All posts tagged Mobile Technology

Make Freemium Paymium

Guest post by John Fletcher

Average iPhone app prices have sunk from $3 in 2009 to nearly to $1 this year and the defensive position is to assume they are heading towards $0.  Enter freemium: apps that are either try-and-buy or free to download and play but offer in-game upgrade purchases (or questionably, advertising).

But freemium economics can be a bummer.  Glu Mobile’s margins have shrunk since it went all-in with freemium.  Likewise, as Korea-based Gamevil has changed from a paid download model to in-app purchases, its operating income margin has grown in the wrong direction.

Freemium Success

But it’s not a total bummer.  We have at least three success stories to review:

  1. Way back in 2009 Tapulous’ Tap Tap Revenge 3 generated 5X the revenue from in-app song packs compared to paid downloads.  (Tapulous was acquired by Disney at a 2.9 forward year revenue multiple in July 2010, a relative deal compared to the other 50+ deals in our mobile media M&A database).
  2. Last year’s Smurfberry mania was so hot it forced Apple to require UN and PW log-in before in-app purchases could be billed.
  3. And this year’s case study: Natural Motion’s CSR Racing had an $11 mil. month this summer from in-app purchases alone.

And the games business is hits-based, so timing and predicting consumer tastes and preferences are key.  In addition, word of mouth is the best app marketing available and reviewers can sink half-baked apps fast.  So don’t go to market with a weak product.

Initial Quality Pays Off

Simply, the longer your game is played, the higher your chances for in-app purchases.  For instance, of gamers who made an in-app purchase, “44% did not do so until they had interacted with the app at least ten times,” according to a January 2012 Localytics survey.  So far it appears the most popular in-app game purchases unlock new levels or in-game upgrades.

So if the key to freemium is a high-quality and addictive game that is playable for more than several hours: how deep and entertaining is your gameplay?

For more details on the economics and trends in the US Mobile App/Second Screen/Game/Music/LBS and Video markets  you can also connect with me on Linkedin. Just click on my name below.

 John Fletcher has a decade of experience analyzing media and communication markets. He is currently the mobile entertainment Analyst at SNL Kagan.

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Send Me A Gibber!

The great thing about technology is it keeps getting better at helping us communicate. Now, there is a new tool, which helps fill out another slice of the communication spectrum. Click on the step-by-step pictures for a larger view.

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Mobile Games Go Up, Way up

While the global economy crumbles, mobile games have finally hit the hockey stick.

US revenue from mobile games is expected to nearly double this year compared to 2010 thanks to a growing base of users on game-friendly Smartphones, easy to access apps, new revenue streams from advertising/in-app purchasing and a boom in the supply of quality mobile games.

And in-app purchasing has had a stellar 12 months.  The concept is relatively new to mobile games with Apple launching the ability 10/15/2009 and Android announcing support 3/29/2011.  Free to download “Freemium” games offer paid in-game upgrades for additional health or ammo, skipping levels, speeding up game play or other game-enhancing functions.  While just a concept a few years back, it has caught on fast.  For instance last quarter Glu Mobile generated $7.7 mil. in Freemium Smartphone sales, up from just $328K in the same quarter last year.

And the near vertical growth for Glu Mobile’s Freemium revenue is not unique.  For instance in-app Smurfs’ Village Smurfberry purchases helped catapult Capcom to report record mobile revenue and earnings in the first quarter of 2011.

But are Freemium revenues here to stay or is this a temporary fluke?  And if repeat use is key for both ads and Freemium, what does it take to make a killer game that brings users back for more?

SNL Kagan’s upcoming Economics of Mobile Games report includes ten year projections for US revenue, EBITDA and mobile game users, the top 47 mobile game publishers by quarterly revenue from 2005 through the end of 2011, top 33 mobile media deals of the past several years including 13 mobile game deals and more.  The report is available beginning September 2011.

Guest Blog by John Fletcher. John has a decade of experience analyzing media and communication markets. He is currently the mobile entertainment Analyst at SNL Kagan.

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