The Pitfalls of In-App Purchases (Part 2)

The in-app purchase model has come under a great deal of scrutiny lately, and last week we took a look at one of the most important things to avoid when monetizing a mobile app using the in-app purchase model.  The last thing you want is your customers to feel they’ve been tricked into downloading a “free” app, only to discover that essential features remain unavailable until money exchanges hands.  However, it’s also important to set up your in-app purchase system so that your app does, in fact, make money.

The game Ski Champion, for example, seemed to get off to a great start, amassing about 200,000 downloads in two months.  Unfortunately, its developers failed to optimize the in-app purchase system in the app, with the result being that those 200,000 downloads only generated $566 in revenue.  That’s a conversion rate of 0.1%, and not the 1%-5% that’s commonly cited for mobile apps using the in-app purchase model.

Ski Champion’s developers are planning to overhaul the in-app purchases in a future update, but as the creators of Whale Trail discovered, if handled improperly such updates can lead to significant backlash by the app’s users.  While the development teams are merely trying to correct a pre-release error that compromised their ability to generate revenue, it looks like good old-fashioned bait-and-switch from the user side.  It’s much safer to get it right the first time.

And how does one go about that, exactly?  David Ngo of Loqheart warns that focusing strictly on gathering a consumer base can take its toll once developers realize that their monetization model isn’t up to snuff.  Ngo offers two useful pieces of advice.  First, reduce the “friction to purchase” – in other words, “keep interfaces super simple and allowing one-click purchasing for impulse buys.”  Second, remember that users who purchase in-app currencies spend either very little or a whole lot; there aren’t many in between, and thus the price points for in-game purchases should reflect this reality.  So, if you’re selling in-game gold, or krill, or ski passes, or whatever, make sure there’s at least one purchase available at 99 cents, and another at $50.

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Mark M. Stetler is CEO of AppMuse and its related businesses: iPhoneAppQuotes.com, iPadApplicationQuotes.com, AndroidAppDevelopmentQuotes.com, and BlackberryAppDevelopmentQuotes.com. AppMuse is the Internet's leading provider of free app development quotes from experienced, pre-screened app developers for iPhone, iPad, Android, and Blackberry smart phones.

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