In-app purchases the future of mobile app revenue, Gartner says

Mobile device users will download 63 per cent more apps in 2013 compared to 2012, say analysts from research firm Gartner Inc., with mobile app stores reaping the benefits.

By the end of this year, mobile app stores should see about 102 billion mobile apps downloaded, compared to 64 billion in 2012. This year, users should also spend $26 billion, up from $18 billion last year.

Those are some big jumps, thanks to users buying more mobile devices and discovering more apps they enjoy, said Sandy Shen, research director at Gartner.

“Over time they accumulate a portfolio of apps they like and stick to, so there will be moderate numbers of downloads in the later years,” she said in a statement. But she added this rapid growth isn’t likely to continue, with strong growth into 2014, but download increases slowing in future years.

While users have been downloading more and more apps, 91 per cent downloaded this year are expected to be free. But by 2017, in-app purchases will represent about 48 per cent of revenue for mobile app stores, compared to just 11 per cent in 2012.

(Image: Gartner).
(Image: Gartner).

Right now, free apps account for between 60 per cent of apps in Apple’s App Store, and 80 per cent of the apps in the Google Play Store, said Brian Blau, research director at Gartner. In 2017, those two stores will probably be where 90 per cent of apps are downloaded worldwide, he added.

Still, by 2017, the average monthly downloads per iOS device should drop from 4.9 in 2013 to 3.9. For Android devices, that will go from 6.2 to 5.8.

“This relates back to the overall trend of users using the same apps more often rather than downloading new ones,” Blau said.

While developers may not want to focus their business squarely on churning out new apps, there is still a way for them to monetize what they’ve already built, he added. Gartner’s research has found in-app purchases are the best way to encourage users to spend money, especially if they already like the apps they’re using.

That pushes developers to zero in on performance-based purchasing, meaning users will only pay for more features of an app if they are already satisfied with it.

“We see that users are not put off by the fact that they have already paid for an app, and are willing to spend more if they are happy with the experience,” Blau said.

“As a result, we believe that [in-app purchasing] is a promising and sustainable monetization method … Users only pay when they are happy with the experience, and developers have to work hard to earn the revenue through good design and performance.”

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Candice So
Candice So
Candice is a graduate of Carleton University and has worked in several newsrooms as a freelance reporter and intern, including the Edmonton Journal, the Ottawa Citizen, the Globe and Mail, and the Windsor Star. Candice is a dog lover and a coffee drinker.

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