Concentrated set of Power Users contribute to Majority of In-App Purchases

The freemium business model with in-app purchases has come to establish itself as the effective monetization avenue for mobile app developers. If you are following this path, you are perhaps spending a lot of money on user acquisition which is really expensive nowadays. Hence it is all the more important that your marketing dollars are spent based on an understanding the profile of your paying user.

Are they spread across the board? Is the revenue more from lower the pyramid or are the high purchasers contributing to the major share? Answers to these questions would impact your marketing strategy.

It would come as no surprise that only a small majority (0.15%) of users contribute to half the in-app purchase revenues (as per the swrve report), reiterating the importance of targeting your marketing dollars to the right demographics. And some behavioral patterns should also be key in your game design, for instance a significant amount of the spend activity is found to place within the first 24 hours of the game played!

The key finding is that a concentrated set of power users are responsible for the lion’s share of the revenue. For instance, while a majority (67%) of purchases are under five dollars, this contributes only to a quarter of the total revenue pie. So you are better placed targeting the smaller subset of power users rather than spreading yourself thin across the board.

The open question still is, who these power users are? But one conclusive takeaway is that they are not uniform, so your blanket marketing spread would be highly ineffective. You are better served paying attention to your game design and analytics to understand the behavioral and demographic profile of your purchasers and target them effectively.

A general pointer from a geographic perspective is that the regions of Japan, South-Korea and Australia have a higher Average Revenue Per Download (ARPD), as we have reported in the our previous article on How do App developers Monetize on Apple store.