How to Drive Revenue With In-App Purchases

Most iOS app revenue comes from in-app purchases. In fact, a recent survey co-produced by Kii portfolio partner App Annie projects IAP will take 51% of the $12 billion mobile game revenue projected for this year. That’s a lot of cash, but nobody’s going to spend any money on your app if the process is difficult, or if they suspect you’re trying to make money at the expense of the user experience.

We advise a lot of customers on the best ways to introduce IAP into their apps, and wanted to share some basic tips here. The following four kinds of in-app purchases typically earn the most revenue, while not alienating free-to-play users who like your app, but aren’t ready to spend money on it just yet:

• Customizations—Build up the fun without affecting functionality. Offer extra outfits or color schemes that give users a chance to personalize their experience.
• Shortcuts—Not everyone likes taking the long way around, especially in games with well-defined difficulty curves. Bear in mind, however, that users get frustrated when paying is the only way to move forward or if a competitive leaderboard isn’t open to everyone.
• Upgrades and subscriptions—When users are about to hit a paywall (e.g. a storage cap or maximum number of free news articles or sessions for the day), let them know they can keep going with an upgrade. Kii customer KeepSafe uses this method, selling an optional premium upgrade feature via IAP.
• Commercial-free experiences—Want to convert more free users to paid? Deliver an amazing experience and give users the ability to remove ads to make it even more pleasant. Music apps like Pandora and Songza are good examples of apps doing it right.

Tip: Users are more likely to leave an app than upgrade if they feel overwhelmed by ads.

IAP isn’t for everyone

Before jumping on the in-app purchase bandwagon, ask if you’re doing the right thing for your app and your users. Some apps are better off without any IAP, depending on their purpose:

• Developing for kids—Giving children the ability to run up big bills is a definite no-no. To stay in parents’ good graces, avoid saying, “Kids under 18, ask permission.”
• Augmenting a real-world business—Boost customer retention by prioritizing their happiness and ensuring they don’t feel nickeled and dimed.

Use analytics to optimize

There’s an art and science to the in-app purchase. Integrate them into the user experience, don’t ambush users at the first open screen, and offer extras where you think users want them. Just as important, use analytics to optimize your IAP rate. Which types of purchases are most popular? Which screens are delivering the most clicks? Which types of users are completing in-app purchases? Pay attention to user behavior, and you’ll soon find the balance that works best for you. We have a customizable analytics solution to track IAP — read more about it in this series of blog posts by Chris starting here.