should we just call them our handheld computers), that a treasure trove of information such as this is lucrative for any marketing firm.

    Recently, reports have surfaced about the loss of privacy associated with the popular ride service, Uber. The app for Uber is being redesigned so that the rise service company can track you GPS location. They are going to be able to accomplish this even is the consumer disables “GPS tracking.” Many consumers and advocates are sounding the alarm in this violation of a consumer’s privacy.

    The lesson learned from your article, as well as examples of apps like Uber, really causes me to pause and think about these “free” apps. While I likely will not read every word of a “users agreement,” I will certainly be more mindful of the necessity of downloading the app in the first place.

  3. Elaine says:

    Thanks for sharing this information! With the abundance of apps and our high usage of them, this post definitely hits some important points. Your emphasis on the privacy issues is an area of increasing concern. Often times we download these apps without thinking through what we are really signing up for or agreeing to. I’m assuming as the usage of apps increases and the concern over privacy increases, more policies will emerge to regulate the industry.

  4. Cynthia says:

    Oh wow! I would have never thought that something so seemingly harmless would be costing me so much and not even in the financial sense. I think the problem is that we as a society have gotten so used to putting all of our information out there for the world to see, that we no longer even consider things like that. However, all of this information that you’ve presented has me really thinking about some of the apps that I’ve downloaded on my phone. I can only image what kind of data it’s gathering without me even knowing. And I won’t even get started on the battery and data drain. It’s a nightmare and I’m happy to finally know the cause!

    Great post!

  5. Ruqqayat says:

    Wow! What a great post Eric! Thanks for making me reconsider the next time I download a free app. What stood out to me in particular was the information you provided about the privacy consequences which come with downloading free apps. I have to admit that I am guilty of quickly scrolling through the terms and conditions and pressing accept without reviewing them, not even considering what the contract I have agreed to many entail. This brings up the great overall debate and question regarding how much of your information is really private, particularly once you’ve uploaded it on to the world wide web. My mother suffered identity theft not too long ago and she is convinced it is a result of an online purchase she made which must have been corrupted somehow.

    As you also mention, I do have to say, free apps are filled with annoying advertisements which often make them less appealing and some times not even worth the price. I don’t know how much they effect my purchasing decisions but according to the statistics you provided, they may have more influence than I realize!!

    Great Post!
    Rocky

  6. Tedria says:

    Hi Eric –

    Great post! Ironically, I was just discussing this with my colleague the other day. We don’t realize how much information we give to these companies when we download free apps. As you stated, when using most of the free applications, they want access to our camera, GPS location, microphone, etc. When this access isn’t provided, it makes it difficult to enjoy the experience of the application A prime example is SnapChat, which is one of the newer forms of social media. When I signed up for the app, in order to post pictures and videos, I had to give them access to my camera and existing photos. Additionally, in order to find friends, I had to give up my phone number – which took quite some time because I was concerned about privacy. Lastly, they wanted access to my GPS location to obtain the certain geo filters that they can only be acquired while using the application. It’s ridiculous that these apps want all of this information before we can use them. I often have the feeling of “what do you want next, my soul?”

    Thanks so much for sharing this! Completely relatable and insanely informative!
    Tedria

  7. Kelli says:

    I’m not exactly sure where to begin.
    Full disclosure, I work for a mobile analytics company that specializes in Freemium (yes, it is now a word) apps. As a former type writer user (yes I was born in the 70s) that wanted nothing to do with technology and a privacy nut…I still can’t believe I work where I do. That all being said I live in the dark side and am here to confirm and deny everything.

    True, free apps are not free but whatever is? Most games and apps are developed by companies who spend a lot of money on the technology in both design and integration. Android, IOS, and Unity platforms are very different so each app has to be customized per platform. These are all expensive. For an “indie” developer, the cost is time and personal resources. At the end of the day, costs need to be recovered and people want to make a profit. Enter advertising dollars.

    Web advertising has never taken off. Very rarely is there a person who purposefully clicks on a banner ad. Web analytics now has the stalking effective. I’m sure you noticed that the pair of shoes who were looking at on Zappos keeps popping up in each browser window you look at.

    Mobile Analytics is different than web analytics (now remember big data only started in the 1990s when a couple of markets asked what the servers could tell them about who was accessing a website). Mobile Analytics is device specific. That means when you download an app, the app store where you downloaded from now has you tagged. It’s not you as a person—it is the device you own. If you uninstall the app, Apple Store or Google Play knows. If you reinstall the app, your same unique device identifier is sent back to the app store. As part of the process of developer/platform, the platform gives the information back to the owner of the app.

    Inside a free game, you have encountered levels that you cannot complete or characters you can’t have unless you make a purchase. Of all the people who download your app only 3% will ever spend money. In the world of sales and gambling, these are known as whales. Over 90% of your app users will never spend money in the games. In order to recuperate costs, you can monetize those users by serving them advertisements. This can be anything that takes you to an offerwall for a choice of things or watch a video, etc. and you will receive in-app currency (extra lives, more gems, a hint, etc).

    Advertisers like mobile because users usually “opt-in” to see the advertising—a captive audience.

    What does it all mean…not that much. Yes, marketers like data. We all know this. We want to most effectively advertise and ultimately sell a product. Should you be afraid of Free Apps, no.
    Yes, there are some predatory apps that exist and try and steal your data but Apple and Google are very good at screening apps before they go to the market place.
    Data is happening for better or for worse—you have a choice to either run-and-hide from it (which is impossible just putting your head in the sand) or you can take advantage of the information is available to better suit the needs of your clients. The choice is yours!