Mobile App Monetization: A/B Test for In-App Purchases

As we previously discussed, In-App Purchase is becoming the primary source of app income. Aside from following implementation best practices, it is important to assess the performance of different in-app items. Assessment can come in the form of monetization KPI tracking or better yet,  an A/B test.

 

The tracking of user behavior isn’t of much use unless you know how to act on each behavior. A/B testing allows us, marketers, to explore and experiment different monetization strategies with minimal risk to revenue loss.

 

IAP A/B Testing Best Practices

 

When is the right time to start an IAP A/B test?

It is advisable to start monetizing with the use of in-app purchases after the app has significant traffic and loyal user base. You can start an A/B test anytime you feel the need especially when you are still tweaking with the IAP monetization strategies. There are times where an A/B test is vital, though. This includes times when you conversion rates seem to be slow or skewed, if revenue is low, and if you add or change any in-app item.

 

Which IAP elements should you test?

It is important to consider first and foremost which stage of the monetization funnel directly affects the result you want to test for. Is the low revenue because of the IAP’s placement, price, or its very nature? Test or add IAPs at each level or part of the app where you feel the users are inclined to spend money on. The test would show if user preference over one item before or after an action.

 

You don’t need to specifically test every in-app item. There are in-app elements/aspects that you can tweak and A/B test for performance:

  • Price
  • Placement (or frequency of appearance)
  • Design (color, layout, etc.)
  • Headlines Wording
  • Nature of the offer (bundles, boosters, extensions, etc.)

 

What types of test should you try?

You can try price point tests, placement tests, conversion funnel performance, and market segment test.

 

There are times when tests generate negative or no conclusive reports. This just means that you need to create and try new hypothesis or combinations.

 

How can you track the results?

App analytics tools are the first option. Google Analytics has a built-in A/B testing tool called Google Analytics Experiments. There are also other A/B testing tools that help in simplifying the testing process and offer special features that can help given an insight into what users want and need.

 

How long should the test last?

It is advisable to continue running the test until a statistically significant result is reached. That is if the aggregated data can be used for objective comparison. The longer the test runs, the more accurate the results will be.

 

But how would you know if an in-app purchase really won over the other? You can use A/B test duration calculators to calculate the amount of time necessary for the test. You can also try the traditional way wherein you just estimate the sample size you would need and then divide it by the daily traffic. The result would determine what sample size you should stop the test.

In-App Purchase Implementation Best Practices

Only about 5% of app users make any in-app purchase (IAP), but the average amount these users spend is about 20 times greater than the average spend of all paying users. In-app purchase is projected to be the primary source of app revenue, amounting to $37 billion by 2017. With these facts in mind, the optimization of in-app purchase design and implementation is vital in order to make the most of the huge revenue potential.

In-App Purchase Best Practices

Don’t Focus too much on In-App Purchases

IAPs should not take the attention away from the main function of the app. First and foremost, design an enjoyable and engaging app, and then design in-app items around it.

 

Keep In-App Purchases Simple and Practical

Don’t flood users with every thinkable item for purchase. Users should be able to use in-app items as commodities that can either aid in the gameplay or optimize the overall app experience. Apps with in-app purchases often alienate users as they see it as a “pay to win” scheme. Make in-app items a must-have but not necessarily the only means to proceed.

 

Be Upfront

Trust is something app users are wary of giving, especially to apps with game mechanics that are geared towards maximum monetization. As much as possible, be transparent especially if there are locked levels or in-app currency that can only be accessed through a purchase.

 

Pricing Strategies

  • Decoy Effect. There is a pricing strategy that looks quite irrational, but it is actually grounded in behavioral economics. One key concept is the perception of value in the context of other options. For example, users would most likely select an item that costs $4.50 over an item that costs $10.25. But if you add a third item costing $13 with an additional booster included, they would jump on the offer thinking that it’s a better deal. The second, more expensive offer was just used as a decoy to emphasize the value of the third offer and convince users to spend more than they would normally do.
  • Dynamic Pricing. This strategy basically entails that you offer flexible price points depending on your users’ spending propensity. There are three basic pricing points based on the main categories of app spenders: minnows, dolphins, and whales. Whales are the big spenders, accounting for 70% of revenue derived from in-app purchases but they only comprise 10% of paying users. Dolphins are considered as mid-level spenders while minnows are low-level spenders. Whales make on average 7.4 in-app purchases per month and opt for special and exclusive offers regardless of price. Dolphins and minnows, on the other hand, make only about 1.75 in-app purchases per month. These purchases also come in smaller amounts so you should offer them items with lower price points or currency bundles to extend the value of their purchase.

 

Create a Sense of Urgency

Free, sale and discount are powerful words in marketing especially if you add words like ‘limited time only’. You can use this to welcome new users and use as an incentive for engaged users. Offers like this can also increase app sessions since some users don’t want to miss out on offers that may suddenly appear.

 

Customize Common In-App Items.

You can get ideas for IAPs from your app users and even from your competitor’s users. App reviews, feature requests, and even social media comments can give you an idea on what users want but don’t fall into the mistake of just copying another app’s in-app purchases. Coins and gems are staples in games but make your offer in context to the app’s theme.

 

Give Purchase Suggestions during Key Moments

So, you’ve been upfront to your users and they know too well that there are virtual goods they can purchase. That means that you can’t just bug them at every move about making a purchase. The same approach when asking for reviews should be used. Prompts should appear during key moments in the user’s progress within the app. This can be during success/failure in passing a level or finishing a task.

 

Don’t Forget to Measure Monetization KPIs

Monitor and measure key KPIs for monetization. Use analytics to track user spending behavior and demographics. You can use data from these KPIs to then run A/B and price point tests.

 

Types of In-App Purchases to Consider

Aside from the regular power-ups, lives/turns, and gems/coins, there are also other popular in-app items that need some exploration. Some of these may not work for your app but can still give you some insightful ideas.

 

Remove Ads

This is considered as the most-utilized in-app offer. This can also be considered as a lifetime purchase so implementation is important. Visibility is the key. The ad removal offer should appear on every session, level, and after ads are shown. It needs to be as unobtrusive as possible, though, and seamlessly integrated into the app’s UI.

 

Bundled Items

As mentioned on the pricing strategies above, you can bundle in-app items together to create an enticing offer that’s difficult to refuse. One way to execute this is to offer bundled features for upgrades, mini-games, boosters, and in-app currency.

 

Lifetime Purchase

Single use or consumable items produce the most number of purchases but lifetime purchases are the money makers. You can offer subscriptions or upgrades and supplement it with secondary purchases like additional features throughout the app’s use.

One strategy that is commonly used in games is to include doublers. Doublers can be used for any booster or any other vital in-app item. The idea is that it will provide a lifetime value for your users.

 

Unlockable Features

This may include levels, mini-games, sequels, and character/item reveal. A common implementation of include users being able to bypass a locked advanced features of the game. This is perfect especially if users are required to wait for a certain amount of time to access said advanced features/levels.

 

Character Customization

A lot of users may not see the sense in collecting virtual goods that can’t aid in the gameplay. That’s where character customization comes in. You can provide accessories for in-app avatars or even entirely new characters they can use and collect. Most often, these collectible characters enable users to explore a new theme (seasonal or not), also somehow enabling them to customize their app experience.

Incoming search terms:

  • mobile game iap best practice

How to Succeed as an Indie Developer

How to Try to Succeed as an Indie Developer

Just like in the real world, only a few control the wealth of the app stores. So what can an indie developer do? Well, there’s one: just give up. But we won’t go that negative route. There’s still hope. Even if you feel lost in the flood of millions of apps in the app stores, or even if indie developer horror stories keep on coming, there’s still a way up.

These tips can help you jumpstart your career as an indie developer. Though these tips don’t cover everything that can get you from point a to b, it can encourage you to stop and think about what it really takes to make it in the app industry.

 

1. Set clear goals from the start.

Why do you want to be an app developer? What do you want to achieve? Take some time to just sit down and think about what direction you want to take. Most of the time, indie developers just plow into “mobile space” without any clear goal or plan. Some do have goals, but most often it’s not attainable. Think of plausible ways to achieve your goals. It’s either you start from scratch, slowly work your up, or just see how it would go. There would be obstacles, so be sure that you have “Plan B” for every step of the way.

2. Find your niche and excel in it.

As nice as “following your passion” sounds, sometimes being passionate about something is not enough. You need to excel in order to compete in a marketplace setting. As they say, you can’t be everything to everyone, or you can’t be what you’re not. You may love gaming but you don’t have the technical skills or back knowledge to design and sell one. But you’ve been in the software utility niche for so long, you know it inside out. Pick a problem in that niche and solve the heck out of it.

3. Believe that there’s a place for you in the industry.

Sometimes, you just need to believe. If you dwell so much on the numbers, you somehow become subjective. “It’s difficult for me to make it because I’m not a big budget developer.” Think that you will be one of those exceptions, not to give you false hope but to encourage you into thinking big.

4. Get it started now.

Just do it – now.

5. Buy into your idea and own it.

Ideas are flexible things, the only part that could go wrong is the execution. Instead of imagining details about your idea, set on to work to see if it is feasible even before you get invested. Consider it as a project and do the necessary research and see if it can be scaled and marketed to the public. If you can’t convince yourself that your idea will work, it’s time to go back to the drawing board. You should believe first before you can even convince others to do so.

6. Learn from apps that didn’t make it.

More often, indie developers jump into the temptation of emulating top apps. It’s not bad so to say; you’re basically reusing a formula proven to work but this strategy had also been the downfall of many indie apps. Study these apps’ shortcomings and learn from them. It is great to learn from mistakes especially if it’s not your own.

7. Optimize app development time.

Success may come slow and disappointingly out of reach if you just wait for one app to bring you there. Create simple apps at first so that you can publish several apps in a year. This way, you can test your ideas and tweak it as you go. Your likelihood of success also increases as you build your app portfolio.

8. Keep the quality up.

Keep it simple, stupid but design is still everything. Find the sweet spot between simplicity and good design and you will have a practical app in the process. Quality need not sacrificed. This is especially important in a highly competitive and ever-changing market.

9. Be critical of your own work.

You can get too invested in your idea that you can no longer notice obvious flaws in your app. Put yourself in the shoes of your prospective users and objectively critique your own app.

10. Don’t sell out even when success seems out of reach.

Just don’t give up. Experts advise that instead of seeking for investors you should build apps in your spare time. You don’t need to pack your bags and leave everything behind just to be an indie developer in the first place. You can work for “the man” as they say. This way, you can still have control over what little success you will achieve.

11. You don’t need to do it all by yourself.

Build a team or join a team or other indie developers that’s on the same boat as you. This way ideas can be shared and developed more efficiently. Resources can also be pooled so that app distribution and marketing would have more impact.

Pokemon GO Logo

Pokémon Go App Revenue

How Profitable is Pokémon Go?

 

The Pokémon Go app is said to be the biggest game app in US history, crushing records with app revenue double the industry average. But does it keep on getting better from there? Pokémon Go actually made $35 million in its first two weeks! Therefore, it seems like there is no stopping the Pokémon Go phenomenon but is the app here to stay or is it just another hype?

 

App Revenue and Key Performance Metrics

Acquisition

  • 4-5 million app installs a day
  • In the US alone, the app was downloaded more than 7.5 million times from both the Google Play store and iOS App Store.
  • Just two days after its release, Pokémon Go was installed on 5.16% of all Android devices in the US.

 

Engagement

  • On July 14, 2016, the app reached 26 million active users for both Android and iOS and as of July 18, 2016, it dropped to about 21 million active users.
  • As of July 8, 2016, average time in app (for Android) is 43 minutes and 23 seconds, considerably higher than social apps like WhatsApp (00:30:27), Instagram (00:25:16), Snapchat (00:22:53) and Messenger (00:12:44).

 

Retention

  • The app’s retention rate is double the industry average with about 7 out of 10 downloaders returning to the app the next day.
  • On its first week, about 60% of downloaders from the US use it daily.

 

 

Monetization

  • The app’s revenue is also double that of the average for casual games. Casual games average revenue per daily active user (ARPDAU) is only $0.10 while Pokémon Go reached $0.25 ARPDAU.
  • As of July 11, 2016, Pokémon Go is earning $1.6 million (for the iOS app only) a day.
  • Pokémon Go’s paid users are ten times that of Candy Crush’s.

 

Positive Contributors in Making Pokémon Go Stick

  1. Pokémon had been around for a decade – it’s not just a hype, it’s a cultural phenomenon. The app is just a new approach in targeting an established market. As long as there are Pokémon fans, the app will thrive.
  2. There’s much room for expansion. Pokémon Go can expand its content offerings relative to the Pokémon franchise. Right now, the app only features the original 150 Pokémons but there are about 570 other Pokémon as of Pokémon X/Y’s release and more to come with the release of Pokémon Sun and Moon.
  3. The app also has great monetization opportunities. This starts with the very premise of the game. The user either needs to spend a lot of time on the game to progress or purchase in-app items to bypass the process. Therefore, the app depends on the number of users and not on whales for effective monetization.

 

The massive success of Pokémon Go undeniably contributed to the boost in Nintendo shares (up to 24.52%). But an analyst believes that in order to contribute real impact to Nintendo’s profits, the app should earn a minimum of $140-196 million every month consistently.