Key Element of 2016 App Economy Is In-App Spending by Kamal Shah

app economy in-app spending

kamal shahKamal Shah is Senior Sales Support and Blog Writer at Waypedia. He has been with the company since it was open and focused on helping developers to find reliable ways to promote their apps. Kamal is also in sales training and has been representing Waypedia in growing Asian markets like India, Pakistan and China. Today he shares with us insights to help you understand your user LTV and in-app spending based on market research.


Previously, in-app spending did not play a major role, however now in 2016, the app economy has changed drastically from what it was a couple years ago. Buying smart is the main difference between success and failure. The most successful app-marketers are now changing their models. The fact is that Lifetime Value (LTV) is the most important Key Performance Indicator (KPI). When the LTV of a user exceeds the cost to acquire that particular user, the app is said to be ROI positive. This formula looks simple. Apart from the above points, measuring the LTV of a user is based on two parameters:

  1. Revenue: The revenue generated by in-app spending, in-app advertising, subscriptions etc. shows how much a user actually spends time in an app. In-App Purchases (IAPs) take a major share of revenue and thereby the growth is expected to increase from $14 billion (2015) to $37 billion (2017).
  2. Retention: the second parameter is retention. This simply shows how active an average app user is. A user is likely to be retentive if he/she is engaged with an app. LTV increases in such cases, resulting in higher in-app spending.

In this post I will give insights to will help you understand your user LTV. I will also provide you with information that will help you understand more about in-app spending. Here are some facts and figures and their key findings.

Methodology

  • Time gap: April-May 2016
  • Money spent: $300 million worth of in-app transaction
  • Number of Apps tested: Over 1,000 apps that have in-app purchase activity
  • First-time Users: 100+ million
  • Purchase events measured: Over 30 million

In-app spending includes any transaction made within the app to purchase any goods or services.

Key Findings of Facts

After doing some extensive research, we here at Waypedia discovered some amazing facts.

  1. Paying User is the boss: There is a huge margin between a paying and non-paying user. A paying user spends almost $9.60 every month (all categories) globally. This amount is 20 times more than any user. Only 5% of the users are paying users which makes them the ultimate king for all developers.
  2. iOS out numbers Android: Apple’s iOS users are 2.5 times more engaged in in-app spending than Android users. The former’s purchase amount is almost double than the later. Even the percentage of iOS users making in-app spending is twice than Android.
  3. Whales dominate gaming apps: The fact is well known that only a few contribute to revenues when it comes to gaming apps. This is called the whale phenomenon where only 3.5% of gamers go for in-app spending. This percentage is small but the users spend a large amount on average when compared to non-gamers.
  4. Android stands for utility: Android is an open OS, therefore, a user gets to use memory boosters, anti-virus and other such utility apps. On the other hand iOS stands out to be a closed operating system. This results in almost 5 times more spending on utility apps on Android when compared to iOS. The average in-app spending for Android is $0.85 when compared to iOS’s $0.24. The few users who spend on iOS are valuable though as they spend almost $7.99 when compared to Android’s average of $3.83.
  5. Shoppers and gamers belong to different worlds: A shopper is completely different from a gamer. Gamers account only for 3% of total in-app spending whereas shoppers cut the line by more than 12%. This actually shows why it is better to invest in a shopping app.

Key Findings of Facts from Regions:

  1. First-timers from Asian region topple others: First time mobile users are more addicted to their savviness and therefore spend a lot of amount purchasing stuff. They exceed users who have been mobiles since long by a very good margin. The average global spending is around $0.50 per app per month whereas Asians spend as much as $0.70.
  2. Latin America is still catching up: Latin America is yet to shake hands with mobile fully. They are still trailing by a long margin when it comes to in-app spending. Even then the number of people who actually spend on in-app purchases is 48 times higher than an average user.
  3. North Americans love shopping: When it comes to in-app spending with regards to shopping, North America stands in the number one position. They spend 2.5 times more than Europe and 4x more than Asian users. An average North American shopper spends almost $2.7 per month per app.

Recommendations for Marketers:

  1. Work on mathematics: Measure cost and revenue and in-app spending to determine the ROI. You should target a positive ROI and then optimize it. You must enter the correct data which includes your app’s revenue data like in-app spending, subscriptions, premium models etc. One must also enter the correct cost data.
  2. Onus lies on Paying users: The app market has become saturated and it has thereby become very difficult to find new users. Paying users therefore hold a lot of importance as they are driving in-app spending. You should focus on them and know everything about them.
  3. Understand Asian Market: Asian are the most valuable users in in-app spending. The cost involved there is not as high as US or Europe. Therefore, it’s important to understand that market well.
  4. Keep an eye on Latin America: Latin America is still a developing market and is slow in in-app spending. This presents an opportunity for all the entrepreneurs to enter a new and non-competitive market. One can easily register a strong foothold there.
  5. Make sure the payment procedure is flawless: In-app spending should be a seamless experience for any user. This motivates them to purchase a product without any hassle. Any stoppage can result into losing out an important conversion.
  6. Make people tech-savy! This sounds a little out of arena. But you can definitely do something or the other to make people in your region a little more equipped with technology. You can do it through PR, blogging, events and advertising.