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Nicholas Lovell
Home   >   Self-Publishing   >   Sales   >   Freemium wins: the average in-app purchase is worth $14

Freemium wins: the average in-app purchase is worth $14

By on July 26, 2011

Regular readers will know that I am a great believer in the free-to-play model, the future of games (and possibly all media) is about satisfying the power-users and superfans (otherwise known as whales) and the anyone pursuing a Lite+Premium strategy is leaving enormous amounts of money on the table.

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Flurry has just released some staggering statistics that confirm that this is true. In particular, they say that the average transaction value for an iOS or Android purchase is $14.

I’ll repeat that: average IAP spend on iOS and Android is $14.

That’s 14x the revenue that most developers get with a Lite + Premium strategy, and is based on an analysis of how 3.5 million consumers spend their money in games.

if you are still making games where the maximum revenue you can make from a single customer is $0.99 (or even $1.99), I’d stop right now. You are wasting your time and effort.

About Nicholas Lovell

As well as founding Gamesbrief, Nicholas is a consultant to the games industry on online and corporate strategy and financial matters. He can be contacted at nicholas@gamesbrief.com Following a decade long financial career in the City of London, Nicholas founded Lodestar Partners, a corporate finance boutique that focused exclusively on the games industry. From 2006 to 2008, Nicholas was CEO of GameShadow, a games website and patching engine. He is a non-executive director of developer nDreams and provides consultancy services to a number of companies including Firefly and Huddle.
  • http://twitter.com/dbltnk Alexander Zacherl

    Very interesting figures. And I mostly agree with your analysis. But this sentence is a bit off:

    “if you are still making games where the maximum revenue you can make
    from a single customer is $0.99 (or even $1.99), I’d stop right now. You
    are wasting your time and effort.”

    This can only be true if your only concern is maximising your profit. Not if you actually care about what (game) you are making.

  • http://www.gamesbrief.com Nicholas Lovell

    That’s a fair point, although I am shamelessly capitalist (and this blog is called “GAMESbrief: the business of games”

    On the other hand, I think that freemium business models mean that people can make a living making games that appeal to smaller niches using this model, which improves the diversity of games, rather than diminishing it,

  • http://twitter.com/export2reality Ben Wilkinson

    Interesting stat, though it does make me question a few things, mainly, how many users dont make a transaction at all to every $14 spent? Or does this include the users who are using the app for free?
    If it doesnt, and over 14 users then surely the $1.99 game is still a viable route to profit.

  • http://www.gamesbrief.com Nicholas Lovell

    It’s complicated.

    For example, Nimblebit says that Tiny Tower has a 3.8% conversion rate to paying (see http://www.gamesbrief.com/2011/07/ios-tiny-tower-on-track-to-make-3-million-in-its-first-year/). But it also got a million users really quickly (I think a week), which would be very hard for a paying game to achieve.

    So yes, it’s possible that the $0.99 model would work. But spreading the word for a game that is not genuinely free (and I believe that Tiny Tower is genuinely free) is much harder.

    In the end, I believe that allowing your superfans to spend a lot of money will make you a lot more revenue than a one-price-fits-all approach.

  • http://twitter.com/export2reality Ben Wilkinson

    Yeah I see what you mean. I do wonder how a “full game” priced at $15 would fair if at random periods, it was completely free in order to spread the word about it. Based on that comparison you would only need 3.8% of people to pay for the game…im certain a much higher percentage than that would be too impatient to wait for it to be free again.

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