In November of 2013, In-App Purchases (IAP) were directly responsible for generating between 92% and 95% of the total monthly revenue of Apple and Google’s app marketplaces. Now being offered in over 71% of the apps available in the Apple Store, it’s clear that In-App Purchases are the new standard for monetization in the mobile industry and are here to stay.
What is the “Freemium” Model?
In-App Purchases can be a great way to start generating revenue through your app, especially with a declining number of users willing to outright purchase an app they haven’t even tried. As of June 2014, there were 1.2 million apps in the Apple app store. With the number of those that can be downloaded for free, users will shop for any available free options before choosing to pay for a download. In response to this, developers have been shifting to a “freemium” revenue model, in which they offer a mix of free and paid content within the app. Gaming apps initially pioneered the approach by charging users for things like extra lives, more levels, and extended time. Convincing someone that they should spend a couple dollars on a unfamiliar app that’s surrounded with free options is a hard sell, even if the app promises to do everything they need. It’s far easier for developers to convince a user it’s worth his $2.00 to enhance an experience he’s already invested in. How else could FarmVille have convinced anyone to spend actual currency on obtaining virtual animals for a virtual farm? Their in-app revenue reached over $1billion in February 2013. Realizing that the freemium model was applicable beyond gaming, Mobile Roadie began offering an In-App Purchases package so clients would have another option for increasing their app’s revenue.
Adding In-App-Purchases to a Content Strategy
Layer General Content With Premium Content:
By mixing free and paid content, you increase the chance that someone who values the free content will make the leap to purchasing the content they’re missing. If you’re selling exclusive video, offer free video as well so users can preview their purchase with the free content. Ideally users should view IAP not as an interruption to their experience but rather as an opportunity to expand it and get even more from an app.
Follow the Principles of Good Content:
Users will view free content as a teaser for the premium media, so make sure both are high quality and substantial. If your content is uneven in quality, users will either be unwilling to pay money for more of the same or disappointed their purchase wasn’t as strong as the free media. Make it easy for users to justify their purchase, both before and after they’ve been charged. Have a high replay value so users can enjoy what they paid for and spend more time in the app. If they’re satisfied, your customers are likely to come back for more!
Set Different Price Points:
Offer multiple price points for different kinds of content to appeal to as many users as possible. Videos on the Rolling Stones app are priced between $0.99 and $4.99, while you can buy a song for $1.29 or album for $12.90. A range of prices allows people to spend what they’re comfortable with, and leaves room for future purchases!
Look at an Example:
The Official App for The Rolling Stones is an excellent example of how IAP can be executed successfully as part of a larger content strategy. By keeping already available content free and charging for unreleased video and recordings, the band manages to entice and excite both casual listeners as well as their biggest fans. Consider the high profile content you could leverage by releasing exclusively as an IAP and start to map out how it would fit alongside other content. Interested in learning more? Looking to implement IAP with an existing Mobile Roadie app? Contact us!