Exploring in-app purchase, the perfect model for monetizing game apps

Whether you are a mobile game developer or a tech company working in the gaming industry, like most of the mobile applications, building gaming apps is associated with making revenue. However, despite this fact, we see that most of the apps available on the Apple App Store and Google Play Store are free to download, and most of the upcoming apps are following the same trend. 

But, it doesn't mean that the mobile app developers are ready to provide their platform free of any cost. It just means that they are looking for other monetization strategies. 

However, there are many ways your mobile game app development company can help you make money with your gaming app despite the free tag. For example, the traditional in-app advertising revenue model is becoming less effective, as marketers have to come up with new ways to keep users' attention. However, this has made the in-app purchases monetization model raise as the more result-oriented option. The research by Statista shows that in 2017, 43% of revenue generated by gaming apps came from in-app purchases, making it the number one source of income, followed by the video ads. 

Let's walk you through in-app purchases monetization strategy for your gaming app and help you understand other models as well.     

What is the in-app purchase monetization strategy? 

The in-app purchases monetization model allows users to buy additional features or goods within the app, such as valuable items, extra time to finish a task, in-game currency, high-quality content, and health points. In-app purchases are a great way of earning revenue through your mobile game or any other app, as they are optional. Besides, by giving your users' the option to purchase the extra features without pushing them too much, it helps build a lasting relationship with them. Let's look at two significant models of in-app purchases monetization strategy. 

Freemium model 

The term freemium comes from two words, free and premium. The freemium model involves apps that are free with a basic set of features and come with the option to upgrade to open additional features or services. The concept of this model is simple. When users download a free app, interact with the app services, and explore the other functions within the premium package with a preview and be motivated to buy the upgrade. This monetization model of in-app purchases works well with gaming apps, as gamers have already invested in the game. If they have truly enjoyed the experience, they would be interested in paying for the upgrade. Few examples of games that use freemium monetization models include Pokémon Go and Clash of Clans.

Freemium monetization model is great in terms of user acquisitions and retention, as there are no intrusive ads, and gamers are free to make their decision. Besides, this model is pretty universal and can be compatible with other approaches like in-app ads. Moreover, your premium version can even be as simple as users' paying to experience interface without any ads. There is also great space to offer additional incentives to gamers like limited-time offers, discounts, and promotions to create a sense of urgency. That said, as the game is ultimately free, it will attract a wide range of users, and with a good marketing strategy the game can even go viral.  

App subscriptions

The subscription monetization model allows users to test the app first, and if they like the experience they can get the subscription. This strategy can be exceptionally profitable, particularly for apps with high user engagement like Spotify and Netflix. 

Traditionally the subscription plan was the primary domain of PC and console games. But, in the last couple of years, increasing mobile game app development companies and developers have been experimenting with app subscription for mobile games as a part of the in-app purchases strategy. Besides, research shows that a subscription plan in mobile games is increasing in popularity with 70% year-over-year growth of game subscribers on Google Play. 

The app subscription monetization model creates a higher level of commitment and loyalty among the users. Along with many other benefits of the model, XFLAG reports that users with the subscription of their game Monster Strike play 20% more on an everyday basis than they did before getting the subscription.

Why is in-app purchases a perfect monetization model for gaming apps? 

The mobile gaming industry has evolved and gained an extraordinary level of popularity around the world rather fast. According to Statista, in 2018, mobile games made contributed 51% to the total global gaming revenue. The monthly users of Pokémon Go reached 10.66 million in 2018. The leading mobile gaming app publisher on Google Play Store worldwide in January 2019, made $2.03 billion of revenue in the year. These figures only prove how rapidly the reach on mobile games has increased over the last decade.

With such disruptive changes in the mobile gaming industry, it is only imperative the mobile game developers and tech companies experiment with new monetization models. They need to up their game in any way possible to keep up with the increasing demand for high user engagement mobile games. As the features of in-app purchase monetization strategy overall deliver more engagement and interactive experience for the gamers, it coming through as the perfect model for mobile gaming apps. Whether its freemium or app subscription model, mobile app developers are starting to make the most of both strategies by adjusting their gaming experience to be more compatible with the type of monetization model. 

However, over the last few years, more mobile game developers have been experimenting with in-app purchases monetization strategy by building new IAP based games. For example, a Brazilian company, Tapps Games, that known for its hyper-casual games, decided to try in-app purchases model in their game called Bid Wars. In less than two years, the company reported an increase of over 200% revenue through in-app purchase strategy.  

More monetization models for gaming apps 

It is always beneficial for the mobile game developer or the tech company to diversify its revenue generation channels. When you expand your mobile game revenue models, it reduces the exposure of only one monetization type and limits its possible adverse effects on the business. Besides, using several game monetization strategies will unlock new opportunities, capitalize a larger portion of the user base and increase revenue and profits. Hence, even when you think the in-app purchase is the perfect monetization model for your mobile game app, it is best to consider other strategies as well. Besides, in-app purchases model goes well with advertising strategy, as only a specific niche of game players engage with in-app purchases, mobile app advertising will allow game developers to increase their revenue.   

In-app advertising 

If you want to consider a more stable source of revenue, you might want to have a look at in-app advertising. These days advertising through mobile apps is becoming one of the app developers' preferred approaches and a sure way to earn profits. According to Statista, in 2019, global mobile advertising spending amounted to $190 billion, and it is projected to surpass $280 billion by 2022. In-app advertising might be a great way to diversify your monetization strategy for a gaming app. 

Interstitial ads 

Similar to in-app advertising, interstitial or full-screen ads are catchy and one of the popular ad formats for mobile apps. They are commonly used in the gaming app, as they typically pop-up between different game levels or when the user loads a new page. Based on a study by AdColony, interstitial ads have high impression rates, which makes them an effective monetization strategy for game apps when combined with engaging images or video. Interstitial ads are very interactive as gamers have no option but to either watch the entire ad or just watch the first few seconds and wait for the skip option to appear.

Rewarded videos 

One of the most popular monetization models for gaming apps, as the name suggests, rewarded videos allow users to earn a reward by simply watching one of the ad videos. Mobile game developers can be as creative with the prize as they like. For example, gamers could gain a hint, one new life, coins, in-game gear, and so on. This monetization model achieves the highest level of user satisfaction and motivates them to spend more time in the app. Above all, rewarded videos aren't intrusive, as users have the option to watch them or not, but as gamers like in-game rewards, there are high chances of them going ahead with the ad.  

Wrap up 

With time mobile gamers' behaviour of playing games is changing, and with it, the monetization landscape needs to change as well. The type of the game and how it engages the user does dictate the applicable kind of monetization model. But, this is the time to go beyond the conventional methods and diversify your sources of revenue by adopting the multiple-monetization model strategy. Developers can explore other options of revenue generation that can help them achieve better stability within revenue streams without compromising the user experience. Diversification will allow developers to gain more control over their revenue by optimizing their in-app purchasing monetization strategy with other models like in-app advertising.