In-app micropayments grow 17% in 2016 – Why developers should focus on driving in-app purchases.

Micropayments appear to be working for mobile gaming apps – at least in Germany where smaller purchases in free games across various devices grew by 17% to €659 up from €562 in 2015.  According to figures published by German Games Industry Association – Bundesverband Interaktive Unterhaltungssoftware e.V. (BIU) – compiled by GfK, 3.9 million people in Germany spent money on virtual goods and add-on content in 2016 compared to 3.3 million back in 2015. The average monthly spending per user increased from €12.02 to €13.57 within the year.

Mobile game app payments were largely driving the increase in overall game purchases, growing 33% to €392 million. Revenue from browser-based online games remained fairly flat at €267 million.

Whilst micropayments are increasing, revenue from actual mobile game purchases dropped 15% in 2016 to €17 million. The decrease in turn helped push up revenue of in-app purchases.

Felix Falk, Managing Director at BIU, explains:

“Free-to-play games are an absolute success model and a significant innovation.The opportunity to play free-to-play games free of charge invites you to try out and explore. Corresponding titles must convince you when playing to [make a purchase] in order to be permanently successful. This makes free-to-play games not only extremely customer-friendly, but also [financially] successful. Within a few years this segment has become a mainstay of the overall market for games.”

Overall, it appears that the growing number of free-to-play gamers are driving the in-app payments growth in the country.

That trend is not unique to Germany. A recent survey from Gartner found that mobile users in the UK, US and China are happy to spend more in-app compared to paying to download an app. Surveyed users said they were spending 24% more on in-app purchases than on apps themselves.

Arguably, offering consumers the choice to buy add-ons instead of charging a flat fee for an app is a more flexible approach which may be indicative of where the app model is heading. Users want to be able to select the features they want instead of paying for an app that does not contain all the functionalities they really need. That’s an interesting approach for a future app store right there: pick and choose.

For developers the message is clear: provide options to boost recurring transactions in-app. However, in-app ads may not be of much help here – at least according to the Gartner research. Just 20% of respondents said they “often” clicked on ads in-app. Whilst that may sound like a damning verdict on in-app adverts, it’s worth remembering that the survey asked just 3,000 participants and that there other types of ads available, e.g. social media app advertising. Indeed, cross-device advertising has been proven time and again to deliver better results.

Overall, the verdict is clear: developers are advised to reconsider their app models to focus on purchasable in-app content.