in-app purchasing webinar - verizon developer community

www.wipconnector.com@caaarlo#wipjam

In-App Payments

Maximizing the Revenue Opportunity

Welcome

• First in a series of webinars hosted by the Verizon Developer Community and WIP

• Learn more about the VDC at: http://developer.verizon.com/ – http://twitter.com/#!/VerizonDev

• Check out WIP’s developer resources and more at http://www.wipconnector.com– http://twitter.com/#!/wipjam

Agenda

• In-App Purchasing Overview and Trends• Using In-App Models in Your App• In-App Purchasing SDKs and APIs• Verizon Developer Community Message• Developer Presentation– Sean Thompson, VP of Production,

MobileDeluxe

• Q&A

In-App Purchasing Overview/Trends

A Few Definitions

• Premium app – an app with a one-time paid download cost

• Freemium app – an app that is free to download, with optional paid features

• In-app purchase – additional features or services purchased from within an app

• Virtual good – a digital item or piece of digital content purchased in an app

4 Basic App Business Models

• Pay-per-download– 99 cent paid download, one-time purchase

• Ad-supported– Typically free to download, ads for life of app

• Freemium– Free to download, payment adds

features/removes ads

• Virtual Goods– Free or paid download, payment delivers

additional in-app content or digital good

App Business Has Shifted

In-App Revenues Booming

• $970 million in 2011 (39% of app revenue)

• $5.6 billion by 2015 (64% of app revenue)

• Source: IHS Screen Digest, January 2012

Free Apps Get More Downloads

Free Apps Get More Downloads

US Android Market Downloads, March 2012 (in Mil-lions)

Free (99.1%)Paid (0.9%)

Source: Xyologic, April 2012 Report

Free Apps Get More Downloads

US iPhone App Downloads, March 2012 (in Millions)

Free (87.4%)Paid (12.6%)

Source: Xyologic, April 2012 Report

The Top-Grossing Apps… are free?

The Top-Grossing Apps… are free?

In-App Purchase Revenues

Source: AppAnnie.com

In-App Purchase Revenues

Source: Distimo, VDC Conference 2011

4 Basic App Business Models

• Pay-per-download– 99 cent paid download, one-time purchase

• Ad-supported– Typically free to download, ads for life of app

• Freemium– Free to download, payment adds

features/removes ads

• Virtual Goods– Free or paid download, payment delivers

additional in-app content or digital good

What’s the Right Model?

• “It depends” • In most cases, a model using in-app

purchases offers the most revenue potential– Do you pair it with free or paid

download?

• A few key questions to guide:–Who are your users?–What’s your app/game/content?

Who Are Your Users?

Who Are Your Users?

What category is your app?

Average price of Top-Grossing Apps, January 2012

Source: Distimo

Using In-App Models in Your App

Why Choose In-App Purchases?

• Increased revenues (2.2x apps without)

• More downloads, more opportunity for revenues– Potential to monetize every user

• Reduces threat of piracy/cracked versions

• Enhanced virality potential of free apps

Designing Apps With IAP

• User engagement remains key– Ongoing relationship with your users– Offering extended value

• Trial/”Lite” editions– Focus on limited experience of full feature

set– Goal is to push upgrade

• Ongoing added value–What can you add to the user experience?– Goal is to create ongoing revenue stream

IAP Possibilities Are Endless

• Removing Ads• New content

– More levels in games– New characters– New data sets (dictionaries, travel guides, etc.)

• Subscriptions– News, real estate, sports

• Added features– Push notifications– Integration with external services

• Cheats– Time vs. money decisions for users

Consumables

• Leading area of IAP items is “consumables”– Currency, “helper items”– Buy upgrades, items– Or get items that can be earned through

play/use more quickly

• Extended and additional value comes at a cost to user – and revenues to you

Balancing Pay vs Play

• Tips from Giordano Contestabile, PM of Bejeweled for Pop Cap Games– “Play forever” – no pay walls or

limitations for non-paying use– Game is still fun without paying!– Pay to have more fun, not because

you’re forced to

IAP Stems From Loyalty

Marketing an IAP/Freemium App

• Download metrics are important• But ROI metrics are more important–What’s the lifetime value of your users?–What can you spend to grab them?

• User acquisition is an investment, not a cost

• Understand your conversion rate– And how you can change it

In-App Purchasing SDKs and APIs

What’s their role?

• Keep the customer inside the app to make a purchase

• Optimize the transaction flow– You want as little friction as possible

• Aggregate different payment methods– Credit card vs. PayPal vs. carrier billing

• Deliver the purchase to the user

Sample API Flow

Sample IAP App Flow

Choosing an IAP API/SDK

• Which platform/app store are you using?– iOS: Apple• Third-party service providers, such as Urban

Airship

– Android: Some app stores mandate their own APIs

• What countries are your users in?• What payment methods are

supported?– Remember: reduce friction and steps to

pay

Not All IAP Systems Are Created Equal

What Are You Responsible For?

Payment Methods and Conversion Rates

• Processing fees are one part of the equation

• Conversion rates are the other• Again, low-friction rules– Carrier billing– Existing wallets (iTunes, Amazon)

• 5-10x boost for carrier billing over CC

Supporting Multiple APIs/SDKs

• Ideal situation: each user is presented with the highest-converting payment method (for them)

• But what’s reasonable for you and your team?

• Find your sweet spot– Coverage * conversion rate– Ease of implementation– Cost of integration

A Word from the VDC

Sean Thompson, VP, Mobile Deluxe

IAP Tips and Tricks

VP of Production - Sean Thompson@seanethompson

• Mobile Developer since 2003• Apr. 2010 - Started Free transition• Dec. 2010 – Released free Solitaire

Deluxe®• July 2011 – Overall free revenue>paid

revenue• Driven by Solitaire Deluxe® (iOS) and

Daily Blackjack on Verizon (Brew).

About Mobile Deluxe

• Regardless of company size, going free requires a leap of faith.• Many large, legacy developers still have

not embraced free.• It’s easy to quantify paid LTV.

• Net Revenue from the Purchase is LTV.• Free LTV has more possible outcomes.

• You control your LTV: based on Retention and Monetization

Free Transition

• Current App Stores are open markets; anyone can enter.• Apple App store: 725,000+ apps• Google Play: 450,000+ apps• Amazon Appstore: 30,000+ apps

• Premium or Free, you need users to download your app. • In a huge catalog, you are responsible for

getting your app noticed.• Easier to acquire users on a free app.

Why free?

• Ad supported model is entirely viable, but ad revenue will fluctuate.• Based upon the supply of ad impressions

in apps and demand of ad purchasers.• IAP gives you more control over your

revenue stream.• IAP allows merchandising opportunities

(sales, bundles, etc.)

Why IAP?

• Brew Daily Blackjack• Converted from Premium app to Free

app in May 2010.• Uses Verizon AVB for IAP• Downloads increase 3000%+• Revenue increased 500%+• Unseated Tetris as Top Seller

Case Study

A Simple Equation

LTV > CPA

To be successful, the average Lifetime Value (LTV) of a user must be greater than the average cost of acquiring a user (CPA).

A Simple Equation

LTV > CPA

1. Live App: Your app is a service

2. User Acquisition: BYOU

3. Analytics: Ignorance is not bliss

4. Social Interactions: A must have

5. Research: Do Your Homework

5 keys for LTV>CPA

Live App:Your app is a service

• Paradigm shift from “Release and Move On” to “Release, Evaluate & Iterate”.• Iteration is required to get your app

properly tuned.• Beta test to make sure you are ready for

prime time.• Bug fixing = happy customers = good

ratings = more downloads.

Live App

• Think about post-launch content releases when you design your app.• New content keeps users engaged.• Engaged users are more likely to be

retained.• App updates are chance to re-engage

lapsed users.

Live App

User Acquisition: BYOU

• If your plan is “I’m going to make a great game and [App Store] will totally feature it,” …you will most likely be disappointed.

• A free app with no UA activity will get < 100 DL a day.

• You must BYOU (Bring Your Own Users)!• You must develop a UA strategy!

User Acquisition

• How we acquire users:

User Acquisition

• You need thousands of downloads a day to yield sufficient paying users.• Far less than 5% of users pay.• Non-payers can still be valuable.

• Experiment with different channels and measure the results.

• All users are not created equal• Pay close attention to value of users by

channel.

User Acquisition

• Social/Viral user acquisition is vital.• Every User you get for free reduces

overall CPA• If you have multiple apps, cross-selling

between them is critical.• If you can pay once for a user in 2 apps,

that reduces CPA.• Look to ad-swap with fellow developers.

User Acquisition

Analytics: Ignorance is not bliss

• Analytics are not a substitute for creativity.• Retention charts won't magically give you

a killer app idea. • User data won't write your code for you.• A/B testing isn’t an art style.

• However…

Analytics

• Analytics are critical to creating a successful app.• First level of analytics tells you about

general app usage.• Second level of analytics helps you

answer questions about why. Cohort analysis, funnels, etc…

• Given the iterative nature of free apps, good data is actionable data!

Analytics

• Some KPIs (Key Performance Indicators) we use:• Daily/Monthly Active Users (DAU/MAU)• $/DAU (or ARPDAU)• Retention Rates• LTV• $/DL• CPA (Direct and Blended)• Cross Sell %

Analytics

• Who to use?• Flurry• Kontagent• Mixpanel• Localytics• Social Game Network (segue to…)

Analytics

Social Interactions: A Must Have

• Why go social?• Acquisition• New users can discover you via Social Feeds

• Engagement• Users are more likely to participate with

friends.

• Monetization• Wooga’s Diamond Dash on iOS – FB Connect

users are 8X more likely to spend.

Social Interactions

• Who to use:• Facebook• Twitter• Game Center• GREE/OpenFeint• Playphone• Papaya• Mobage• Viximo

Social Interactions

• What to look for in a social game network:• Feature list• Cost• Analytics included• Cross-Platform

Social Interactions

Research: Do Your Homework

• General Industry News:• @kimmaicutler – TechCrunch• @deantak – VentureBeat• @InsideNetwork – Inside Mobile/Social• @pgbiz – Pocket Gamer UK• @AllThingsD – WSJ/All Things Digital• @SAI – Sillicon Alley Insider

Research

• Analytics:• The Flurry Blog: http://blog.flurry.com/

• Kontagent Kaleidoscope: http://kaleidoscope.kontagent.com/

• Distimo Monitor Blog: http://monitor.distimo.com/app-store-analytics-blog

• Caryl Shaw Presentation: http://www.slideshare.net/caryl_shaw/would-you-like-some-data-with-your-coffee-aka-the-key-analytics-you-should-start-every-day-with-10031647

Research

• Free Revenue Models:• Gamesbrief Free-to-Play spreadsheet:

http://www.gamesbrief.com/spreadsheet/

• Dub It - Social Gaming Glossary: http://www.dubitplatform.com/blog/2011/12/31/the-2012-social-gaming-glossary-15-of-the-most-important-social-game-jargon/

• Social Interactions:• FB Developer Showcase:

https://developers.facebook.com/showcase/diamonddash/

Research

Q&A

Thank you!

• Webinar will be recorded and published

• For more info on the VDC, visit:http://developer.verizon.com

• Contact speakers at:– Carlo Longino, Director of Developer

Marketing Services, WIP: carlo@wipconnector.com

– Sean Thompson, VP of Production, MobileDeluxe: sean@mobiledeluxe.com