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Study: Big discounts on bulk IAP buys in mobile games barely affect earnings

Study: Big discounts on bulk IAP buys in mobile games barely affect earnings

July 8, 2016 | By Alex Wawro

If you're a mobile game dev thinking about how to price your in-app purchases, take note: Economists at the University of Chicago recently worked with F2P mobile game maker King to study how deeply discounting IAP bought in bulk affects a game's profitability.

The result? Not much, apparently, at least not for the revenue generated by King games experimented upon in this study.

"Varying quantity discounts across an extremely wide range had almost no profit impact in the short term," reads an excerpt of a recently-published paper about the study. "Second, almost all of the impact of the price changes was among those already making a purchase; radical price reductions induced almost no new customers to buy."

To conduct the study, researchers spent some time watching how over 14 million people played King games like Candy Crush Saga and spent money on in-game items like gold bars, which can typically be bought in bulk at a minor discount. 

They then conducted a three-month "randomized field experiment in which quantity discounts were varied over an extremely broad range" from 9 percent to more than 70 percent. After the three months were up they returned the King games' IAP pricing to normal and observed player behavior for another two months, to note any changes. 

Changes to overall revenue generated were minimal, as you can see in the chart below. However, it's important to note that deep discounts on IAP bundles did appear to cause players to buy more of those bundles; the trick is, the uptick in bundles purchased was offset by the discounts themselves.

"The small differences in revenue across treatments disguise significant impacts on quantities purchased. Relative to the standard discount treatment, the progressively deeper discounts drive quantity increases of 6.7 percent, 11.2 percent, and 44.9 percent, respectively," reads an excerpt of the paper. "These differences are all highly statistically significant. The average price paid falls by similar proportions, however, leaving revenue essentially unchanged."

But while this study didn't lead to any major breakthroughs that King can apply to juice its bottom line, it did (according to its authors) create interesting complications for established economic models based on non-virtual goods. More intriguingly, according to its authors, working with a mobile game maker like King was a remarkably cheap way to study the economic behavior of millions of people.

"There can be little doubt that partnering with firms offers opportunities for scientific advances that otherwise would be out of reach," reads the paper. "In the quest to test economic theory in real-world settings, firm-based field experiments represent a unique opportunity previously out of reach for academic economists. This path appears to be a promising one for future scientific advances."

For further details on the study and its findings, developers should read the paper in full via the Proceedings of the Natural Academy of Sciences of the U.S.'s website.

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