Only a fraction of users spend money on in-app purchases, but those who do, spend up big, according to a report from AppsFlyer.
The State of In-App Spending report found that while just 5.2% of users spend money on in-app purchases, the average for each one was $9.60 a month – more than 20 times the average of all other users (at $0.50 per month).
It is therefore integral for app developers and marketers to understand their key audiences and nurture them accordingly.
What is an in-app purchase?
An in-app purchase allows users to buy subscriptions or extra content from inside an app – such as a shopping or gaming app.
An example is the popular mobile game, Candy Crush Saga. The app is free to download, but users can buy currency (in the form of virtual gold bars) within the app to boost their performance and extend their player lives (among other things).
As app developers look for monetization channels, a reliance on in-app purchases (IAP) is becoming a key trend for freemium models. According to the report, IAP revenue is expected to grow from $14 billion in 2014 to $37 billion by 2017.
The AppsFlyer’s survey looked at the in-app purchase (IAP) behaviours of more than 100 million mobile app users across more than 1,000 apps to identify the following key trends.
1. In-app users in Asia spend more
Asian consumers spend 40% more on in-app purchases than the rest of the world – with a monthly average spend of $0.70 per user per app. This compares to North American users who spend $0.61 a month pre app.
“It is likely that Asian app users are spending more money in in-app purchases simply because they are savvier, more trustworthy or more reliant on apps than users throughout the rest of the world,” says Ran Avrahamy, vice president marketing, AppsFlyer.
Avrahamy says mobile-first lifestyles are the norm throughout much of Asia.
He adds: “Asian users have been ahead of the pack in many other areas of technology. Asian countries pioneered the freemium model for gaming, and they appear to be leading the IAP trend in that category as well.”
Asian users are also comfortable using their app for payments, he says.
In particular, Asian users spend big on in-app gaming, with an 85% higher average purchase than the global user ($12.92 versus $7.00).
App marketers should focus on attracting Asian users whenever relevant as there can be higher payouts from users, on top of lower costs for promotional campaigns than in Europe or the US.
However, Avrahamy warns that the Asian market has many nuances, and marketers should know this specific market well before proceeding.
2. iOS users spend more than Android users
Interestingly, iOS users spend nearly 2.5 times more than Android users (the average purchase amount is $12.77 for iOS users versus $6.19 on Android).
The report also finds 7.1% of iOS users make at least one payment per month compared to 4.6% of Android users. Not only do iOS users spend more, they are also 50% more likely to spend than Android users.
China in particular tends to stand out when it comes to iOS users spending in-app, though users in other Asian countries spend more when it comes to Android.
3. Shopping, gaming and utility apps
Only about 3% of gamers make in-app purchases compared to 12% of shopping app users. Shopping app users also spend more, with an average monthly in-app spend of $2.68 versus users on gaming apps who spend $0.32.
This is not surprising given users who download a shopping app are already displaying strong purchase intent. The average purchase of a virtual good (like virtual currency) is also lower than physical goods – $7.00 compared to $36.54.
What this means for marketers
“Finding quality users, especially the paying ones, is extremely important for app marketers as they drive in-app spending. Focusing on these users means knowing everything there is to know about them through granular measurement. Marketers need to make intelligent decisions on their communications through owned or paid channels so that these quality users stick around, remain happily engaged and continue spending,” says Avrahamy.
The focus should be on ensuring a great user experience for these paying users by focusing on:
- An optimal in-app experience
- Constantly measuring and optimizing activities to build a strong base of loyal, valuable users
- Ensuring payment processes are flawless. This is the most demanding act of users – yet also one of the most important – so any friction in the process will increases the chances a user will increases the chances a user will bounce, says Avrahamy.
The increased availability of data and analytics to track the customer journey has opened up entire new worlds for marketers.
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