We introduced a new and important concept in an eBook we released last week on IAP (The Developer’s Guide to In-App Purchases) that I wanted to spend a few moments clarifying. The central idea is that when a user downloads your app, monetization methods generate revenue at different times. By understanding when each monetization strategy makes money, and when they don’t, you can design the core user experience to support high user retention while improving the average revenue you generate per user.
The core idea is represented by what we call the Lifetime Monetization Curve (shown below). The curve provides a rough understanding of how the different revenue strategies differ. The goal in showing this difference is not to suggest how one approach is better than another, but instead so that as you design or optimize an app, you can apply this understanding in order to plan as you time each strategy.
The Lifetime Monetization Curve provides a snapshot of what each class of monetization looks like on an average app, but it isn’t meant to suggest that you select a single approach to monetizing user traffic. Depending on your app, it may make a lot of sense to combine these strategies. No matter if you use one or several strategies, think about how you time each step in the user progression.
The biggest takeaway, at least when taking about consumable IAP (content that gets used up like virtual currency), almost no users will actually convert on IAP in the first few sessions. Apps like Paper that are nearly paid apps and sell non-consumable app features can convert faster, as can some content apps especially in Newsstand, but as a general rule, you should put yourself in the shoes of your users and ask ‘have I gone deep enough in the app that I am likely to bet with my money that I’ll keep using it.’ Any time that answer is probably not, selling is hurting user retention and ultimately reducing your average revenue per user. Your first priority is making sure they know how to use the app, and then getting them hooked. Sell them on the app before you try to sell anything else.
When mixing multiple strategies, you have to be a bit more calculated. Best bet is either tying monetization features to app progression or linking your monetization with your analytics, so users get hit at the appropriate times. With ads in an IAP app, it can do a lot of good to hold off displaying ads until after the first few strong opportunities to sell IAP have passed. For users that actually convert at that point, don’t show them at all. When it is clear a user is not going to provide direct revenue, it is worth trying to get some distribution value out of the user, encouraging them to share via social media before starting the ads.
This isn’t meant to suggest that you should be tricking or deceiving users. It just means that you should understand what a user looks like that will actually pay you money, and don’t substantially reduce the likelihood of that transaction chasing $0.90/eCPM.
For a deeper dive into IAP, download The App Developer’s Guide to In-App Purchases (Available Free)