In-Game Purchase Revenues on Smartphones to Reach $4.8bn in 2016

A new report from Juniper Research finds that a growing user acceptance of in-game purchases and a sharp rise in smartphone adoption will push sales of in-game items from $2.1 billion in 2011 to $4.8 billion in 2016.

The report finds that as users became accustomed to the freemium model, particularly purchasing in-game items, the proportion of gamers who purchase these items will increase. This will be most apparent in the Social & Casual genre in which users are increasingly expecting entertaining and immersive gameplay from free or low cost games.

Another driver for this increase is the growth in the number of game developers adopting the freemium model rather than the pay-per-download model. This is due to free games being downloaded in greater volume, potentially making the paying user base much larger. In-game purchases also provide an easy way of reducing piracy as the game is typically downloaded for free, and any purchases must be verified via the developers’ server.

According to report author Charlotte Miller, ‘An increasing number of games developers are finding the in-game purchase model attractive simply because it provides easy answers. Their piracy rate will drop and the game will see more downloads. However, while some games may generate significant revenues from in-game items, the model doesn’t work with all games and developers have to tread a fine line between encouraging purchases and appearing to be exploitative.’

Other key findings from the report include: Social & Casual games will account for the lion’s share of mobile games downloads; Mobile games downloads on tablets will increase dramatically, accounting for over a third of mobile games revenues by 2016; Mobile games revenues on featurephones will halve over the next five years.