Meet our new guest poster, Yaniv Nizan, CEO and co-founder of SOOMLA and also an expert in dynamic in-app purchases. In his first post, he will share some tips on how to handle one of the biggest challenges of free to play games: avoiding the aggressive pay-to-win mechanics.
Being where we are and doing what we do, developers often come to me and ask for advice on pricing their In-App Purchase Store Items. And I believe this is a very important challenge for freemium games. On one side, if you price too high, people might not buy your digital products. On the other, if you price too low, you will not be earning as much as you can.
What’s your Target ARPU?
The first question I always try to ask myself is what will be a good target ARPU. What average revenue per user will be considered a success? There are a few ways to go at it:
- What do you think your game is worth to the average user? Is it worth 25 cents, 50 cents, $1, $5 – that’s a good indication of what you should be aiming for.
- What ARPU will allow you to spend money back on user acquisition? The cost of advertising when divided by the number of new users is often considered the customer acquisition cost (CAC). This cost ranges between $0.5 and $2 depending on the location of the user but if your game is social and viral the new users will bring more users and will reduce the effective CAC. If your ARPU is higher than your CAC, you can scale your game quickly.
- Who else is taking a cut in your revenue? You are probably giving 30% away to Apple and Google. If you find a way around that, please share it with us . Is there anyone else? Publisher? Service Provider? If you do, you might need to increase your ARPU to maintain operational margins.
Your Purchase Ratio
Using the Target ARPU and Purchase Ratio as a Benchmark for Pricing
Pricing to Reach a Solid ARPPU
- Single Use Items and Energy mechanics help make the game more addictive and create a base for a stream of purchases
- Upgradable items that have levels can give users a sense of progress that leads to multiple purchases
- Balance the power of the items you are selling against the difficulty curve
- Make the user think about his options – never allow a user to get enough coins to buy everything
- Repeat #4 for paying users. As odd as it may seem, paying users will get bored if they can buy everything.
This article was originally posted and featured on the SOOMLA blog.
About the author
Yaniv Nizan is the CEO and Co-Founder of SOOMLA - the self-serve platform for dynamic In-App Purchase Stores.
Yaniv is also a writer of articles featured in publications such as: Gamasutra, Gamedev.net, Gamesauce and blog.soom.la and a speaker at different industry events. You can follow Yaniv at @y_nizan