Back in 2008, the world changed. Apple introduced its first ever iPhone and a store to house small icons that led to larger applications, called apps, that could be downloaded to your device – the App Store. Since then, an entire and very profitable industry has been built around app design and development. The App Store offers nearly 1.5 million apps in 24 categories, including social networking, gaming, photo & video, health & fitness, travel, to name a few.
The most successful category of apps continues to be gaming. According to a report from The NPD Group, the average time spent playing mobile games in 2014 increased by 57% compared to 2012, with three hours daily playing games on our mobile devices and tablets. This explains why this business has become so successful over the years, and it’s not stopping. A recent study predicts that the total revenue for mobile gaming will hit $30 billion in revenue in 2015 and $40 billion in 2017, up from $25 billion in 2014.
The Role of In-App Purchases
Since the vast majority of mobile apps are free to play, what is driving this insane revenue growth? One important driver is in-app purchases — an increasingly prevalent feature in free apps, that allows users to continue playing their favorite game by purchasing an extra life or allowing access to additional levels or game-enhancing features — all with the touch of a button.
Though extremely convenient for feeding your mobile gaming hunger, in-app purchases aren’t so tasty in other areas. Children between the ages of 2-12 spend the most time gaming on mobile devices. With the easy access of purchasing more lives while in a gaming app, this age group has been racking up big time dollars in in-app charges without the knowledge or permission of their parents. Marketers must be cautious for at least two reasons:
- First, the the Federal Trade Commission (FTC) has settled two high-profile actions against Apple and Google for this type of in-app purchase activity; it is also litigating with Amazon over the same issue.
- Second, if kids are being targeted by an app, or if an app knows that it has users under the age of 13, it must abide by the requirements of COPPA, the Children’s Online Privacy Protection Act (COPPA), which requires that an app get “verified parental consent” for marketing to kids under the age of 13.
FTC action around in-app purchases reminds us once again of the importance of clear disclosures to your end users — not just about privacy, but also about how transactions in your app will take place. Below are three suggestions to keep in mind while ensuring you’re creating a sticky user experience for your app. Privacy compliance is not an option anymore; make it a competitive advantage!
1. Communicate Openly and Effectively
Having a privacy policy is very important and should be a priority, but having a privacy policy that is transparent, comprehensive, and accessible is even more important. Consumers have a right to know what data is going to be collected and how exactly it will be used and shared. The key is to make your privacy policy clear so consumers actually understand how the app is handling their data. This will gain you their trust. Transparency has long been a core component of the FTC’s privacy recommendations, so that consumers learn how, and for what purpose, companies collect, use and share their data.
2. Disclose Consumers’ Rights and Liability Limits
A clear, comprehensive disclosure is a first and important step in preserving trust with consumers. For apps that feature in-app purchases, a disclosure around the consumer’s potential liability for unauthorized transactions is a must. Besides being the right thing to do and not tricking your customers into unauthorized purchases, providing clear disclosures around in-app purchases immediately sets you apart from your app competitors.
In fact, the FTC’s 2014 study on mobile shopping apps, demonstrated that most apps fail to provide specific disclosures around consumers’ rights, liability limits, and/or a dispute resolution process for unauthorized, fraudulent, or erroneous transactions. If you feature in-app purchases, then your privacy policy and other disclosures should be clear on what the consumer’s rights are, and what your dispute resolution process looks likes.
3. Provide Users With Choices and Controls
Giving consumers choice and control is another important way to preserve trust; it’s also a recommended best practice for mobile app developers (see for instance, mobile guidance from the Center for Democracy & Technology and the Future of Privacy Forum — which emphasize the importance of providing choice and control). Put simply, consumers should be aware of the “data exchange” that’s involved in a particular in-app transaction when the app accesses data from their mobile or other device.
Unfortunately, most apps continue to collect, use and share consumer data without the appropriate disclosures; they also fail to obtain consent for collection of sensitive data such as location, and health data (see the FTC’s study on mobile shopping apps for more on this point). This signals yet another opportunity for app developers to differentiate themselves from the rest of the pack. Developers should be focused on creating an engaging app experience that also informs the consumer about the data collection involved, asks their consent when it comes to sensitive data, and provides an opt-out of data collection and use.
An opt-out is especially critical, as it provides consumers control, especially around data that might be sensitive to them. And, if you are transmitting data to third parties, like ad networks, it’s important to make sure that these partners also provide the user with choice and control, by providing sufficient disclosures, obtaining consent where necessary and offering an opt-out of data collection and use.
In Summary
As the app ecosystem grows, the opportunities for in-app transactions grows along with it. Developers looking to increase their in-app revenue must be focused on providing the right disclosures, choice and control to consumers. Clear and comprehensive disclosures are an important first step — not just around data collection and use, but also around your policies for handling consumer transactions and disputes. Also important is providing choice or consent if needed, and an opt-out of data collection and use. Don’t be deceptive. Communicate thoroughly, make sure your consumer is aware of their rights, and provide them with a choice. In this way you will gain a consumer’s trust, and, assuming your mobile app continues to hold their attention, also gain their (in-app) business.
About the Authors:
Saira Nayak:
Saira is the Chief Privacy Officer at TUNE, passionate about the intersection of privacy, security and data. Privacy is my current focus, I’ve also specialized in antitrust and IP.
Cortney Bigelow:
Cortney is a Corporate Marketing Specialist at TUNE. As an early employee, she provides years of experience in finance, operations and the company as a whole. Cortney joins the Marketing team this year and is excited to bring value to an area she’s passionate about while focusing on corporate brand initiatives. Cortney graduated from Washington State University with a BA in Communications and a focus in Advertising. Outside of work she enjoys running, yoga, wine and snapping photos of her French Bulldog, Smalls.
