IAP Conversion Rate Guide — What Developers Need to Know

It’s hard to convince people to pay for something they’re used to getting for free. And with hundreds of thousands of free apps on the App Store and Google Play, competition for mobile users’ attention is stiff enough before even considering in-app purchases (IAP). There are tons of developers succeeding off ad revenue alone, but many rely on IAP revenue as well, which requires convincing free users to make a purchase in your game or app.

It’s easier said than done, of course, but if increasing your IAP conversion rate is the goal, there are some strategic ways to do so. From types of paid content to best practices, here’s what you need to know.

 

What is IAP conversion rate?

IAP conversion rate refers to the percentage of users who complete an in-app purchase within an otherwise free game or app. For example, if you had 100 people using your free app and 3 of them made some sort of purchase within the app, your IAP conversion rate would be 3%.

As far as what counts as an in-app purchase, that’s when things get a little varied. It could be a one-time transaction, such as buying a weapon or skin for a small price in a mobile game. It could mean going from a free version of an app to a premium version, again requiring a one-time fee. This might grant the user access to special content or an ad-free version of the experience.

IAP conversion rates also refer to those who go from free or trial versions on an app to paid subscriptions. This is a little different in that it can be a bigger or longer commitment than a one-time purchase, but subscriptions are becoming more and more popular among app developers. And users have shown they’re willing to commit to a recurring fee if the content warrants it; just look at the success of Netflix, Amazon Prime, and Spotify.

 

What’s considered a good IAP conversion rate?

Sources vary on average purchase conversion rate, but most put it at around 2% to 3%. There are a lot of other factors to consider as well, such as smartphone vs. tablet, App Store vs. Google Play, and so forth; for example, according to Business Insider, iOS users are 80% more likely to make an in-app purchase than Android users.

The bottom line is, your IAP conversion rate may look low on paper, but that doesn’t mean you’re not successful. It only takes a small percentage of paying users to drive a large amount of revenue.

 

Is IAP conversion that important? Why not just focus on ad revenue?

Naturally, there’s still plenty of money to be made incorporating clever, creative, and engaging ads into your app experience. That said, why limit yourself to just one revenue source when you have the potential to earn more? A healthy blend of ad sales and IAPs can make an app profitable even in today’s crowded marketplace.

And if you’re still thinking IAPs aren’t worth the effort, think again. Just look at Candy Crush Saga, an ostensibly free game that’s earned over a billion dollars on in-app purchases. In the current app economy, not considering IAP conversion rate is leaving money on the table.

 

What are some best practices for improving my IAP conversion rate?

While there’s no foolproof formula to turn free users into paying users, there are steps you can take to make your paid offerings more attractive to users.

 

Time has value

For busy professionals, paying a dollar or two to unlock more lives or power-ups is preferable to waiting for an arbitrary timer to click down. Remember, time is also a precious commodity, and your IAP options should reflect that.

This also applies to mobile games, which often provide in-game items for a small cost. Often, these are items that could be unlocked after a random loot drop or many hours of play, but even full-priced AAA titles offer gamers shortcuts to buy some items immediately.

As mentioned above, the Candy Crush franchise has built a billion-dollar empire off of this concept. As more and more big developers and publishers bring their games to mobile — as we’ve seen with Fortnite — in-game items are going to be a big source of IAP conversion rates.

 

Remove interruptive ads:

At this point, any mobile user understands that ads are part of the process. An occasional marketing message is a small price to pay for a free game, productivity helper, or whatever other service the app might offer. Note that this almost never applies, however, to rewarded ads which are a welcome addition to any robust free-to-play economy as long as they provide consistent value.

 

Keep the content coming

While free apps might quickly run low on content, giving users an incentive to keep coming back for more — even if they have to pay for it — can also increase IAP conversion rate. This might mean providing elevated experiences not available in the free version, seasonal events, bonus content; as a developer, it’s up to you to create that drive.

More and more, app developers are using subscriptions as a regular source of IAP revenue. The trade-off is that you’ll have to give users a steady stream of updates to justify the monthly or yearly cost, but gaming, entertainment, travel, and mindfulness apps have been able to do just that, to name just a few.

While IAP conversion might not be the biggest number in your dataset, it’s still an important one. Some users are never going to pay, and that’s okay. What’s important is targeting the potential payers and offering them worthwhile experiences they can’t get for free.

For more information about in-app purchases and mobile marketing, the experts at Tapjoy are ready to help.

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