Loyal Users Generate More In-App Purchases

January 20, 2012

localytics-in-app-by-first-session.jpg44% of mobile application users who made an in-app purchase did not make it until they had interacted with the app at least 10 times, while one-third made their first purchase some time between their second and ninth session, according to a study released in January 2012 by Localytics. Just 22% of users in the study who made an in-app purchase did so during their first session. On average, a user who made an in-app purchase was found to do so 12 days after first launching the app.

Engagement Aids CLV

Data from Localytics’ study indicates that users who interact with an app multiple times before making their first in-app purchase have a 25% higher customer lifetime value (CLV). First session purchasers will make an average of 2.8 purchases in a given app during their user lifetime, compared with 3.5 purchases for all other purchasers.

In fact, only 16% of users who make a purchase during their first app session will go on to engage with that app 10 or more times, compared with 26% of overall app users.

Revenue from Purchases to Increase

According to a January 2012 IHS report, revenue from in-app purchases will increase to $5.6 billion in 2015, up from $970 million in 2011. In-app purchases will account for 64% of total market revenue in 2015, up from 39% in 2011. January 2012 data from Juniper Research, meanwhile, has a less bullish revenue forecast, estimating that global revenues from in-app purchases could reach $4.8 billion by 2016, representing a 129% jump from the $2.1 billion total estimated in 2011.

IHS also estimates that 96% of all smartphone apps were downloaded for free in 2011, and that by the end of Q3, free-to-download apps already represented 45% of the top-grossing US iPhone applications as well as 31% of the highest-earning US Android Market applications. IHS calculated 68% of the top-grossing US apps to feature some form of additional content or functionality available via an in-app purchase.

Virtual Currency Most Popular Purchase

Data from “Free for All: In-App Purchases to Dominate Smartphone App Business” indicates that most in-app purchases at the end of Q3 2011 in the US and UK involved buys of virtual currencies, such as additional chips for poker, or redeemable points in games. IHS estimates that 63% of in-app purchases on the US iPhone App Store at the end of Q3 were for virtual currency, while the next most popular category of in-app purchase was for specific in-game functions or features, rather than general currency, which accounted for 22% of the most popular US in-app purchases. Other popular in-app purchases include time-limited navigation services, dating and premium social network access, as well as specific functions or features for photo and video apps.

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