40 percent of Apple game downloads are free titles with in-app purchases

Lets see how Apple handles this one going forward with their change in stance on Pay-per-install as its a big part of the market for apps in the App Store…plus a revenue generate for those developers who monetise through in app purchase…

Free-to-play games have become huge on Apple’s App Store in the past 19 months. Almost 40 percent of game downloads are now free titles with in-app purchases, according to a study by Xyologic, a startup that indexes and searches through App Store data.

In March, there were more than 99.9 million downloads of free iPhone games from the App Store. About 80.8 percent of all app downloads in the month of March were free. In many of these games and apps, the free-to-play model is used, where a user can pay real money through the in-app purchase feature for virtual goods such as better weapons in a game.

The scary part is that Apple has made a lot of the developers of these apps and games nervous because of its shift in stance on a particular kind of model, known as pay-per-install. In games that use this model, an app will offer an incentive for the user to install another app as a kind of cross promotion. But a couple of weeks ago, Apple cracked down on the pay-per-install model because it can be used to artificially inflate a game’s ranking in the top 25 apps in the store. That has affected pay-per-install marketing firms such as Tapjoy.

The problem is that the free-to-play model (of which the pay-per-install model is one part) has become a bigger and bigger part of the total number of app downloads, and it has become a bigger percentage of revenues for developers. Those developers used pay-per-install marketing to help their apps stand out among 350,000 iOS apps. Apple feared it was leading to market manipulation. To ease Apple’s concerns, Tapjoy has limited certain promotions using the pay-per-install model.

“It may make Apple’s platform possibly less attractive vis-a-vis Google Android if developers can’t find a suitable alternative to offer walls,” the report said. “This is the biggest interference by Apple into the app economy in recent months. Its effects, at this point, are unclear.”

While Apple makes much more money with the App Store than Google does with the Android Market, the number of apps is another story now. Xyologic says that in March, 28,963 new apps debuted in the Android Market, while 18,787 debuted in Apple’s store.

Apple has to be careful about how it resolves the pay-per-install problem if it wants to hang on to its developers. The top developers affected by Apple’s decision likely include Glu Mobile, which saw 2.48 million downloads of free games with in-app purchases in March. The second-ranked company was Pocket Gems, with 1.55 million downloads. That was followed by TeamLava (part of Storm8) with 1.41 million; Craneball Studios with 1.41 million; Gameview Studios with 1.41 million; Sunstorm Interactive with 1.18 million; Capcom Interactive with 969,000; Backflip Studios with 933,000; Storm8 with 752,000; and BayView Labs (DeNA) with 723,000.

Xyologic says that almost all of the paid games on the App Store are priced below $3.99. Of the 8,017 iPhone apps offering in-app purchases in the App Store in the U.S., some 2,156 of them were free games with in-app purchases. That was up from 709 in September. Overall, about 4 percent of game apps account for 40 percent of all downloads.

Of the 150 top free games on the App Store, 94 games, or 63 percent, are games with in-app purchases. These are some of the observations based on the data that Xyologic dug out through its search service. Berlin-based Xyologic indexes 610,000 apps in the App Store, the Android Market, and the Windows Phone 7 Marketplace on a monthly basis. It can rank the number of downloads for each app and publisher in the month, according to Xyologic’s Matthaus Krzykowski (an occasional VentureBeat contributor).

Source: http://venturebeat.com/2011/04/28/almost-40-percent-of-app-store-game-downloads-were-free-titles-in-app-purchases/

Three Ways Google Could Push Adoption of Android Market’s In-App Billing

Charles Hudson is a co-author on our Inside Virtual Goods series of industry reports, a co-founder of Android game developer Bionic Panda Games and a partner at SoftTech VC. Bionic Panda recently began using Google in-app billing, which finally came out to consumers at the end of March after several months of anticipation from the Android developer community. Hudson also used to work at Google on new business development.

We recently decided to launch Google In-App Billing in our first game, Aqua Pets. As a matter of background, we had been using PayPal to monetize our original game and were beginning to get user requests for support for credit cards. About one week ago, we released Google In-App Billing for Aqua Pets and decided to see how it would perform.

Our one major reservation with moving forward with Google in-app billing was the relationship between the 30 percent commission and what we anticipated the payment-enabled customer audience to be. While we don’t develop for the iOS platform, there are two compelling reasons why we think the 30 percent that Apple takes makes sense:

• Apple has over 200 million credit cards on file already, so they’re bringing a large payment-enabled audience to application developers and they have every right to charge for access to that audience.
• Apple kept alternative options off the platform from the very early days, which meant that just about everyone had to live with the same constraints around what they could and could not used to monetize. This is markedly different from other platforms, such as Facebook

After a week of using Google In-App Billing, we decided to dive into some of the data for our first week of paying users. Google does pass a field called “Account Age” that allows you to determine how long a given user who successfully transacts has had a payment-enabled Google Checkout account. We ran the data on our first batch of paying customers to determine the distribution of account age and charted the data below:

This is an admittedly small sample size of transactions and Google In-App Billing has only been publicly available for less than a month. However, what was of particular interest to us was the dark blue slice — nearly 25 percent of the users who transacted have had Google Checkout payment capabilities for less than a week and a meaningful number of them had account ages of 0 or 1, which means they essentially enrolled in Checkout to purchase in our application. Another 21 percent had only had payment capabilities in Checkout for less than a month, still relatively new to the world of spending money on applications through Google.

We really do want to see Google In-App Billing succeed and succeed quickly — it would be good for anyone building paid or free applications on the Android platform. If I were trying to drive broad adoption, there are three things Google could do and they are not mutually exclusive:

1. Compensate application developers who are enrolling net new Google Checkout customers: One way in which Google could make In-App Billing more attractive to developers would be to pay developers who enroll net-new Google Checkout customers. A small bounty of $5 to 10 per activated account would be interesting for most developers and would give the community a stronger incentive to push it more aggressively to users. A bounty of that size would be inline with what other payment options, namely PayPal, have paid historically to activate new users. It doesn’t seem unreasonable for Google to consider compensating developers who are helping to acquire customers.

2. Make Google In-App Billing mandatory for all application developers and enforce it: One other way to drive more broad adoption of In-App Billing is to strictly enforce usage of Google’s In-App Billing as a required and perhaps exclusive way to pay for in-app purchases across the network of applications in the Google Android Market. I do think that having end-users consistently see the Google Checkout experience across applications will make it feel more familiar and help hopefully grow the base of payment-enabled users. Having a standardized, simple, consistent way to checkout and buy things in apps that feels familiar to all users would be a net benefit for the platform.

3. Waive all of the fees for the rest of the year: One objection that developers have to rolling out Google In-App Billing is the 30 percent commission that Google is charging. There’s a simple solution to that — just remove it for the remainder of 2011. Yes, it will cost Google money. But zero-cost transaction processing is attractive to every developer out there and would likely spur some of the folks sitting on the fence to integrate in-app billing into their apps and encourage users to use it. They can reinstate fees in 2012 with a larger base of installed users and a happier set of developers who’ve seen the benefits of using in-app billing in their own applications.

At the end of the day, it’s Google’s platform and they’re free to do what they choose. But enabling platform-level in-app payments should be a priority and everyone will benefit when the solution is more widely used.

Source: http://www.insidemobileapps.com/