A new report from App Annie (http://www.appannie.com), an app market data analysis firm, and the International Data Corporation (www.idc.com) research group says mobile app revenues are beginning to displace other forms of monetization, including mobile browser and PC-based advertising. What’s more, freemium and in-app advertising models driving the majority of growth among various business models.
“App Annie has tracked the growth of the mobile economy since its infancy, and we’re really starting to see publishers hit their stride with mobile in-app revenue growing 1.7x last year,” says App Annie CEO Bertrand Schmitt. “The continued innovation in mobile apps, monetization models and mobile advertising have driven significant growth in freemium and in-app advertising revenues. The space has matured significantly and publishers have the required ‘know-how’ to monetize off the significant app usage they’re generating.”
The report says that freemium app revenues grew by over 70%, while paid and paidmium app revenues declined by 19% and 24%, respectively. The maturity and general success of the freemium model are clearly evident in freemium’s dominance of direct app revenue models. Mobile app revenue per device (including advertising) is projected to grow 2.5x by 2018.
Freemium is a pricing strategy by which a product or service is provided free of charge, though money may be charged for proprietary features, functionality, or virtual goods via in-app purchases. Paidmium refers to a mobile app that one must purchase from iTunes or Google Play – immediately requiring the user to either spend more money on in-app purchases or perhaps look at ads within the application.
Mobile in-app advertising revenue also grew by 70%, outpacing both mobile and PC browser-based ads. By 2018, spending on mobile in-app advertising alone (in the 10 key countries measured) will be greater than spending on online search advertising, today’s digital advertising juggernaut.
The report says that geography matters and it’s not one-size-fits-all across countries. Revenue generated through app stores versus in-app ads widely varies across countries. For example, India brings in 70 percent of its app revenues via in-app ads while Japan makes more money via app stores (81%). The US and Japan are the largest markets for mobile app revenue, but emerging markets such as Brazil, India and Russia are projected to quickly grow through 2018.
“Both freemium and in-app advertising will continue to be great opportunities for developers to make money out of their apps,” says Karsten Weide, IDC’s Vice President of Media & Entertainment. “In the 10 key markets we looked at, in-app ads will grow by a factor of 3x by 2018, and app store sales by a factor of 2x.”