Syndicated on Mobile Orchard

In last week’s post we worked towards identifying ways to calculate the Revenue per Daily Active User as part of our Lifetime Value equation. This week, we look at ways to identify another variable in that equation: retention.

What is retention?

Retention is a key metric that speaks to how many users stick with your app day to day after initially being acquired. When attempting to calculate retention rates there are a variety of different ways to drill into the data and group users. Those groups of users, or vintages, may refer to the day they were acquired, the method in which they were acquired (offerwall, organic, advertising etc.)Or the source from which they were acquired (specific publisher source).

Calculating retention rates for mobile apps

Retention is calculated as an average of active users over time. We first have to calculate the daily retention rate on the first day a user is acquired, retention rates are 100%. Let’s say on day 1 100 users are acquired. On day two, 50 of those users are still active, making the retention rate on day two 50%. Now if only 25 of those users return on day three, the third day retention rate for that vintage would be 25%. To calculate the average retention rate for the entire application, we then take an average of all the daily retention rates for the period. . If we want to look at a more formulaic approach we could justify the following:

Retention Rate = Rate X (1 – Attrition Rate), so Day 1 it is (1 – Attrition Rate) and Day 2 it is (x% X (1-Attrition Rate))

For the sake of calculation, we used large, rounded numbers, often times when calculating the retention you’ll work with a larger data set and have a lower average.

Developers can also dive deep to understand specific retention rates by different user groups/vintages. By segregating by vintage, developers can start to identify different trends that will ultimately help make strategic decisions on user acquisition strategies. Consider the following:

User Group₁ = Week 1 Users Acquired

Revenues₁ = Week 1 Revenues Earned

Rev/User₁ = User Group₁ Rev/User for Week 1

User Group₂ = Week 2 Users Acquired

Revenues₁ = Revenues earned by this group in their Week 1

Rev/User₁ = User Group₁ Rev/User for Week 1

Note on retention rates

This post looks to identify, simply, how to calculate retention but its worth noting that projecting or forecasting retention rates may also come into play. Additionally, there are different ways to look at and interpret the data depending on what kind of information you’re trying to gain from your users.

Next week we’ll bring it all together to look at calculating lifetime value.

Do you have a question about freemium gaming or a topic you’d like us to explore? Let us know in the comments or catch us on twitter @rechargestudios or @w3i.

Matthew Tubergen, Product Manager, Recharge Studios, W3i, LLC
Matt is a mobile content expert with a decade of experience working with brands that include Disney, NFL and LucasArts. Matt heads up W3i’s wholly owned publishing arm and investment fund, Recharge Studios

Some, like developer Recharge Studios have called upon Apple to publicize its refund policy and process in the App Store and have begun running a warning in App Store descriptions noting that in-app purchases require real money. Other developers like Capcom have also run similar warnings in their apps. The question is, will Apple need to formalize these warnings to ensure it’s informing parents and users about the real-world consequences of in-app payments?

Others have also wondered why in-app purchases feature bundles as high at $99 for virtual goods. Recharge Studios has dropped the highest price of its goods in Dolphin Play and is exploring time-based limits on purchases. Apple might consider similar rules to limit the potential for big purchases by children.

Read more at CNN Money.

It’s the scenario every app gamer dreads, at least those of use that reach for our phone first chance we have a free moment. You’ve been in meetings all day, you’ve felt your phone buzzing, unable to be checked. How many emails and texts and calls have you missed? You finally get a chance to peak at your phone. You pause in disgust briefly before throwing your phone across the room after tapping with 4 dozen push notifications for everything from rotting crops to the tenth “deal of the day”.

Alerts and push notification are powerful mechanisms for engaging users and driving freemium game success, but wielded incorrectly they can destroy your chances. In this week’s  Mastering Freemium Game Mechanics we’ll examine different kinds of push notifications and appropriate use, in coming weeks we’ll dig deeper into wielding some of these tools.

Freemium Game Development: How Many Times Can I “PUSH”?

The third time is the charm. Generally speaking more than three push notifications a day is pushing, no pun intended, the limit. So use them wisely. What kind of push notification and why/when you use it are key to successful gaming mechanics. So what events are susccessful as a push notification?

• Decay Thresholds
• Time Thresholds
• Maximum Thresholds
• Visitors
• New Content/Features
• Discounting

All of the above offer key opportunities to either drive users back into your app or encourage game progression. Decay , time and maximum thresholds all should be familiar from the post on reward schedules. These thresholds are tied to events or actions within the game think: farming, cooking, and building be it time to harvest or completion of an action (building).  Visitor alerts tie to social elements of freemium games while new content and discounting drive action and game progression. Next week we’ll explore the thresholds deeper.

Do you have other key opportunities to utilize alerts that you’ve identified in your games? Sound off below.

Matthew Tubergen, Product Manager, Recharge Studios, W3i, LLC
Matt is a mobile content expert with a decade of experience working with brands that include  Disney, NFL and LucasArts. Matt heads up W3i’s wholly owned publishing arm and investment fund, Recharge Studios

Last week we discussed the importance of user retention and outlined some key steps for optimizing your reward schedule, an element every successful freemium game needs. Once you’ve established a game that can be strongly monetized you’ll want to make sure to add key elements to avoid, and easily resolve inadvertent in-app-purchases.

Freemium Game Mechanics: In-App-Purchase Price Points

The first step is to think through your price points. While it may seem illogical to remove your top tier price points ( > $49.99), it follows logically that those really intending to purchase $100 +  in virtual currency can do so through multiple transactions. By removing the top levels you avoid the rapid accumulation of inadvertent in-app purchases. $49.99 accumulates slower than $99.99.

Additionally, always make sure you indicate the real dollar value when presenting virtual pricing.

Clearly State Purchase Price Examples

Access the in-app purchase menu.

Real dollar values are present at time of purchase in game menu.

Real dollar values are presented on confirmation screen.

Less Effective Purchase Price Disclosure

Real dollars are NOT shown at the purchase menu.

Real dollars are only presented on the confirmation screen.

Freemium Game Mechanics: In-App-Purchase Transparency

Disclosure is key to insuring the customer understands the in-app-purchase process. Here are three things you can do to increase transparency of in-app-purchase processes and support in your app.

• Provide a mobile friendly FAQ along with answers to common billing questions.
• Include links to Apple’s Customer Support Site and billing policies.
• Provide clear contact  information for your customer support through your app and on your web-site.

Freemium Game Mechanics: In-App-Purchases

What tactics do you use to reduce inadvertent in-app purchases? We’d love to hear from the community on ideas.

Matthew Tubergen, Product Manager, Recharge Studios, W3i, LLC
Matt is a mobile content expert with a decade of experience working with brands that include  Disney, NFL and LucasArts. Matt heads up W3i’s wholly owned publishing arm and investment fund, Recharge Studios.

This week’s buzz word appears to be Monetization and Engagement in the world of apps. Last week, Localytics released data indicating 26% of apps are never opened more than once. Luckily, as the market matures we’re discovering sound ways to engage users, retain those users and monetize usage.

Maximizing Mobile Revenue

On Sunday, GigaOm published a report outlining Best Practices for Maximizing Mobile App Revenue. The post outlines three methods for monetizing apps including in-app advertising, in-app purchases and freemium versions. Not surprisingly, the report also cites data that indicates of all app categories, games generate the highest click through rate (CTR).

Increasing Player Retention

Gamasutra published a post by Brice Morrison that discussed Increasing Player Retention with Daily Bonuses. In the post Morrison writes that “Social games are, despite the massive successes that have taken place, a tough industry.” Certainly a sentiment we won’t disagree with. He goes on to outline how daily bonuses can impact retention of gamers.

How to Plan a Reward Schedule

With all the attention given to gaming mechanics, retention, engagement, and monetization, the new head of Recharge Studios Matt Tubergen shared his insights on planning a rock solid reward schedule, a component that Tubergen says is a must for any freemium game looking to monetize. You can find his definitions and executable tips in the latest installment of a yearlong series: Mastering Freemium Game Mechanics: How To Plan An Effective Reward Schedule.

Mobile Thought of the Week

With Mobile World Congress coming up next week, the thought of the week comes from a preview posted on the Wireless Industry Partnership (WIP) Blog that reads

“We are currently seeing a pivot in the industry where engagement has a direct impact on monetization.”

Based on the content we’ve seen produced over the last week, engagement and monetization is on the minds of many developers. What did you find last week to be of interest from the world of apps?

Scan for our daily app finds.

Ryan Ruud, Associate Marketing Communications Specialist, W3i, LLC
Ryan is a new media communicator with a decade of traditional and emerging mass media experience. He uses his passion for apps and connecting people in W3i’s marketing/communications efforts.

With 26% of apps downloaded in 2010 being opened only once, attracting and retaining user engagement is vital to sustained success for freemium gamers looking to monetize their product. If you want your freemium game to succeed and not be counted in the 26%, it must incorporate strategic rewards schedules. What are they and how to maximize their use are the topic of this week’s focus on freemium.

Freemium Game Mechanics, Reward Schedules Defined

In freemium gaming, there are two kinds of reward schedules most often discussed. The first is fixed interval.

Fixed interval reward scheduling is tied entirely to timing within a freemium game and is popular in games using delay or decay mechanics (think farming, cooking etc). Fixed interval reward schedules strengthen monetization opportunities by offering “hurry” methods. This reward schedule works by providing a gamer the option to bypass the element of time, essentially hurrying an action in exchange for “X”, usually virtual currency. Instead of waiting four hours or two days for a crop to mature or dolphin to grow, you can do it now. Additionally, the fixed interval ties into compulsion loops of advancing game play. A second kind of reward schedule is fixed action.

An example of fixed interval reward scheduling in the iOS game Trade Nations

Fixed action reward scheduling basically presents gamers this value: collect/do/find “X” and achieve “Y”. In plain English, clean a tank, get a dolphin buck. The achievements can be tied to both time and/or action within your freemium game.

An example of fixed action reward scheduling in the iOS game Dolphin Play

Freemium Game Mechanics, Elements of a Good Reward Schedule

• Contingency, a user is clearly educated on what the process for reward is. In other words, they know what needs to be done to achieve advancement, rewards etc.
• Response, when requirements are met, the game must provide clear and consistent messaging of the achievement, this is a great opportunity to build social/share element in your game. Trade Nations is a great example of executing this element well, and allowing an opportunity to share your achievement with your social network.
• Reinforcement, providing positive reinforcement for users who complete desired actions, pass certain time milestones etc. is the final and third component and ties to the response factor of an effective reward schedule.

An example of reinforcement in Trade Nations

Freemium Game Mechanics

Well timed rewards are a key element to successfully retaining active users inside your freemium game and are a key in optimizing your game for monetization success. What other strategies pertaining to reward scheduling have you seen that are effective in engagement and retention?

Matthew Tubergen, Product Manager, Recharge Studios, W3i, LLC
Matt is a mobile content expert with a decade of experience working with brands that include  Disney, NFL and LucasArts. Matt heads up W3i’s wholly owned publishing arm and investment fund, Recharge Studios.

App Usage Patterns

A new study published this week by analytics firm Localytics reminds app developers just how important creating insanely great experiences for users is and shines the light on user retention. The data shows that while app users are willing to give a new app a try, 26% of the time the app never gets a second shot. For developers of freemium games it’s  important to ensure the quality of the app is stellar.

App Market Growth

Worldwide mobile app downloads are expected to hit 17.7 billion in 2011, a 117% increase over last year. Of the nearly 18 billion downloads, 81% are expected to be for free apps leaving a 14.3 billion download opportunity. Sure, they aren’t all going to be freemium games, but it’s an enormous market of opportunity.

Mastering Freemium Gaming

We’ve been a champion of the freemium model, it’s in our DNA. For mobile game developers, we want to help you maximize your chances of success and plan to bring insight every week into various components that make freemium games successful both in terms of user retention as well as ability to monetize. We’ll look at game mechanics, social interaction elements and gamification to name a few. Starting next week we will provide strategic insight to the use of reward schedules in social games and how important they are to driving some serious conversions.

Tracking App News

We ended 2010 with a tremendous amount of excitement for what the new year would bring to the world of apps. We made our predictions and summarized others’. Going forward we’ll take some time each week to recap the big news of the app revolution as well as leave you with the thought of the week. Don’t forget to check out our daily paper.li of all the great app things we find and share on twitter. You’ll find a link and a QR code at the bottom of this post.

Mac App Store Opens, and Makes a Splash

It wouldn’t be a new year without some sort of Apple announcement or launch. The folks over on 1 Infite Loop brought the success of the mobile App Store to Mac Desktops operating Snow Leopard with the launch of the Mac App Store. Quoted in MacWorld, Tim Bajarin of Creative Stategies calls the Mac App Store groundbreaking. “I think this will be more than just an experiment—I think it’ll be quite successful within the Apple community. Those who are familiar with the Mac way of doing things will easily accept this, and probably embrace it.” The Mac App Store Opened with more than 1,000 Apps on January 6th.

More Proof: Freemium Trumps Paid When It Comes To Web Apps

At W3i we’re always scouring the Twitterverse and Blogosphere on all things apps. We’ve been a champion of the freemium model since inception, but don’t just take our word for it’s impact on demand. Matt Mazur owns the web app Preceden and posted a candid response to a month long test he conducted to gauge the lift off freemium versus paid. He provides more insight for developers answering the question: freemium vs. paid for my web app?

Mobile Advertising Projections Look Strong, In-Game Purchase Projections Stronger

The last half of 2010 saw a  number of reports projecting significant growth in mobile advertising. A new report out by Juniper Research shows mobile advertising growth is expected to increase tenfold by 2015. However as Ryan Kim from Gigaom points out “in-game purchase revenue will be ten times greater than ad spending.”

Thought of the week

A new year provides new beginnings . The thought of the week comes from the ATT Dev Summit via a tweet from @JumpingShip :

Think tactics on the present, don’t be tied to what worked in the past.

Interested in what we find daily? Scan the code with your smartphone or click it to link to our daily newsletter.

Ryan Ruud, Associate Marketing Communications Specialist, W3i, LLC
Ryan is a new media communicator with a decade of traditional and emerging mass media experience. He uses his passion for apps and connecting people in W3i’s marketing/communications efforts.

How do you make money off an app when you give it away?

At W3i we’ve been a champion of the freemium business model for more than a decade. But I’ll level with you, I understand the challenge developers face when choosing between a freemium or paid option for their web app. At face value, giving away a product you’ve dumped your blood, sweat and tears into seems preposterous. I get it. You wonder, “how can I make money with my app when I’m giving away free access?!” Look at it this way, if the product provides enough value, consumers are naturally going to desire the product and crave more access. That knowledge can drive your development to create a stellar product. Still not convinced, the explosion of mobile apps has helped drive freemium forward.

Freemium gets a push from mobile

In 2010, mobile apps helped shine the spotlight on freemium, in 2011 all signs point to major gains in the market. We’ve written alot about freemium models over the past year but I found a very candid post from Matt Mazur, the founder of Preceden, a web app that helps users create timelines, to be refreshing.

Okay Ryan, freemium is looking pretty good but . . .

Don’t just take our word for it, we know freemium models drive significant lifts in demand for your app. In Matt’s findings, those who tried the app under the freemium model were nearly 350% more likely to buy access than under no freemium option. Take a look at his findings.

Matt eliminated the Free plan from his Web App for a Month: Find Out What Happened

Ryan Ruud, Associate Marketing Communications Specialist, W3i, LLC
Ryan is a new media communicator with a decade of traditional and emerging mass media experience. He uses his passion for apps and connecting people in W3i’s marketing/communications efforts.

According to Gigaom, “When Apple began allowing free apps to include in-app purchases a little over a year ago, it opened the door for freemium models to flourish.” True. But why?

The blog published earlier this week that an incredible number of top grossing apps are free, 34 out of 100 (on the day they looked) to be exact. The co-founder of analytics firm Distimo seconded the incredible revenue growth from freemium apps, stating that the app industry is “seeing more developers implement more in-app purchases especially with games,” says Remco van den Elzen.

The real story here isn’t the power of a freemium business model; it’s been around a long time. Freemium is a model that in 1865 helped King Gillette distribute his safety razor. The story isn’t even in-app purchases. Some of the free apps that offer in-app purchases are offering access to the full game as the in-app purchase. In other words they ditch the “lite versions” in lieu of a free app with an in-app purchase to the full game, usually on a level by level basis.

The real story is the mega-growth projected in the world of virtual currency, or consumable goods ($2 billion + in 2011). Looking at the top grossing apps today (November 12, 2010) 37 out of 100, are free. Of those, more than three quarters offer in-app purchases classified as consumable goods.  Simply put, virtual goods are driving  revenues behind 75% of the top grossing free apps.  Sounds like a winning business strategy, no?