All Fun and Games: Technology for Maximizing In-App Purchases

    By Rachel Kaufman | Small Business

    With free apps accounting for nearly 9 out of 10 app downloads, developers need other ways to make money. They often turn to advertising or the “freemium” model.

    In a freemium model, the game or app is free to download, but extras (power-ups and extra lives) cost real money. In fact, 95 percent of app users may view ads, but the 5 percent who make in-app purchases account for 90 percent of the actual dollars rolling in.

    But unless you’re the makers of Candy Crush Saga, who are raking in (according to some estimates) half a million dollars a day, finding that sweet spot where gamers and other app users are willing to shell out for extras inside your app isn’t about waiting to strike it rich. It’s not a lottery – it’s science.

    Mobile analytics companies crunch app numbers to determine which apps have the most chance of netting an in-game purchase. For example, Apsalar recently found that strategy games have the highest tendency for in-app purchases. A user of a strategy game is 18.5 times more likely to buy a cheat or power-up than a player of a game classified in the Apple App Store as “arcade.” Other popular game categories include trivia, adventure, and RPG. Educational games, on the other hand, are unlikely to generate any in-app revenue.

    One less-surprising finding from Apsalar’s research is that games with higher engagement levels generate more purchases. In other words, users who interact with an app for longer are more likely to buy something from that app.

    Perhaps to that end, Amazon recently launched Engagement Reports for apps in its store, which provides data on how well a developer’s app is doing on Kindle Fire and any Android device running the latest version of the Amazon App Store. The report details not just the number of people who have installed the app, but the number of people using the app on a daily or monthly basis, the retention rate, and the “sticky factor” – a number that analyzes whether first-time users keep coming back to the app.

    Finally, Chartboost, a mobile-app services company, recently launched the Chartboost Store, which tracks purchases within a freemium app with just a few lines of code. Developers can see in real time how their digital wares are selling and adjust prices or promotions based on who’s buying what.

    With some estimates saying that the in-app purchase market will be worth $9 billion ($3 billion for tablets, $6 billion for smartphones) by 2016, knowing where your customers are and what they want to purchase will be more important than ever.

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