This year, it was reported that 62% of all Apple App Store revenue is generated by in-game purchases – noteworthy when 75% of its games involve no cost. The most popular games – often targeted at children – drive enormous revenue. 

These purchases come in many different forms. They unlock new areas of games. They give you boosts in performance. They sometimes simply cosmetically decorate your character or environment. 

Cosmetic virtual objects, sometimes known as “skins”, usually have little or no impact on gameplay – for example, paying a few pounds to add a personalised outfits to your avatar in Among Us (below). They can, however, become compulsive, must-have items. 

In the Roblox-powered Adopt Me, users aged 7+ collect cute animal pets – for little other than status of building their collection. Yet it can get so competitive to have the latest ‘legendary’ pet release, users will spend, trade and even scam other users to upgrade. The quickest way to upgrade is to spend more money in-game – gambling on loot box-style eggs (more below). Some even arrange pet purchases outside of the game via marketplaces like eBay. 

Virtual items, including skins, have become virtual currencies in themselves – developing their own ecosystems, as we discovered in our 2018 skin gambling report. With YouTube channels awash with vloggers promoting new or exclusive skins, the market rarely rests.  

Other in-game purchases are designed to affect progress – making a user’s experience difficult or even impossible unless they spend. The reason so many developers use the ‘freemium’ model is that users have to either suffer a frustrating wait to advance, pay to unlock new areas, or watch an advert to do so. 

In the end, a player’s progress often comes with an added income for the developer and the app store.

Spending in games can enhance the experience, especially when well-managed, but this can be complicated by the use of virtual currencies – such as Fortnite’s V-Bucks. To unlock many of Fortnite’s more attractive features – such as a season battle pass – you’d need 1,000 V-Bucks (costing roughly £7).  

It can be hard to unpick the ‘exchange rate’ between virtual and ‘real world’ currencies – adding a further detachment from reality, especially if a user’s financial or numeracy skills are still developing. 

Given that virtual currencies vary from game to game, children and parents have little hope of predicting the real world cost of a game – especially if it is initially free to download. Spending is designed to be ongoing: there is always another level or item release to unlock. This represents a shift in how the gaming industry operates, with games moving away from being complete products, and instead now greater resembling sales platforms. 

It is estimated that in 2020, the average smartphone generates £8 a month on freemium games – as players buy upgrades, power-ups, speed-ups, other advantages and cosmetic goods.

Some tactics to monetise users are rather more cynical. So-called ‘dark nudge’ techniques – from pop-ups to time-limited ‘buy now’ countdowns – add psychological pressure to purchase in-game items. 

Children and young people are even more susceptible than adults to these pressures, due to immature controls over impulsive behaviours. This might explain why, in our Rip-Off Games report, almost half of 10 to 16-year-olds who game online say it is only fun when they spend money. 

Many games feature techniques used by online casinos to keep players playing. Cumulative daily rewards, reward-removal, time-limited offers and on-screen countdowns all add to the pressure to keep playing and spending. As Parent Zone CEO Vicki Shotbolt wrote in a blog, these techniques exploit a child's 'right to play'.

Loot boxes are the most prevalent example of gambling-like activity in online games. Their function is generally the same: offering blind ‘packs’ which can – but generally don’t – contain high-value contents. The user usually has no idea what is inside until they buy – and are very unlikely to unlock the skin or reward they’re hoping for. Some developers do reveal the exact odds of success in loot boxes. But usually these odds are not great.

The scratchcard-like nature of loot boxes can be compelling or even addictive to children – especially if the reward is otherwise out of reach. Parent Zone has called for loot boxes to be classified as gambling, and therefore banning their sale to children. This March, we submitted evidence to the Government’s call for evidence in its review of the Gambling Act 2005, which you can read here. A Review of the Gambling Act 2005 white paper is expected before Christmas.

In-game payments are not the only way online platforms monetise their users’ experience. Live-streaming platforms bring influencers and users together in live-broadcast video streams. Streamers will often call-out fans who interact with the stream, in front of thousands of other viewers. It is an obvious attraction – and has inevitably been monetised.

Fans can pay for in-the-moment engagement in a number of ways. On Twitch – which was purchased by Amazon in 2014 for £750 million and attracts on average 3 million viewers at any given moment – different levels of subscription (ranging from £3 to £19 a month) unlock different emoticons. These offer a user greater recognition when seen on-screen during a stream. Streamers can also set up donation buttons for fans to tip them mid-broadcast. Each donation triggers an animation and the streamer often gives a shout out to the fan it came from. 

Tipping on live-streaming platforms shouldn’t be dismissed as a waste of money. It supports content creators – just as you might tip a busker on the street. But as bigger donations usually equal greater recognition, it can be expensive to have your moment. With platforms taking a share of tips (30% in Twitch’s case) live-streaming platforms will inevitably be increasingly designed to keep fans watching – and paying. 

The power of social media influencers on the spending habits of children and young people should neither be understated. Monetising a fan’s sense of connection with their favourite TikTok or YouTube star is an opportunity for marketers and creators alike. 

The most popular YouTubers are paid vast sums to seamlessly integrate a company’s products and services into their videos – and many have grown to the stage of developing their own lucrative product lines. Nine-year-old Ryan Kaji, the star of YouTube channel “Ryan’s World” earned nearly £22 million from his toy “unboxing” and review videos in 2020, making him the highest-paid YouTuber for the third year in a row. He made a further £149 million from branded “Ryan’s World” toys and merchandise.  

While the concept of celebrity idols and role models is nothing new, thanks to social media platforms their appeal no longer rests on their performance, but their perceived “authenticity”. Celebrities were less accessible pre-social media: now, you can DM (direct message) your favourite influencers and get a personal response, or take part in a live Q&A. This develops a “para-social relationship” where the follower feels a greater sense of trust,  like they “know” the influencer personally as a friend, further distorting reality – and giving their recommendations even greater clout.

The Advertising Standards Agency (ASA) has taken steps to increase the visibility of paid-for content or brand partnerships – requiring influencers to disclose when something is an #ad. However, the ASA has said that there is an “unacceptable” level of non-compliance from influencers. One monitoring exercise reviewed 24,000 posts to Instagram Stories and found that a quarter were advertising posts, but only 35% had been appropriately labelled as such. In response, the ASA said this shows “how much more there is to do”. 

So what can parents do to help children navigate such a commercialised environment? 

A simple step is to make sure that if you have a bank card or account linked to an app or gaming store, you set up a password or PIN code so your child cannot purchase without your permission. On some devices and games, you can also set up weekly spending limits. If your child has their own account attached, try to keep track of how much is going out of it. 

Parents do not need to be tech experts to help their children manage these pressures – your offline parenting rules can apply online too. Some conversations might feel a little old-fashioned in the tech age – like explaining the value of money – but they are more important than they ever were.

Developing an understanding of the online spaces they enjoy can really help. Talk regularly and openly about what your child enjoys doing online. Ask them to show you the games they play, the things they have bought – or want to purchase – so you can understand their interest better. Don’t dismiss things as a waste of time or money, as that could discourage them from coming to you in the future. 

Allowing them to make age-appropriate purchases with their own pocket money can be a great way to help them learn about the value of money and develop independence – as long as you ensure purchases are made responsibly. 

Encourage them to think critically, and as they grow older, have conversations about how they think these platforms and content creators make money. Make sure your child is aware that these platforms are designed to entice users to keep spending, and that their favourite influencer may be recommending something because they’ve been paid to do so.

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