GigaOM » in-app purchase

9 in 10 app downloads are free as in-app purchase takes off

Ryan Kim — Tue, 11 Sep 2012 14:51:15 +0000

Mobile app lovers like their free software but that doesn’t mean developers ought to worry. That’s the takeaway from a new Gartner study that found free apps will represent 89 percent of global downloads in 2012 and will grow to 93 percent of downloads by 2016.

The forecast, if accurate, suggests that while downloads are exploding — 45.6 billion expected this year and 309.6 billion predicted by 2016 — people will buy fewer and fewer apps. And the amount paying customers will spend is also expected to go down. Gartner said that paid apps priced $2.99 or less are expected to represent 87.5 percent of all paid download this year and will account for 96 percent of all paid downloads by 2016.

This might sound depressing for some developers but the upside is that in-app purchasing is growing as a key monetization tool. Gartner found that apps with in-app purchase in which users can buy extra items, levels or services inside the app is expected to soar in the coming years. Apps that feature this approach are expected to increase from 5 percent of all apps worldwide in 2011 to 30 percent of all apps in 2016. And the revenue in-app purchase provides will grow from 10 percent to 41 percent over the same period.

This move to in-app purchase isn’t new if you’ve been following along. In a mobile games report it released in January, Juniper Research said worldwide revenues from mobile in-game purchases totaled $2.1 billion in 2011 and were expected to grow to $4.8 billion by 2016. We’ll be talking about app monetization strategy at GigaOM’s Mobilize conference Sept. 20-21.

Many developers are finding it’s easier to attract users with a free price tag and then monetize a portion of their audience through upgrades and additional purchases. There will still be a room for paid downloads and the revenues that model provides will still be substantial. That’s good news for developers who put out a quality product but may not drive enough download numbers to make in-app purchase work well or don’t have an app that easily lends itself to in-app purchases.

But the forecast suggests that the freemium trend is only going to continue and if app developers aren’t already considering it, they should look at how their app might adapt to this new reality.

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Why Amazon’s in-app sales of physical goods could be big

Ryan Kim — Mon, 10 Sep 2012 16:10:10 +0000

Amazon is giving mobile developers the ability to sell physical items in their mobile apps using a simple one-click process. The option, available for Kindle and Kindle Fire HD apps, will give developers another viable way to monetize their apps.

Activision is the first publisher to make use of the new in-app purchase option, which will be available in the game Skylanders Cloud Patrol. Users will be able to buy a physical toy for 99 cents using Amazon’s 1-click transaction system and have it shipped to their address. They will also be able to get a digital copy of their character that will be playable in the game.

As we’ve noted, mobile advertising is still waiting take off and in many cases it works better for apps that have a lot of usage. But now, developers who have some physical items to sell can enjoy the simple check-out process that makes Amazon purchases so easy and addictive. That could help attract more developers to support Amazon’s Appstore for Android.

Many developers are already seeing a better return on their investment in Amazon than in Google Play, even though Amazon’s mobile efforts are built atop Android. Flurry reported in March that among top apps that appear on the Apple App Store, Google Play and Amazon Appstore for Android, Amazon apps make 89 percent of the revenue per active user of the same iOS app while Google Play lags behind with 23 percent of the revenue per user. That was before Amazon officially turned on in-app purchase for its appstore apps. Now, Amazon will have another selling point for developers who are serious about monetizing their apps.

I’m not sure if this will be used primarily for toys sold in video games. That in itself is smart because there’s a lot of opportunities to get players, especially kids, to buy their favorite characters. But this could be huge if it’s used by bigger mobile commerce players. Most people use their phones to research rather than buy products because it’s not always simple to check-out on a phone. But if Amazon can make buying physical stuff in apps super easy, that could be a boon for a lot of sellers. And it could show that mobile has a lot of opportunity as a revenue generator for developers and publishers, despite some early signs that it’s still lagging.

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Where Apple spends its money in Washington, plus 4 other Apple stories to read today

Erica Ogg — Mon, 23 Jul 2012 17:51:47 +0000

With so many people writing about Apple, finding the best stories and reports isn’t easy. Here’s our daily pick of stories about the company from around the Web that you shouldn’t miss:

Apple was once again outspent by Google in lobbying our nation’s policymakers. Still, as Fortune points out, it’s interesting to see which causes Apple cares about most: patents, copyright law, batteries, and more.
CEO Tim Cook is an efficiency expert. And The Wall Street Journal has a piece today exemplifying what he brings to Apple: the company gets paid for its products faster than it pays to make them.
The loophole that allowed an in-app purchase hack for iOS apps has been closed by Apple. And Alexey Borodin, the Russian developer behind the hack, admits he’s been defeated, according to ZDNet.
Reuters says it has confirmed what has been rumored for months: that Apple is set to change up the docking connector on the next iPhone.
Cult of Mac looks at the choices consumers face when they want to buy ebooks and how Apple’s iBooks can present a particular dilemma for buyers.

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How Apple is fighting iOS in-app purchase hack

Erica Ogg — Mon, 16 Jul 2012 14:41:19 +0000

On Friday, Apple issued a brief statement that it was looking into a published workaround that lets iOS users get in-app purchase content for free. It doesn’t look like Apple has found a true solution yet. But it’s certainly been busy this weekend, including taking down the original demonstration video on YouTube and getting PayPal to block donations.

The workaround was published last week by Alexey Borodin, a Russian hacker who demonstrated in a (now inaccessible) video on YouTube that with the installation of two certificates and a tweak to an iPhone’s Wi-Fi settings, he could bypass the step that requires payment for extra content within some iOS apps. (Macworld has more detail on how he’s doing it.)

By Friday afternoon, an Apple representative told us the company was “investigating.”

Here’s what Apple has done since then, according to The Next Web:

Over the weekend, Apple began blocking the IP address of the server used by Russian hacker Alexey V. Borodin to authenticate purchases.

It followed this up with a takedown request on the original server, taking down third-party authentication with it, also issuing a copyright claim on the overview video Borodin used to document the circumvention method. PayPal also got involved, placing a block on the original donation account for violating its terms of service.

What Apple hasn’t done? Actually gotten in touch with Borodin, according to the report.

And Borodin isn’t backing down, he says he has responded to Apple’s manuevers by moving his server to another (unnamed country) and is using a different PayPal account to gather donations for his project. So, while Apple is attempting to contain this security breach, developers can’t rest easy yet — the problem has not yet been solved.

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Tips for preventing the iOS in-app purchase hack, plus 4 other Apple stories to read today

Erica Ogg — Fri, 13 Jul 2012 19:36:33 +0000

With so many people writing about Apple, finding the best stories and reports isn’t easy. Here’s our daily pick of stories about the company from around the Web that you shouldn’t miss:

Following this morning’s revelation that a Russian hacker has found a way around paying for iOS in-app purchases, ZDNet offers some tips for app makers looking to protect themselves from this vulnerability.
Even though Apple is following U.S. policy about not selling goods that will end up in Iran, it’s not doing much good in keeping iPads and iPhones out of the country. Reuters has a report today detailing how the nearly 100 Apple resellers in Tehran have, despite the trade embargo, been doing great business selling Macs and all sorts of iDevices.
The Atlantic looks at Apple’s “annoying” habit of killing off older technologies before they’re actually dead, and how in the long-run it’s pushing us all faster into the future.
Digital artist Kyle McDonald has a fascinating retelling in Wired of what happened last summer when the Secret Service investigated him for his art project, which included installing software on the computers in a New York City Apple Store that collected images of random customers staring into a laptop’s screen.
In a piece looking at how major American companies contribute to the U.S. economy in ways beyond just hiring workers, The Atlantic notes how tech firms like Apple and Google rank among their peers in big business.

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Amazon turns on in-app purchasing for its Appstore apps

Ryan Kim — Tue, 10 Apr 2012 14:15:26 +0000

Amazon is turning on a key money-making tool for developers in its Appstore for Android, letting app makers offer in-app purchase through Amazon. The service, which has been in testing recently, allows developers to easily sell in-game currency, upgrades, content and magazine issues with one click, helping developers, especially makers of freemium apps, pull in substantial revenue.

As we’ve noted before, in-app purchase has become a huge monetization tool for iOS and Android developers, who are increasingly turning to freemium models to make money. By turning on its own in-app purchase system, Amazon can continue to tout its app store as a great place to make money. Developers for the Kindle Fire will have to use Amazon’s in-app purchase system while non-Kindle Fire apps sold in Appstore for Android can make use of other payment systems. But with Amazon’s easy one-click system, which takes advantage of millions of credit cards on file, developers should be able to expect a good return for incorporating Amazon’s in-app purchasing API.

Amazon developers will get 70 percent of the revenue from in-app purchases, the same as Apple’s App Store. Even if Amazon discounts the in-app purchase, developers still get their same cut of the list price. That’s an important distinction because Amazon got flak from developers for the way it was allowed to control the price of app downloads in its store.

Flurry recently took a look at in-app purchasing systems from Apple, Amazon and Google and found that Amazon’s system generated 89 percent of revenue per active user compared to the best performer, Apple’s App Store. That put it well ahead of Google, which had just 23 percent of the average revenue per active user compared to Apple’s App Store.

Michael Ritter, senior vice president Licensing & Distribution at Social Gaming Network said in Amazon’s blog post that the fact that Amazon has millions of customer accounts and has a very simple check-out system encourages in-app purchases. That’s been a problem for in-app purchases on Google Play because many people still haven’t set up payment accounts. Perry Tam, CEO and co-founder at Storm8, said his company was able to increase revenue by tenfold within two months for a test game. Within two weeks, Store8 had four of the top five free apps in the Amazon Appstore, Tam said.

With 34,000 apps, Amazon still has a much a smaller app store compared to the iTunes App Store and Google Play. And it received some early criticism last year for the way the store worked. But with the launch of the Kindle Fire, which relies on the Amazon Appstore for Android for app downloads, the store has helped more developers make some serious money. Developers have been saying because of Amazon’s slick buying process, they’re seeing real growth on paid downloads, something Google Play is still not known for. Now, by adding in-app purchase to the mix, Amazon can appeal to not just developers of paid apps but also free app makers.

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Devs: Want more in-app sales? Build loyalty first

Ryan Kim — Wed, 18 Jan 2012 13:44:50 +0000

As the mobile market increasingly moves toward in-app purchases as a key monetization tool, developers often question how to extract revenue from users without being too aggressive or manipulative. New data from app analytics firm Localytics suggests the best way to make in-app purchase pay is to build loyalty and engagement, which can result in more revenue overall than a quick sell.

Localytics, which analyzed about 30 million users’ in-app purchases, finds that those who conduct an in-app transaction on their first session make an average of 2.8 total purchases. But all other users ultimately make 3.5 purchases throughout the course of their use with an app. Now, some of this is intuitive considering that Localytics previously reported that 26 percent of app users abandon an app after one try. Developers can better monetize a user who sticks around then one who leaves.

But the figures make the case that it’s better to focus on engagement first and build a good relationship with a user before trying to hit them up with an in-app purchase offer. Localytics said only 22 percent make a purchase on their first session while 33 percent do so between two and nine sessions. And 44 percent make their first purchase after 10 or more sessions. And users take an average of 12 days between the time they download an app and make their first purchase, said Localytics. Getting some money early might seem appealing given how fickle users are and how much competition there is, but Localytics found that only 16 percent of users who made a purchase during their first app session will go on to engage with that app 10 or more times, compared to 26 percent of all app users.

The idea seems to be that it’s more important to establish loyalty first and get people hooked on an app before hitting them up to buy virtual currencies or paying for a premium service. The fact that users often take their time before making a purchase means developers should think about how engaging their app is over weeks and months, not days. Some may still just want a quick pay off, but building a relationship with users can ultimately be more lucrative.

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Please Stay Calm thinks location is key to mobile MMOs

Darrell Etherington — Thu, 08 Sep 2011 14:25:26 +0000

The iPhone offers a wealth of zombie-related games, and for good reason; zombies are so popular the U.S. government recently tried to use them to raise awareness around the CDC and emergency preparedness. So while it makes sense that developer Massive Damage based its first game around a zombie infestation, it also stands to reason that they’d have to add in something unique to make sure their effort stood out from the crowd. That’s where location comes into play.

The game, a mobile massively multiplayer online role-playing game (MMORPG) called Please Stay Calm, makes its debut today in the App Store, though only in Canada for now; Massive Damage is cutting its teeth in the Canadian market in preparation for an October U.S. launch. But the new game is worth a look no matter where you happen to live, because it uniquely combines location and personalization with tried and tested models of iPhone gaming success.

A unique twist on success

At its core, Please Stay Calm bears some strong similarities to games such as World War and Crime City. All the games use a store of energy that refreshes over time and can be spent to accomplish things or take action, like engage in combat, for example.

Please Stay Calm tweaks this, making it much more social through global in-game chat and a clever system whereby players (who take on the role of zombie apocalypse survivors) work together to fight off the undead threat. Also unique to Please Stay Calm is a strong focus on location; the game detects your real-life surroundings using the iPhone’s geolocation services, allowing you to set up a defensive bunker in your local Starbucks, for instance.

Massive Damage CEO and Co-Founder Ken Seto told me that the “core of [the] game is centered on providing a truly local social experience.” He says that “people have an affinity for their favorite spots like cafes, bars and even their offices.”

The major appeal of Please Stay Calm, according to Seto, is that “being able to upgrade a real-life location like your office as the biggest baddest safehouse in your city is quite the feeling.” In this way, the location-based elements of Please Stay Calm sound a bit like Foursquare’s mayor mechanism, except that you invest virtual resources, as well as time in a specific place in order to take control of it.

Location: more than just background

Location is about more than just where you do your zombie-fighting in Please Stay Calm. Seto also points out that “characters you run into in the game are local, and you’ll see them in-game time and time again.” City- and safehouse-specific chat will also soon be added, in addition to the global chat option that currently exists. Also, players near your location, and even “non-player Foursquare users automatically help you out if you’re fighting off the zombie hordes in the same location as them,” Seto says.

It’s exactly the kind of rich use of location mechanics that Ryan Kim recently suggested might be the way forward for mobile location services, but in this case, those added value features are extending, rather than replacing the gaming paradigm.

Blended revenue models to suit different tastes

Please Stay Calm is free to play, but uses in-app purchases to allow players to enhance their experience if they wish. The freemium model employed by Massive Damage for this game is designed to “allow people to spend as little or as much as they like,” according to Seto.

The game’s in-app purchases allow you to buy credits, which can then be used to upgrade items and locations. You can also earn credits in other ways, too, and the game does a good job of striking the right balance so that players don’t feel obligated to spend money. There’s also a clever secondary means of earning credits; players can opt to view 10-second videos (essentially advertisements) in exchange for free credits. Seto says they went with this approach because it keeps the app ad-free, while also providing a way for those unwilling to spend on in-app purchases to experience some of the advantages of the game’s freemium model.

For mobile gamers looking for something that takes advantage of the unique abilities of smartphone devices, instead of just making compromises regarding what iOS lacks, Please Stay Calm is an ideal title. Massive Damage also promises episodic content packages, with more cinematics, missions, zombies and weapons coming in at least 10 free chapter upgrades, so the action shouldn’t get stale. Also, the game features tons of great-looking original artwork that gives Please Stay Calm its own unique feel. If you’re Canadian, check it out now. If you’re not, mark your calendars for October and try to be patient.

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Boku’s Eurotrip nets big mobile payment deals

Ryan Kim — Mon, 29 Aug 2011 21:00:04 +0000

Like a lot of American tourists, Boku headed to Europe this summer but it came away with more than souvenirs. The mobile payments startup has signed a deal with Telefonica, the huge Spanish communications giant with almost 300 million subscribers, who will use Boku to power its payment API for BlueVia, its global developer program.

The deal comes a week after Boku signed partnerships with French mobile carriers SFR and Bouygues Telecom, which means the company now effectively covers all French mobile users through its existing deal with Orange. It’s a nice haul for Boku and it shows the work that the company is doing in impressing operators with its technical prowess, said Ron Hirson, co-founder and SVP of marketing for San Francisco-based Boku.

“I don’t think we’ve reported how deep our technical platform is, but this is a validation of that,” Hirson told me.

The BlueVia deal means that developers looking to deploy increasingly lucrative in-app payments in mobile software titles can tap Boku’s carrier-billing payment system for simple purchases. And it means fewer barriers for Telefonica users to make in-app transactions. The system won’t, however, work with the iPhone, which doesn’t permit outside payment systems. But it’s a nice win nonetheless for Boku as it looks to expand. It currently operates in 65 countries across 230 carriers and has been competing with Billtomobile and Zong, which is now in the process of being bought by PayPal.

It’s still up to merchants and developers to utilize Boku’s payment system, which is currently employed by 1,000 merchants. But as Boku expands and nabs significant carrier deals, it’s better positioning itself as mobile payment explodes. Juniper Research expects mobile payments to grow from $240 billion this year to $670 billion by 2015.

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Apple Adds Additional Password Protection for In-App Purchases

Ryan Kim — Thu, 10 Mar 2011 18:19:38 +0000

UPDATED: In an apparent attempt to quell concerns from parents, regulators and legislators, Apple has moved to require password entry on every in-app purchase, closing a 15-minute grace period that some children used to inadvertently rack up pricey charges of virtual goods. The latest update to its iOS software 4.3 will now include the requirement, which Apple hopes will add further protections against unwanted purchases.

As we’ve reported before, Apple has been under pressure to address the rising instances of children buying virtual goods in games without realizing they were incurring real payments. In some cases, parents did not make use of existing parental controls in iOS to restrict all in-app purchases. But in some cases, children were able to make inadvertent charges because Apple allowed users who enter a password for a purchase or download to make additional purchases for 15 minutes without re-entering their password. We reported earlier that Apple was considering closing the 15-minute password window, but it appears it’s only been applied to in-app payments, not downloads from the App Store.

“We are proud to have industry-leading parental controls with iOS,” Apple spokeswoman Trudy Muller told the Washington Post. “With iOS 4.3, in addition to a password being required to purchase an app on the App Store, a reentry of your password is now required when making an in-app purchase.”

Still, it’s unclear if this will satisfy everyone. The FTC recently responded to a call by Congressman Ed Markey and said it would look at Apple’s in-app purchase system, specifically the way it markets and delivers apps to children. Many of the games that have been cited are social games geared toward younger children. The requirement of a password doesn’t appear to address the marketing concerns of the FTC, Markey and others.

Some, like developer Recharge Studios have called upon Apple to publicize its refund policy and process in the App Store and have begun running a warning in App Store descriptions noting that in-app purchases require real money. Other developers like Capcom have also run similar warnings in their apps. The question is, will Apple need to formalize these warnings to ensure it’s informing parents and users about the real-world consequences of in-app payments?

Others have also wondered why in-app purchases feature bundles as high at $99 for virtual goods. Recharge Studios has dropped the highest price of its goods in Dolphin Play and is exploring time-based limits on purchases. Apple might consider similar rules to limit the potential for big purchases by children.

Apple is treading carefully here. It doesn’t want to slow down the in-app payment train, which is turning into a major money-maker. But it needs to be mindful of government concerns. It seems to have done just enough to appear to be responsive while making sure the 15-minute window is still preserved for App Store downloads. Closing that window across the board would be a big annoyance to users and could slow down the downloads of apps, which are often bought more than one at a time. I expect Apple may be pushed to eventually add more protections and warnings about in-app payments. But for now, it’s taking measured steps to ensure that in-app payments keeps chugging along.

UPDATE: An Apple spokesperson clarified that the password is not required for every in-app purchase but is necessary the first time someone opens up an app, even if it falls within 15 minutes of a password entry. If a parent agrees to the first purchase within an app, that opens up another 15 minute window. The idea is that requiring a password for the first in-app purchase should ensure that a parent has signed off on the payment. This is not as aggressive as we first reported and puts a little more responsibility back on parents.

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