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Mobile in-app purchases, as we recently reported, have eclipsed paid downloads as a revenue driver for mobile developers. But exactly how much money is that worth? Well, analytics service Flurry said the average in-app game transaction is worth $14, a pretty hefty sum that speaks more to the importance of reeling in what casino’s call whales, or big spenders.
Flurry found that 71 percent of transactions in iOS (s aapl) and Android (s goog) apps were for less than $10 each and 16 percent for between $10 and $20. Transactions for $20 or more were just 13 percent of all transactions. But the higher value makes up for the lower quantity: these generated 51 percent of revenues. In fact, transactions of more than $50 accounted for 30 percent of all sales revenue. All of this leads to an average of $14 per transaction.
Now, this may sound high to some. But it speaks to the nature of the freemium app model. Most users, 97 percent according to Flurry, won’t spend a dime in a typical freemium mobile game. But 3 percent will open up their wallets and when they do, they’re not exactly counting pennies. These are dedicated uses who are knee-deep in these games. In fact, 5 percent of transactions are for more than $50, more than twice that of 99 cent transactions (2 percent).
What does this all mean? Well, as Flurry’s Jeferson Valadares, GM of Games points out, freemium mobile app development is increasingly about hooking big whales.
“If you’re a game designer, your main take away is that very few transactions, and consumers who complete those transactions, make up the bulk of your revenue. Therefore, your own “meta-game” should be about whale hunting,” he said.
This is not exactly news in the overall gaming space. This has been the case in social gaming for a while. A survey last year by Inside Networks found that whales on Facebook represent about 2 percent of the audience but generate most of the revenue for game publishers at $25 or more per month. But the interesting thing is that the economics have really transferred over to mobile gaming.
That explains why big Facebook names like Zynga, Crowdstar and others are pushing hard on mobile gaming because if they can get it right, they can get their hooks into the kind of whales that have enjoyed their social games. And it also shows that start-ups like Pocket Gems, a mobile developer with a couple of top grossing titles, can make a lot of money by staying relevant to its users and offering up a quality experience that has lasting appeal over time.
As Flurry estimates, total U.S. iOS and Android game revenue will surpass $1 billion this year. This is going to be a big business for those that can unlock profits from the freemium business. As I mentioned before, there’s still a place for business models that rely on paid downloads and advertising. But with these numbers out from Flurry, we’re seeing that there’s a compelling case for freemium if you can make the formula work.