The red-hot virtual goods market is working its way onto Apple’s iPhone app platform, as developers hope to cash in on the iPhone’s relatively new support for in-app payments.
Prime example: The new, free game “Eliminate Pro” from Ngmoco, the iPhone gaming firm founded by ex-Electronics Arts star Neil Young.
Eliminate is an awesome, social shoot-’em-up game, meaning you’re running around, shooting at people over the Internet — whether they’re friends from real life, pals from social networks, or total strangers.
Eliminate launched earlier this month and has already blown past 1 million downloads. It’s basically a miniaturized, iPhone answer to “Call of Duty,” the hit console game. It’s very fun.
And it looks like Eliminate is making Ngmoco heaps of dough — by the iPhone’s standards, at least. As of Wednesday evening, it was the seventh highest grossing app in the App Store. This means only six apps — of more than 100,000 — were generating more revenue, faster, than Eliminate. This could be several thousands, or even tens of thousands, of dollars per day.
What makes this more impressive is that Eliminate is a free app to download. Therefore, 100% of its revenue is generated by in-app purchasing of virtual goods.
Here’s how it works. To earn credits in the game, which can be exchanged for virtual goods, you need to have “energy” to play. Energy drains quickly, and can only be replenished by waiting an hour — previously four hours — or by buying it back in the form of “power cells.” (So if you’re having fun playing, it’s going to cost money rather soon.) Credits, in turn, can be traded in for virtual goods, such as weapons, armour, suit decoration, etc. The most popular in-app purchase is a 99-cent pack of energy; no. 2 is a $9.99 pack.
Eliminate is one of the first games to take advantage of a new policy change Apple made, which allows in-app payments in free apps. Previously, only paid apps — minimum 99 cents to download — could offer in-app purchasing. This significantly limited the potential audience size — the vast majority of apps downloaded are free apps — and therefore limited potential revenue.
What does this change mean? For app publishers, more players and more revenue. For consumers, potentially more free, high-quality games and apps, with premium options available via in-app commerce.
Eliminate, as a free app, is probably getting about 10 times as many downloads — well over a million — as it would be getting as a paid app. This means there is a dramatically larger audience to pay for in-app virtual goods. (A bonus is that it makes the game, which relies on a large community, even better, too.)
Ngmoco’s Neil Young would not disclose the game’s revenues, but in an interview, suggested that a long-term financial goal for the game might be to get about an average 5 cents in revenue per day, per active user. That could add up. If Eliminate could eventually get 500,000 daily active users, that’s a revenue run rate of more than $6 million per year, after Apple’s 30% cut. Not bad for one “free” game on a relatively new platform.
Another game making great use of in-app purchasing and virtual goods is “Tap Tap Revenge 3,” the latest rhythm/music game from Tapulous, an iPhone app startup. The Tap Tap Revenge franchise is basically the iPhone equivalent of “Guitar Hero” or “Dance Dance Revolution,” and has been around for a long time.
Tap Tap Revenge 3 launched in October, when only paid apps could use in-app purchasing, so it still costs 99 cents. But it topped the paid app charts for several days and likely has hundreds of thousands of downloads worldwide.
It, too, is using in-app purchasing for virtual goods: Mostly music tracks for users to play along with, such as song packs from Lady Gaga, the All-American Rejects, Blink-182, Lynyrd Skynyrd, etc.
Tapulous CEO Bart Decrem wouldn’t disclose the game’s total sales or downloads, but says the company has sold “hundreds of thousands” of tracks using in-app commerce. Sounds like another hit.
And while in-app payments will clearly be driving a new market in virtual goods within free iPhone apps, other developers have also found interesting, different uses for it.
One example: Navigon — whose $89 MobileNavigator GPS mapping app is the top grossing app in the App Store — uses it to unlock an add-on feature for its app. Via a $19.99 in-app payment, you can get live traffic for your GPS app.
Expect to see more in-app payment opportunities to “unlock” things like this — ranging from add-on features, to unlocking levels and goods in free games, to using in-app commerce to manage subscriptions. The result: Ideally, more revenue for app makers (and Apple), giving publishers an incentive to keep investing in making more great iPhone apps.
Ngmoco is giving this awesome game away for free, making the bet that it will be able to generate more downloads that way, and therefore could generate more revenue via in-app virtual goods.
Eliminate is currently the no. 2 app in the App Store -- was no. 1 for days -- and despite being free to download, is the no. 7 highest grossing app as of Wednesday evening. Top in-app purchases are the game's energy 'power cells,' which let you earn credits for your play, priced in various denominations at 99 cents, $9.99, $11.99, $4.99, etc. Credits, in turn, can be exchanged for virtual goods.
The app by Electronic Arts costs $6.99, and in-app purchases -- sets of music tracks to play along to -- cost 99 cents. Top virtual goods include track sets from Foo Fighters, Smashing Pumpkins, Ok Go, Lenny Kravitz, etc.
Currently the no. 5 top grossing app in the App Store and the no. 22 best selling paid app.
Boxcar is basically a universal alerts system. It turns on Apple's real-time push notifications system for several Web and mobile services, such as Twitter (replies, direct messages, search queries, etc.), Facebook (notifications), email, etc. The app is free and comes with one alert. But you can purchase additional services for 99 cents using in-app purchasing. Facebook and Twitter are the most popular in-app purchases.
EA's game costs $6.99, but it's hoping that regular users spend plenty more on virtual goods via in-app purchasing. The top purchases so far include settings and costumes from the 'campus life,' 'vampires and werewolves,' and 'castle life' sets.
Currently the no. 9 top grossing app in the App Store.
This is one of the cheapest -- if not the cheapest -- turn-by-turn GPS apps for the iPhone. The app costs $2.99 to download, which gets you a 30-day test drive. After that, you can use in-app purchasing to buy a month of service for $2.99 or a year for $24.99.
It's currently the no. 24 top grossing app in the App Store. (Its $89.99 rival, MobileNavigator, is no. 1.)
The 'I Am T-Pain' app by Smule uses 'auto-tuning' audio distortion technology to enhance your voice while you sing along to background music, primarily by artist T-Pain, who co-produced the app. The app, published by iPhone music appmaker Smule, costs $2.99, and additional tracks cost 99 cents. Top purchases include 'On a Boat,' the Saturday Night Live gag song, and T-Pain's duet 'Buy U a Drank.'
This app has been a huge hit, selling over 300,000 copies in its first three weeks. Even now, two months after launch, it's still the no. 18 highest grossing app in the App Store and the no. 24 best-selling paid app.
Tap Tap Revenge by Tapulous is the original iPhone music/rhythm game. The company started allowing sort-of premium track purchasing in earlier apps, but went all-out on virtual goods and in-app purchasing in TTR3, which launched recently as a 99-cent paid app.
Top in-app purchases include song tracks from Lady Gaga, Blink-182, All-American Rejects, Lynyrd Skynyrd, etc. Currently the no. 28 top grossing app in the App Store and the no. 10 best-selling paid app.
Like many games with in-app purchasing, Ngmoco's new Touch Pets Dogs lets you purchase credits for dog food, which you can use to buy virtual goods inside the app. But it's using a slightly outdated system: The credit packs are separate apps in the App Store, ranging from 99 cents to $29.99. This was done before Apple decided to allow in-app purchasing in free apps.
We assume Ngmoco (and other publishers using this system) will switch over to straight in-app purchasing eventually.
This app offers a variety of casual games ranging from chess to blackjack and poker, each with social features so you can play against friends.
The game costs 99 cents, and players have been buying packs of 'papaya' credits for 99 cents, $9.99, $4.99, etc. Currently the no. 39 top grossing app in the App Store.
This social baseball slugging game costs $4.99, but in-app purchases seem to be generating more revenue for Com2uS, the publishers. Top purchases include customised players and equipment ranging from the 99-cent 'catcher' to the $4.99 'captain slugger' and the $19.99 'DeMarini CF4.'
Currently the no. 40 top grossing app in the App Store.
- App makers are starting to incorporate more in-app purchasing into their apps.
- Apple's recent decision to open it up to free apps will have a huge effect, because it dramatically increases the number of people who have downloaded the apps, and can therefore become paying customers.
- More high-end apps and games may now be free, with in-game virtual goods.
- Many other uses for in-app purchasing will evolve.