Scott Kveton is the CEO of Urban Airship, a mobile services platform provider. He is an expert on mobile app strategy and cloud infrastructure and speaks frequently on app monetization and engagement, developer ecosystems and cloud computing.
In-app purchasing (or in-app billing) on the Android platform is one of the most attractive ways to monetize a mobile app. Android developers now have access to a source of previously unavailable revenue. They can offer premium features, including unlocked content, paid downloads, upgrades and expansions for games and content packages.
As Android developers start to integrate in-app billing into their mobile offerings, they should know what works and what doesn’t. Drawing from my company’s experience helping thousands of customers optimize their products with in-app purchase features, I’ve compiled this list of best practices.
- Do make it clear in the description that the downloaded app can be augmented with additional features via in-app purchase. This is an app’s first opportunity to market future add-ons and they should let users know upfront that the app is feature-rich and expandable.
- Do make the purchase process super obvious to the user. Users should never feel they purchased something by accident, nor should they be unsure what’s going to happen once they click the purchase button. Plus, refunds are a pain to process and should be avoided at all costs.
- Do test different pricing. Try to offer a variety of items at different prices. A user may not want to fork over $20 for a fully featured app, but it’s possible that they will pay for a lite version at a reduced price. Don’t take the option off the table.
- Note: Pricing is one area where iOS and Android differ. Apple prices by “Tiers,” with tier 1 starting at $.99. Apple then converts that into the local currency for international markets. Android has no tier system; developers set an arbitrary amount. Android just deployed currency conversion, but not everything is supported. Developers should pay careful attention to Google’s guidance on this.
- Do evaluate a freemium revenue strategy whereby the app is free with in-app purchasing options. People have unpredictable ideas about how much apps are worth. Some are unwilling to pay even $0.99, but that may change once the user is hooked. Once they are engaged, users are less cautious about spending money on additional features and content. Developers using the freemium model can hedge their bets against subjective valuations of their apps.
- Note: In-app purchases can increase the per-user value of a simple app download. Free apps have greater reach and up to 10 times more users than paid apps, by some counts. With greater reach, conversion rates also go up. With that tenfold increase in exposure, a free app has the opportunity to attain the same revenue as paid apps by converting only one-tenth of its user base. Remember, revenue from app downloads can only be collected once per user. In-app purchases allow ongoing revenue from each user.
- Do repurpose existing and archived content to leverage the long tail on the mobile channel. Most companies will have some content they can turn into an in-app purchase. A news app, for example, could offer back issues, or even single articles, as in-app purchases. For example, an app for a recording artist could sell live versions of songs or outtakes from a recording session. Many brands have existing content that engaged fans will pay for. The mobile channel offers an easy way to tap into that demand.
- Do consider the size of the app. There are two ways to add content to an app after the initial download: unlocking hidden content for users post-download, and offering additional content as in-app downloads. Most apps are limited in size. iOS directs users to a WiFi network for apps over 20MB, whereas Android limits apps to 50MB. Apps that contain hidden content are less dynamic than those with content downloaded later. Because the app already exists in its entirety, the only way to add or change the content is by updating the app. Developers should be aware these additions will increase the complexity of the app.
- Do think about subscriptions. Subscriptions are a realistic and viable revenue model for any app. A smart strategy is to offer some content for free to generate demand and prove an app’s value to users. Developers can offer premium content or unlimited access to content through subscriptions to drive revenue further than an ad network could do alone.
- Don’t underestimate the market. According to independent metrics firm AndroLib, the rate of Android application growth has been on a nonstop increase for months, and it shows no signs of slowing down. Gartner predicts Android will command 49.9% of the smartphone market by 2012. There is huge potential.
- Don’t offer an app that can’t stand on its own without additional features. Ideally, an app pleases users as-is and whets their appetite for more content. A useless app — or one with disingenuous pricing — will not motivate users to make in-app purchases. Similarly, a free app that only works well with a $9.99 in-app purchase is a big turn-off and a disincentive to users to pay for more.
- Don’t grumble about the fees that Google or Apple will take from the transaction. These markets offer distribution to an enormous audience, and is well worth the 30% revenue share
- Don’t Make the free version of the app so featureless or devoid of interesting features that users lose excitement. Developers must strike a balance between what makes the app good enough to engage users and what makes users want to pay for more.
- Don’t neglect your app. New content and features drive increased app usage from existing customers, many of whom are likely to purchase additional in-app content. Angry Birds does this to great effect by continuously adding new levels. At the end of the day, delighting users should be the ultimate goal of developers. It’s critical to driving increased monetization.
- Don’tthink in-app purchase or in-app billing (IAB) is easy. These are complex features that require significant investment in developer knowledge and time. The revenue is worth the effort, but don’t underestimate the engineering required to properly integrate IAB.
- Google IAB uses Google Market/Checkout for all transactions. All terms and conditions of that system apply to Android IAB. Accordingly, app developers have to be responsible for their own taxation and related reporting. This varies from iOS, where Apple does all business on behalf of the apps. In addition, Apple handles all international taxation and related matters and cuts the app publishers a check at the end of the process.
- Google IAB requires users to have a Checkout/Google account to complete the purchase. This will manifest as a Google branded pop-up in the app, which will include all the credit card and related purchasing info associated with the account. iOS in-app purchase is tied to the user’s iTunes Account, and does not have any branding associated with IAP. Note that although IAB might be Google/Checkout account based (and likely will continue to be) the payment options are expanding. Developers are advised to stay up to date with changes on the platforms.
- Google’s in-app purchasing APIs lack the ability to transmit all details of an app’s inventory (such as its price) to the app. iOS, on the other hand, is easier to set up, as the price and description are pulled directly from the developer’s iTunes Connect account.
- Neither system is particularly friendly for identifying your end-users, making refunds a challenge. Google has a leg up here because app publishers will have all the tools of Market/Checkout at their disposal. These tools enable canceling purchases, processing refunds, and so on. Apple offers none of this.
- Apple’s currency conversion is more straightforward and easier to understand. Google has only just begun to roll this out.
Key Differences Between iOS and Android
Regardless of what platform you use, in-app purchasing is a huge market waiting to be conquered. Share your own tips or experiences in the comments below.
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