With the recent addition of in app purchasing (IAP) to the Amazon Android app store, and the implementation of IAP with our friends at Urban Airship we thought it was only fitting to get some feedback about the in app purchasing model for Android apps.
Last week a big story broke when it was discovered that for every $1.00 generated for apps in the Apple iTunes app store, Amazon was making $.89 with their app store while Google Play was only making $.27. That’s a huge difference between Apple and the Google Play Store.
We’ve often come to the conclusion that Android users who have experience with other Google products are accustomed to getting things for free and are less likely to pay for apps. We talked about this at one point with Millennial Media. Of course this philosophy holds true. There’s also a big problem with pirating of Android apps, which makes it hard for developers that aren’t in big studios to make a living.
More after the break
Glu Mobile is no stranger to the mobile apps scene. Glu Mobile has been around for over a decade and due to the ever changing mobile ecosystem they’ve found themselves pivoting a number of times over the years. Their most recent pivot has been a highly successful launch into the world of in app purchases.
Glu’s chief of sales and marketing Adam Flanders recently spent some time talking IAP with thedroidguy. Flanders was able to reveal that 80% of Glu Mobile’s freemium revenue comes from in app purchasing. To put that into perspective, Glu has global operations with over 600 employees, and they’ve bet the entire livelihood of the company on IAP.
While other studios are still tweaking the IAP formula (and Glu is constantly evaluating as well) Glu Mobile has found a way to let their game players have a full game experience without IAP, while you can get an enhanced experience utilizing IAP.
For instance their hit game Frontline Commando is one that I really enjoy. The first person shooter military setting game comes with an arsenal of weapons that you can use against the enemy. Along the way you accumulate points where you can, after a while, upgrade to heavier artillery. However if you want to go ahead and blow everything up right now and advance through levels quicker you can purchase coins or virtual currency to get the bigger guns. This is basically the way most IAP works, even on Facebook games like Cityville. You can play, but you can play faster by using IAP.
Rival Gameloft recently released a football game that required the user to use IAP to pay for each play. This model of course turned users off almost immediately. It’s Glu’s blend of being able to play with or without IAP that makes this a very successful revenue stream.
Flanders admitted that there is no cookie cutter way of doing in-app purchases. At Glu they consider each game it’s own individual product and while most of their games are action games, they carefully analyze each game to see where in-app purchasing fits in the best. Is it more guns, ammo or health or is it continuing levels after losing a life.
When you break in app purchasing down to it’s fundamentals it’s something that’s been around for video games since their existence. I remember as a kid spending 20-40 quarters on games in the arcade like Dragons Lair which meant I could continue even after getting beaten.
Does it pay off?
As we said above 80% of Glu Mobile’s freemium revenue comes in app purchasing. In their Q4 2011 results (the last results publicly announced to date) Glu Mobile saw non-GAAP smartphone revenue up 340% year over year. Of course 2011 saw an explosion of smartphone users and with that, naturally came more gaming. When we look at the 340% increase year over year we again have to consider that 80% of this revenue is entirely made up of in-app purchasing. Flanders told thedroidguy that the other 20% of revenue is made up from advertising and other similar revenue streams.
To add to that, in the fourth quarter of 2011 Glu Mobile saw 1,522, 000 in app purchase billable transactions which was up from 886,000 the previous quarter. The average revenue from in app transactions was $5.79
Flanders wouldn’t comment on exactly what Glu’s conversion rate was from purely freemium customers to those utilizing in-app purchasing however he did advise it’s inline with the average of other similarly sized publishers.
Glu Mobile has a whole slew of new games coming out in the coming months. Glu recently acquired the entire “Deer Hunter” brand from Atari and plans to release Deer Hunter reloaded very soon. Deer Hunter is a game that many of us 30 somethings know very well from the Atari and arcade games and it’s a hit with a higher demographic than a Gun Bros, Contract Killer or Frontline Commando.
Flanders, who’s been with the company for 6 years, has seen a decline in overall premium gaming pricing. At first you could get away with charging $5.99 for a great mobile game, long gone are those days and more and more games are $.99. Of course at a $.99 price tag you need to sell a whole lot of downloads to recoup your expenses. It’s obvious that in app purchasing is a great model to insure that Glu sticks around (see what we did there) for many years to come.
Check out some of Glu’s great titles in the Google Play Store