A second strategy that is seeing an increasing uptake amongst app developers is In App Purchases (IAP). In this scenario a full version of the game or program is offered for free but within the app are opportunities for users to buy items or add-ons that will improve the user experience or expedite their progress through a game. A perfect example of the IAP model is Candy Crush whose addictive Technicolor delights I have blogged on previously. Once hooked on Candy Crush and using it to avoid any of life’s slower moments a user often finds their progress through the hundreds of levels obstructed, either by a particularly fiendish level or by regular barriers placed in the user’s progress by the game developer. These barriers require users to complete three additional challenges in order to progress with the game. Nothing unusual there, except than only one challenge may be played every 24 hours...72 hours with only three levels of Candy Crush! “but, but...” the user finds themselves thinking “ there must be some way around this” and indeed there is. A single one off payment will allow you to skip merrily past the obstacle and onto the next 15-20 levels before another obstacle appears. What about those fiendishly difficult levels which seem to be slipped in from time to time? For just 69p a gamer can buy ‘power-ups’; special candies with special powers to make the level more achievable and help the user advance in the game. A third way of making a user open their digital wallet is by restricting the number of lives they have. Fail a level and you lose a life. Fail five times in 20 minutes and the game is closed to you until you get more lives. Lives are restored at a rate of one every 20 minutes but again a small one off payment can get around this obstacle and allow the gamer to merrily keep on crushing candies.
In 2012 8% of the top-grossing games relied on in-app purchases as a significant part of their revenue model. In 2013 the number had jumped to 52%. This increased uptake in the use of IAP helped propel top-grossing games to a 79% increase in total revenue.
Freemium (free-premium) apps with in app purchase already generate the majority of app revenue and there is still plenty of growth potential for that business model. The U.S market has enjoyed strong growth, but China and Japan are showing larger revenue shares from the freemium apps, with each taking a record 94% in January 2014.
In 2012 8% of the top-grossing games relied on in-app purchases as a significant part of their revenue model. In 2013 the number had jumped to 52%. This increased uptake in the use of IAP helped propel top-grossing games to a 79% increase in total revenue.
Freemium (free-premium) apps with in app purchase already generate the majority of app revenue and there is still plenty of growth potential for that business model. The U.S market has enjoyed strong growth, but China and Japan are showing larger revenue shares from the freemium apps, with each taking a record 94% in January 2014.
To understand how individual apps monetize, Distimo looked at the average revenue per download (ARPD). By this metric, the most lucrative countries for app developers are concentrated in the Asia-Pacific region. Japan was the leader by far. On average, one app download there is worth $5.32 through add on purchases made after download.
Data like this can help to inform app developers, especially those of us who are new to the app creation market about the best way to monetize thier programs and of regional differences in purchasing behaviours. Social scientists who are developing apps with business or training potential might find less use of the freemium strategy than offering a "lite" version of their app with reduced functionality purely because of the fact that they have limited additional products to sell.
Data like this can help to inform app developers, especially those of us who are new to the app creation market about the best way to monetize thier programs and of regional differences in purchasing behaviours. Social scientists who are developing apps with business or training potential might find less use of the freemium strategy than offering a "lite" version of their app with reduced functionality purely because of the fact that they have limited additional products to sell.