Monetization strategies and in-app purchases (IAP) can be somewhat contentious issues in the kids digital entertainment space. Companies and developers are at something of a loss when it comes to how to manage in-game spending and successfully price apps. But a new report from UK-based kids digital agency Dubit offers to shed some light on the situation.

Dubit studied the Kids section of the UK Apple App Store to see which price-points and monetization strategies were most effective. Dubit CTO Matthew Warneford gives us the scoop on the report. Read on for his findings on in-app purchases, price-points and how educational aspects can affect cost.

What were the key findings of the study? Did any trends emerge?

When most people think about mobile apps and games, they tend to think they have to be given away for free to be a success, with in-app payments used to bring in revenue. What we found with our study was that this couldn’t be further from the truth when designing apps for young children.

For each of the three age groups we looked at (ages five and under, six to eight, nine to 11), the majority of the highest-grossing apps were paid for. For nine to 11s, only 10% of the highest grossing apps were free. This would be unheard of outside of the kids section. Some paid-for apps also used IAP, but they were in the minority.

What is the concern with IAPs in kids apps?

For games not specifically designed for children, the fear around IAPs seems to be based on children spending vast sums of real money on virtual items. Although the risk was low, it brought a lot of media attention and it led to both Apple and Google changing their IAP policies. We examined parents attitudes to IAP at the end of 2013. This, combined with heightened awareness, has helped to curb the issue. But IAPs, in games featured in the Kids section, are very different than IAPs featured in other games.

From your research, are more paid kids app being downloaded? Or more free apps? Why do you think that is?

Because of the closed nature of the App Store, it isn’t possible for us to see download numbers. Instead, we focused on the apps appearing in the highest grossing charts – revenue is a better signifier of success than download numbers. What is clear, is that unlike apps for all ages, kids apps can break into the highest grossing chart without having to be free.

There are a number of reasons why this might be. It could stem from parents seeing the value in a paid-for app for their children, as they may not want them buying (or asking for) in-app purchases. Also, many of the highest grossing apps either use a popular IP or have an educational focus—both allow for premium pricing. It’s also possible that parents will pay more for things, including apps, for their children but not for themselves. We’re sure that many of the parents paying more than US$2 for a mobile app for their child would never pay more than US$0.99 for one for themselves.

How are IAPs for kids different from purchases in other games?

IAPs for apps in the Kids section of the App Store tend to be focused on the purchase of additional content, such as extra books, packs of stickers and expansions to the app. This is quite different to the type of IAP we’re used to as adults, like getting hassled to buy lives in Candy Crush or doughnuts in The Simpsons game. Part of this comes down to responsible developing, part can be attributed to restrictions on how ‘Kids’ apps must behave to be in that section of the store, and part comes down to the type of games young children play. Ultimately, very young children don’t want to play ‘click and create’ games—they want a more open playtime—so being hassled every minute for in-game currency doesn’t work.

What was the average price-point for the apps?

The average price point is US$2.99, which is high enough to appear premium without being so high that it looks expensive. It’s the price used by Toca Boca and the Peppa Pig games, so it’s also possible that it’s the popularity of these brands, rather than the popularity of the price-point, that makes it so prevalent.

However, these apps and others in this bracket very rarely used IAPs, only 3% did. So for US$2.99, the parent is buying a complete product. Compare that to apps priced at US$1.99 and US$0.99 – 16% and 17% of these price points, respectively, also use IAPs.

How does age affect pricing?

Age didn’t affect pricing as much as we expected. For under-fives and nine- to 11 year-olds, the most popular price-point was between US$1.99 and US$2.99, whereas the peak for six to eights was US$3.99 to US$4.99. Apps aimed at nine- to 11 year-olds had the lowest proportion of free apps in the highest grossing chart.

What role does education play in determining price?

Many apps in the highest grossing charts have an overtly educational title, although we don’t know if this is the reason why they’re placed so high. For instance, around 25% of the most successful apps in our study featured terms like ‘phonics’, ‘maths’, and ‘ABCs’ in their title. Away from the more overtly educational titles, the majority of successful kids apps contain some form of educational benefit, whether that’s matching colors or learning sums. The same could be said for much of kids entertainment.

Do you have any tips for developers looking to craft a monetization strategy for their apps?

To begin with, if you’re developing for young children, you shouldn’t be afraid to charge for your app—especially if it’s aligned with a known brand. But it’s not possible to have one rule for all children’s apps, the strategy has to match not only the market but also the app.

As a general rule we advise our clients to consider children’s apps as a hub, or a storefront for your future apps and games. It’s much easier to suggest new apps or content within an existing app than it is to expect the child or parent to find new ones in the App Store, especially if you’re not working with a recognized IP.

Where do you think pricing will go? Will there be more IAPs in the future?

We expect to continue to see a range of pricing strategies on the Kids section of the App Store, and also an increase in IAPs as discoverability becomes a bigger issue. Discoverability is already a challenge, and it’s one of the reasons why games sell expansions, such as extra levels or books. Creating an excellent hub-app allows your brand to become the destination parents and children go to for more games, rather than the App Store. It’s what apps like the hugely popular Disney titles, Disney Junior Play, Disney Storytime and Disney Princess: Story Theater, are doing already.

Pricing of Kids’ Games on the App Store from Dubit