People just love "freemium" things, and there are good reasons why it's a promising pricing strategy.
Freemium is where developers offer their products for free, but requires payments if users want additional features, services, or virtual or physical goods.
If compared to free software or the more traditional pricing strategy where users need to pay first before using, "freemium" allows developers to take advantages that cannot be present on those that are either "free" or "premium." Here, developers of those apps get revenue from users' in-app purchases.
The strategy is promising because it allows users to enjoy a product at a premium quality without having to pay for anything, but allows addicted users (gamers) to buy the things they like to improve experience. It's promising because these people can spend a lot of money because of their recurring purchases, and this account to a whole lot of revenue for the developers.
App stores, including platforms like Facebook also take their share of this revenue, because after all, the business is promising.
But on Android, Google has taken a huge share of revenue from app developers. For this reason, Facebook announced that it's forgoing its 30 percent share of Instant Games in-app revenue on Android.
On the official Instant Game Page, Facebook revealed this update, saying that: "We are focused on making the Instant Games platform an environment that is rooted in strong economics for our developer partners."
Instant Games are casual titles that users can play and share in messenger apps, such as Facebook Messenger. Facebook launched Instant Games in 2016, and saw good results by partnering with those like Zynga’s Words With Friends and classic games like Tetris.
After rolling out Instant Games to all Messenger users, and added livestreaming and chat, Facebook finally enabled in-app purchases to instantly monetize Instant Games.
Starting that time, Facebook said that developers would receive 70 percent of their Instant Games revenue, with 30 percent going to Facebook. But apparently on Android, developers also had to share 30 percent of their revenue with Google.
Because Google took the cut first, Google gets 30 percent of the total, and Facebook took 30 percent of what's left (which is significantly smaller). This leaves developers with only 49 percent of the total revenue on games they had created.
After evaluations, Facebook decided to roll back its revenue share, so developers only have to pay Google on Android.
But still, business is business, and the app industry is indeed promising.
With Facebook stops cutting developers' revenue, the company is rolling out ad units for Instant Games, enabling developers to run user-acquisition campaigns.
This ad format is a click-to-play experience, where Facebook users can see the ads and click on them to directly play on Instant Games on Facebook and Messenger.
Because they are ads, developers are required to pay Facebook for the advertisements.
So here, Facebook ditched one monetization source, and introduces another where it can still generate revenue from Instant Games.
The only difference is that Facebook is getting revenue from developers that purchase the ads. Those that aren't willing to put their games up front, can enjoy their increased revenue.
Read: Facebook's Instant Games Feature Starts Allowing Developers To Monetize Their Games With Ads