How much is an active user?

Original author: Developer Economics
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According to AppAnnie, in-app purchases accounted for almost all of the revenue growth from apps over the past year. But is this only due to the fact that this business model has become very popular? Or is there a place for revenue overconcentration among top publishers who mostly prefer the free-to-play model?

Probably both of these facts had their effect, but do not forget that in-apps, in addition to a sufficiently large revenue stream, are generated by the subscription model.

If we exclude developers of top-end applications (those who earn more than $ 50 thousand per month and have more than 500 thousand active users), it turns out that one of the most important aspects was attracting users and their subsequent retention. Moreover, the average revenue per active user is quite static, regardless of the monetization model.

The graph shows the average revenue per active user for different monetization models. On the left, applications that earn more than $ 50 thousand are excluded. On the right, they are included to illustrate the impact of this factor. These data are based only on those applications where analytics is built-in.

In this study, a Freemium application refers to a limited free application, with a separate paid version advertised as a free application, or a free application with an in-app upgrade.

In-app purchases - any virtual goods, features or content purchased within the application. The application itself can be both paid and free.

It is worth noting that developers can use several monetization models at the same time (it happens quite often). For example, a freemium application with ads in the free version.

The average number of models used per developer in the study is 1.7. Therefore, if we take developers using only one monetization model, in general, the picture will hardly change.

For most developers, an active user costs about 4 cents per month.

If you do not have an excellent reputation or cooperation with some well-known brand that can attract a large number of paid downloads, it is best to avoid a situation where the user pays for the main function of the application.
Refusal from a paid model will lead to more downloads and significantly expand the user base.

With the Freemium model, everything is not so smooth: even if the free trial version can get a crazy amount of downloads, the actual number of paying users will be less than if the application was paid.

Advertising and in-app have approximately the same user bases and revenue. The subscription model has the smallest active user base, but brings the largest revenues, however, such a model requires constant maintenance of the quality of content and extensions within the application, which naturally increases costs.

The picture is slightly different if you take into account applications with high revenues. At this point, paid applications are far behind both in terms of ARPU and the total user base and revenue in general. This does not mean that you cannot have a paid application with good revenues (Minecraft for example), just the likelihood of repeating such a success is much less.

Subscriptions are still the most profitable model, although they are not so much pushed forward. A smaller ARPU for subscriptions means that top-end applications with this model have a very popular free part of the application.

The Freemium model at this level (taking into account top-end applications) shows much better results than paid applications, both in terms of active users and in terms of revenue.

Finally, in-apps and ads have the largest databases of active users, providing their core functionality for free. However, a well-thought-out in-app purchases system allows this monetization model to define advertising with some margin in terms of revenue.

In addition to all this, it is worth considering that the average revenue from one active user should significantly exceed the cost of “servicing” this user (and not to mention the cost of attraction). This is especially true for developers whose applications use server technology (BaaS). For example, if most developers earn 4 cents per month per user, then with an average BaaS cost per user of 3 cents, the developer will not have much profit.

PS You can familiarize with the interactive schedule in a source.

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