App Zap’s Counterintuitive Secret for Monetizing Through In-App Purchases? Make Your Game Paid

It may seem counter productive to ask users to pay for extra content in a paid app, but it’s not always, at least according to Munich-based startup App Zap.

Paid games with additional paid elements, whether it be extra content or in-game currency, is a trend we’ve been seeing more and more of lately. While it is easy to assume players will balk at the prospect handing over more money if they’ve already paid for a game, paid users will monetize at a much higher rate than free ones according to App Zap’s chief marketing officer Roman Bui.

The developer’s biggest hit right now is Kick the Buddy, a simple physics-based game where users can dish out a variety of tortures and indignities to a dummy named Buddy. It reached #4 top grossing in the U.S. before it was taken down by Apple due to some privacy bug that Bui is fixing right now. Unlike most App Zap’s previous titles, there is both a free version and a paid version — a decision that App Zap made to help them avoid advertising and monetize the game early on to fund additional content updates.

While the developer’s free apps are typically downloaded 10 times more often than their paid ones, having two versions of the game has given App Zap the best of both worlds according to Bui, who revealed conversion rates from the free to the paid version can be as high as 20 percent on weekends when iOS downloads are at their peak.

“If we have a really good free version of the game, and we have a user who’s only played the free version, they all want to buy the full version of the game. If they have the money, they buy it – it’s very smooth user retention,” says Bui.

While Bui didn’t reveal the exact figures for ARPU for App Zap’s free games as compared to their paid one, he did say in no uncertain terms that paid users are far more valuable to his company both in the short and long-term. While in-app purchase rates vary greatly from game to game, most developers find less than 5 percent of players will actually spend money on a free-to-play game. However, App Zap has found when users are paid first, they’re far more likely to keep paying. According to Bui, about 30 percent of all Kick the Buddy users buy every every in-app purchase as they are added.

“It’s very interesting because if a user buys our game, they like the game more and that user is more interested in giving us a dollar for an official update,” explains Bui.  “But if we’re speaking about a free game with in-app purchases, a free game is just a download and sometimes users don’t even launch the game, which means that user isn’t going to buy an in-app purchase or new levels.”

App Zap’s other tactic is community management — relying on feedback to ensure the paid updates are something the users are actually willing to pay for.  “That’s why our first and most important aim is to please our users,” he explains. “If you go on Kick the Buddy’s Facebook page, we have a lot of conversations with our customers and reply to almost every message that we get. When we add updates, we add elements that users have requested from us, so when we add an item they’re really, really interested in it.”

According to Bui about 95 percent of the in-game items that App Zap adds to Kick the Buddy are based directly off user feedback and while the majority of them are rolled out for free, approximately every two in 10 are paid items, a balance that keeps players happy, but also paying for extra content.  On average App Zap receives more than 50 suggestions a day for new Kick the Buddy content and looks seriously at about 40 of them.

App Zap has two new games coming out in 2012, a sequel to their game All-in-1 Logic Game Box and a new version of Do Not Press The Red Button. All-in-1 Logic Game Box 2 will be a paid app with paid downloads, like its predecessor and Kick the Buddy, but Do Not Press The Red Button will be completely free. The developer will also be experimenting with in-app purchase bundles in Kick the Buddy to help monetize players who haven’t been tempted to add more items to the game.

Author’s Note: Last week App Zap removed all iPhone versions of Kick the Buddy from iTunes store to fix a privacy bug, but App Zap is hoping to have all the games back in the App Store by next week. The iPad version of the game isn’t affected by the bug and is still available for $2.99.