iPhone App Makers Make Their Money From Games, In-App Commerce

iPhone App Makers Make Their Money From Games, In-App Commerce

Recently featured on Business Insider, this chart illustrates that 93% of the top 100 grossing iPhone apps use in-app commerce. Of those 100 grossing apps, two thirds are free.

As the article points out:

As most the top grossing apps are games, in-app commerce is most commonly used to sell in-game currency. However, companies like Pandora and eHarmony are using in-app purchasing to sell subscriptions, while Marvel is using it to sell access to comics.

Since in-app commerce and gaming apps tend to go hand-in-hand, it makes sense that something like Angry Birds Space, which charges $19.99 for a bundle of 980 space eagles (yes, really), would turn a profit. Big in-app charges combined with the game’s more reasonably priced $0.99+ charge for smaller features mean that the Angry Birds’ following is full of people who are willing to pay real money for virtual gratification.

And those people are definitely buying; Angry Birds Space describes itself as “#1 in 116 countries,” and holds one of the top 10 spots on iTunes’ most popular apps chart.

All of these numbers and trends give new significance to the word “freemium.” It sounds like an element on the Periodic Table, but freemium refers to the business model that drives some of the above mentioned top-grossing games. These games are provided free of charge, but additional features – whether it’s new levels, points, or space eagles – cost a pretty penny.

A report by App Annie points out that freemium’s “no-barrier to pay strategy” gives games a higher chance of revenue success – even though the revenue comes almost exclusively from in-app purchases.

Another determining factor in an app’s success is its type. Long-term games, which are defined by App Annie as games that spent 12 months or more in the Top 26 – 125 Grossing ranking by revenue, are dominated by strategy-based games. Short-term games, which spent 3 months or less in the Top 25 Grossing rankings, are mostly action-based. Among both groups, simulation games account for the second largest share.

 

What are your thoughts?

Scott Kaufmann
[email protected]

Scott is Partner at Lucid Agency and a lover of all things technology, marketing, investing and entrepreneurship. Scott volunteers on the board of the Denver-based Nonprofit Celebrate EDU and as a mentor for SeedSpot (a Phoenix-based social startup incubator).

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