Google's free-to-play decision could rock the app economy

Posted on July 21, 2014 by Eric


Update: After this post was published, Google changed the label of the Top Free Apps chart in EU countries to read, simply, Top Apps (and for categories, eg. the top downloaded games chart now reads Top Games, not Top Free Games). This appears to be the extent of the change for now, although more substantive changes could always be made in the future.

On July 18th, the European Commission announced that Google would no longer label free-to-play games as 'free' in EU countries. The decision on Google's part was the result of an appeal the commission made to both Google and Apple in September.

The development is not surprising; the European Commission has been discussing the possibility of regulating the freemium app economy for some time. The position the European Commission sent to Google and Apple in September presented four fairly mild requests about how free-to-play games (and the position applied specifically to games, not all freemium apps) are managed in platform app stores. From the position:

- Games advertised as "free" should not mislead consumers about the true costs involved;

- Games should not contain direct exhortation to children to buy items in a game or to persuade an adult to buy items for them;

- Consumers should be adequately informed about the payment arrangements for purchases and should not be debited through default settings without consumers’ explicit consent;

- Traders should provide an email address so that consumers can contact them in case of queries or complaints.

The principal change Google appears to be implementing in capitulating to the European Commission's request, as per the press release issued on July 18th, is that it will no longer label any games (again, specifically games, not all freemium apps) that offer in-app purchases as free. From the press release:

Google has decided on a number of changes. Implementation is underway and will be completed by the end of September 2014. These include not using the word "free" at all when games contain in-app purchases, developing targeted guidelines for its app developers to prevent direct exhortation to children as defined under EU law and time-framed measures to help monitor apparent breaches of EU consumer laws. It has also adapted its default settings, so that payments are authorised prior to every in-app purchase, unless the consumer actively chooses to modify these settings.

It should be noted that these changes will only apply to EU stores on Google Play and that Apple has not indicated that it will make similar changes to the App Store. But despite the somewhat narrow scope of the policy implementation, the effects of these changes could have fundamentally alter app discovery and marketing, for two reasons.

Discovery for pay-to-download apps will effectively die

The most absolute and concrete (ie. not subject to loose interpretation) aspect of Google's policy change in Europe is its declaration that games that contain in-app purchases may not call themselves free. Assuming this change will apply to the Top Downloaded charts, it means that free-to-play games will now be considered paid and thus included in the Top Paid, rather than Top Free, charts.


This is a significant development. According to a June 2013 report by Distimo, the number of downloads needed to attain top 10 chart position on the Top Free chart (US / iPhone) was considerably higher than for the Top Paid chart. Assuming this relationship holds true for Google Play in European stores, moving free-to-play games to the Top Paid chart will result in their near-total appropriation of that chart, effectively killing discovery for pay-to-download apps.


In this new dynamic, the Top Paid chart will be dominated by free-to-play games, and the Top Free chart will be dominated by completely free utility and social networking apps like Facebook, Instagram, Snapchat, etc. Pay-to-download apps will have no channel through which to be discovered, which might instigate an exodus from that business model.

More apps may shift to an advertising business model

With free-to-play games moving to the Top Paid charts, bringing with them their massive marketing budgets and competitive frenzy over visibility, an opportunity will materialize in the void of the Top Free charts: games that monetize exclusively through advertising (or even other, non-direct methods) will now have the ability to reach chart position where once the burden of positive LTV margin was too great.

Absent free-to-play games, the Top Free chart will be dominated by the various 'essential' apps (such as Facebook, Instagram, etc.) that spend very little or nothing on app install ads and generate a constant and predictable stream of installs through their existing gravitational pull. Thus the baseline of app installs needed to reach a visible position on the Top Free chart will shift downwards from a level at parity with the top free-to-play games to a level at parity with the top 'essential' apps.

This shift in baseline installs for visibility (at which point 'organic' installs are generated) reduces the total cost of a marketing campaign and thus the effective CPI required for reaching a top position in the Top Free chart. Of course, the assumption here is that a visible position (ie. Top 10) in the 'new' Top Free chart will generate as many installs as the 'old', pre-policy change chart, which may not be true. But if it is, the LTV economics of chart position will change as the same number of installs are delivered for a far lower campaign price. Advertising revenues alone can't currently support the marketing budgets required for Top Free chart visibility, but if the competition leaves, they might.

Note that CPI prices will not change; free-to-play games will still be competing in the same app install marketplace as all other apps. The difference catalyzed with this policy change will be a decrease in the number of installs needed for visibility; again, assuming the benefits of visibility ('organic' installs) don't diminish but the cost of that visibility does, the effective CPI of a campaign that reaches a top position and generates considerable 'organic' installs will decrease. The marginal CPI of an app install will remain exactly the same.

Will it work?

Google's policy change in Europe may be seen as an experiment: does this new treatment of free-to-play apps inspire more confidence in the app ecosystem and thus drive engagement? If it does – and how that will be evaluated remains to be seen – Google may roll the change out globally.

But even if this new treatment works for Google, Apple may not follow suit. Apple and Google have very different goals with their app stores: Google seeks to expand the reach of its software platform to drive search queries and other advertising-supported interactions, and Apple seeks to expand the reach of its hardware offering. Success, then, isn't a universal standard; even if Google applies these changes globally, it might be the only one to do so, further differentiating the experience for app developers of operating on Google Play versus the App Store.

  • Fascinating post, and a great example of the law of unintended consequences. This change will make it harder for people who want to pay upfront to find the games they want and it will also drive the ad-funded model to be more prevalent. Personally, I'm much happier with my kids playing games with IAP than ones with ads, but hey ho.

  • mcelroy

    I really like this post. Helped me think through this change and the implications.

    Possible disagreement-

    That f2p games will be pushed into the same category as current paid games- because they won't be labeled as free. I can imagine a new term emerging for what we now call paid- basically renaming the charts but keeping them pretty much the same.

    As you point out- otherwise discovery for paid games gets really really hard. If you can't possibly chart then the economic viability of making paid games goes way down.

    iOS user here so can't comment on Android- but Apple's featured games these days are often high polish and paid games. Paying for premium content is a trend they are trying to drive. Assuming Android is on the same path- merging the charts is shooting themselves in the foot.

  • Makes me want to make some actually free stuff. Like, no ads, no IAP, just free.

  • Sarah Northway

    "Assuming this change will apply to the Top Downloaded charts, it means that free-to-play games will now be considered paid and thus included in the Top Paid, rather thanTop Free, charts."

    This doesn't necessarily follow. Yes, Google barely promotes paid games anymore and probably wouldn't care if they disappeared. But what percentage of popular free games have no IAP - aren't they all cruddy jigsaw puzzles and dressup games with the occasional Threes clone? What's the point of keeping a "truly free" category for those if nobody downloads them anyway? I think we're more likely to see Google rebrand the "free" side as something new. From the way things are going, maybe just "games" vs "paid games".

    • Eric Benjamin Seufert

      I'm talking in the article about the "general" Top Downloaded / Grossing charts, not the games-specific charts. Included in those charts are "truly free" apps like Facebook, Instagram, etc. that offer no IAPs, as well as Spotify and Skype, that are freemium products but likewise don't monetize via IAPs. Also, there are plenty of games that monetize exclusively through ads that would still be included in the free chart were Google to move games with IAPs to the paid chart.

    • ESeufert

      "But what percentage of popular free games have no IAP - aren't they all cruddy jigsaw puzzles and dressup games with the occasional Threes clone? What's the point of keeping a "truly free" category for those if nobody downloads them anyway?"

      Many free games are supported exclusively through advertising. But I'm not just talking about the Games charts -- the "overall" charts are dominated by games but also feature many freemium non-gaming apps (Instagram, Facebook, Skype, Snapchat, etc.) in the Top 10 - 20.

  • Sarah Northway

    What they *should* do is force developers to put a cap on the $$ that can be spent on IAP in their game, then display that total just above the price tag. Temple Run 2: 5 IAPs $100 max FREE

  • Robin Clarke

    Google have simply renamed the existing "Top Free Games" chart "Top Games", so yeah, your assumption is pretty badly flawed. There's nothing in the EU ruling about presenting a chart of the most downloaded games, and a chart of the top selling (implying paid) games, without using the word "free" anywhere.

    • ESeufert

      We have no idea what the extent of the decision will be; renaming "Top Free Games" to "Top Games" probably isn't it.

      And you're missing the point. If Google lumps all games together, paid games get less exposure. If Google puts free games in the Paid chart, paid games get less exposure. The only way paid games don't get less exposure is if Google creates a separate chart / category for games with IAP, which I don't think it will do.

      • Robin Clarke

        Google have removed the word "Free" from everywhere on the Play store. That is the full extent of the change.

        Google aren't lumping all games together. They're not obliged to make any further changes to the chart system they currently have in place.

        • ESeufert

          We'll have to wait to see if this is true; I have a feeling they'll be making more fundamentally structural changes in the coming months (what they've done so far is purely cosmetic and doesn't address the heart of the EC's complaints). You may be right, but I think bigger changes are yet to come.

  • I can't see why they can't have a third chart like Top IAP Apps, for want of a better title.
    It seems to me that would help a lot of issues:
    a) non-tech savy people would instantly know more about the monetisation of the apps they're downloading (assuming IAP is properly explained at point of download),
    b) app store owners are fulfilling any legal requirements over free vs iap and improving relations with their customers in one go
    and c) it would help developer economics by improving visibility i.e. 3x top 10s for people to look at vs 2x top 10s.

    If Google is lumping all games together it would make discoverability even harder for all games regardless of monetisation options.

    I must agree with Nicholas too, as a developer and a father, I know I have a lot more control over what IAP options are shown to my children (along with the magic power of "No") and in my own apps compared to grabbing random adverts from companies like chartboost