Study Shows Engaged App Users Pay More

The prevalence of freemium games and in-app purchases surged in 2011, and will only continue to grow in 2012. Many developers have found the freemium model to be significantly more lucrative than a traditionally priced app thanks to in-app purchases, which can include virtual currency, additional levels, new weapons, or other similar features.

What spurs people to make in-app purchases? According to a new study of nearly 30 million in-app purchases by Localytics, a solid, positive relationship with the game and the developer is key, because it encourages long-term usage of an app. Of the iOS users who made a purchase in the study, 44 percent of them did not do so until they had used an app on 10 separate occasions.

Did you know that 26 percent of apps are only used one time after being downloaded? That’s bad news when the average person waits 12 days before making an in-app purchase. Customer engagement and subsequent retention have become major driving factors for app publishers.

At this very moment, 17 of the top 20 top-grossing games in the App Store are freemium games, with DragonVale, Battle Nations, Modern War, and The Sims FreePlay in the top five. If you’ve played one of these games, you know that they start off strong, with a series of quests or tasks to complete with a sufficient amount of currency to get you hooked.

It’s beneficial for app publishers if users wait before making an initial in-app purchase, because the ones who use the app multiple times before dedicating money to the experience will make 25 percent more purchases during their lifetime as a customer. People who buy during the first session make an average of 2.8 purchases, while those who spend more time with the app make, on average, 3.5 purchases.

The goal for publishers shouldn’t be to encourage people to make a purchase right away, but instead, to turn their buyers into repeat customers. Just 16 percent of first-session purchasers use the app 10 or more times, and if a customer isn’t continuing to use an app, there’s no further money to be made.

Many freemium games and apps haven’t caught on to this yet – limiting resources and charging money far too early in the process – but as this new information catches on, we should see more apps that provide a better user experience before demanding real life cash in exchange for virtual goods.

Localytics’ study provides great information for publishers and developers, who should take away the importance of building a brand and encouraging app engagement among users, which will result in happier customers and more revenue in the long run.

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