Mobile apps are hot news in the business world, and recently the evolving sales models have had a lot of media attention. So we sought out the developers behind one very successful app to ask their thoughts, and it's fascinating stuff.
Limbic Software is behind "Tower Madness" a classic tower-defense game with an aliens-and-sheep motif that's been bumping around in the top end of Apple's iOS app store for around a year. The thing is, the app has had varying fortunes as the business model that Limbic has used has evolved, and Apple's app store model evolved too. How did the game transition from its original popularity through several modes of existence to its current profitable state? With some nimble-footed adjustments that leveraged the changes made by Apple.
Limbic's co-founder and CEO Arash Keshmirian explained to us that at first the game sold itself. Immediately on its May 2009 launch it earned good reviews and landed an Apple Featured App status, but "as with all apps, things dwindled after a few months." In an attempt to reinvigorate the app's fortunes, Limbic tried a tactic that's still popular--a Lite edition with reduced functions to tempt users to buy the full version. It had moderate success, but then it too "tapered."
Then came the full-featured free version, Tower Madness Zero (TMZ) that totally changed the game's fortunes. The game shot up the charts to the number two popular slot, earning itself lots of publicity. But did it cannibalize the sales of the full game, as Limbic expected? Nope--the exposure of the high "popular" chart position lifted the full-paid $3 app up to number 22 in the same chart. The thing is, though ad revenues were working, the income from paid apps was much greater.
A few months later, Apple enabled in-app purchasing. And this transformed Limbic's game completely: The inclusion of in-app expansion packs did cause a "slight angry backlash" from existing paid users, but that was expected. Limbic has now created four in-app purchase expansions, with the fourth in approval phase, and their income has "outpaced ad revenue by about four times in TMZ." The first in-app addons resulted in a "massive surge" of players expanding the game, and the additional revenue from this drove the app high up in the "top grossing" charts on the App Store--the increased exposure from this caused even more sales of all versions of the game. The trick, according to Keshmirian is that the in-apps allowed Limbic to "continue to engage and generate existing revenue from our existing users on an ongoing basis across all of our products" whereas ad-based revenue is limited to the free edition, which seems to have sales trends that're driven by the paid edition.
The upshot? "Over the last three months, IAP revenue has outpaced ad revenue by about 4x in TM Zero. If we consider total revenue across all applications (TM Zero, TM, TM HD) ad revenue is only 1/20th of IAP revenue." This is absolute confirmation that in-app buys are the secret sauce to making money from popular apps on the iPhone. But there's more: "Many of our in-app purchases, taken singly, have individually generated more revenue than our total ad revenue."
So in a few words, how does a successful app keep generating revenue? First: Succeed with a free model that earns exposure and a core ad-based income. Next, generate a paid version that offers the same experience, less the ads. Then create regular, engaging, and genuinely value-added in-app purchases that please your core userbase, and push the app back into visibility on the App Store to tempt new buyers. As Keshmirian notes, it "makes sense for our game to sell map-packs and items. Some games lend themselves very well to this model," but it's not going to be universally a good trick: "For other game genres, the expansion opportunities may only be limited to themes and other cosmetic aspects," and here Keshmirian thinks banner ad revenues may be more lucrative.
In simple words, the advice from Limbic's experience would seem to be: When it comes to the App Store be agile and be clever. And leverage the heck out of the in-app purchasing system.
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