A survey by apps analytics firm Flurry has found that average spending within ‘Freemium’ gaming apps has reached US$14 – which it says could cut into the revenues from portable gaming devices such as the Nintendo DS and Sony PSP.
The survey studied how 3.5 million consumers spent their money across top iOS and Android Freemium games. It found that 71 percent of in-app purchases on such titles were for less than US$10 in value, 16 percent in the US$10-US$20 bracket, and 13 percent above US$20 – the average in-app purchase calculated at US$14. However, while the under-US$10 bucket accounts for over two-thirds of the transactions, it only accounts for about one third of the revenue generated (31 percent). Spending over US$20 (13 percent of transactions) accounts for over half (51 percent) of revenue. Moreover, 30 percent of the total revenue is generated from transaction sizes of over US$50.
“On the low end, we’re ‘packing sardines;’ that is, accumulating a lot of small transactions. On the other end of the spectrum, at the ‘over US$20’ spend-level, we find the ‘whales’,” said Flurry’s Jeferson Valadares in a blog post. “If you’re a game designer, your main take away is that very few transactions—and consumers who complete those transactions—make up the bulk of your revenue. Therefore, your ‘meta-game’ should be about whale hunting.”
Flurry measured that iOS and Android revenue share of the US portable game software category exploded to 34 percent in 2010, up from just 1 percent in 2008. Over this same time period, it calculated that Nintendo’s US portable game revenue share contracted to 57 percent from 75percent. By the end of 2011, Flurry estimates that total US iOS and Android gaming revenue will surpass US$1 billion.
“The Freemium business model on mobile, enabled by a device that is always with consumers, and always connected, is unlocking profound new ways to deliver value and extract revenue from consumers,” said Valadares.
The Freemium model refers the use the free-to-play model, where the game is given away for free, and then the consumer can purchase virtual currency and/or virtual goods through in-app-purchases. This is in contrast to the Premium model, which simply charges for the download.