Report Says In-Game Purchases Will Rise to $4.8 Billion in 2016

I swore I would never do it. My friend swore she’d never do it. And still, after months of fighting the urge, we both did it. We both spent money in-game in order to advance play. A mighty eagle, here, an extra life there. The question now is, where will it end?

If Juniper Research is right, it may not end until we’re both out on the street begging for change in order to buy Words with Friends tokens.

Juniper says we (all of us, not just my friend and I) spent $2.1 billion on in-game purchases in 2011. They expect that number to rise to $4.8 billion in 2016.

One of the big reasons for the rise is that more developers are giving their games away free. Yes, in this case, free equals more money. This is because we’ve become accustomed, and addicted to the freemium model. In other words, Play now, Pay Later.

A report from Flurry, published back in August 2011, showed that 65% of revenue generated by the top 100 game apps came from freemium games. And though consumers balk at any price point over .99 for an initial game purchase, the average amount spent on a freemium transaction was $14.

Personally, I can’t see myself ponying up $14 to buy virtual goods, but then, I swore I’d never pay more than .99 for a game, and I just bought the new Law & Order: Legacies for $2.99.

The downside to pushing in-game purchases on a freemium model is that its easy to drive customers away. Finding the balance between paid upgrades and constantly putting your virtual hand out for more dollars is tricky. The best games allow you to progress without payment, it just takes a little longer. Any game that requires me to pay in order to move forward is getting deleted from my phone.

The Juniper report also found that Social & Casual games accounted for the majority of mobile game downloads. And tablet games are expected to increase to over a third of all mobile games by 2016.

Gaming apps are good business and even though there are 1,000′s available, we haven’t come close to reaching a saturation point. If you build an addictive, casual, mobile game, they’ll not only come, they’ll come with their wallets wide open.