In-App Purchases to Drive Mobile App Revenue

Growing smartphone and tablet sales mean a major boost for app downloads in 2013, which are forecast to top 102 billion downloads by year’s end.

That dwarf’s 2012’s 64 billion downloads, thanks in large part to the Apple and Google stores, which are collectively expected to reach $26 billion in total revenue, according to data from Gartner.

The research firm’s numbers suggest that free applications account for more than 90 percent of 2013 downloads — that’s about 82,880 no-charge apps, compared to the 9,190 apps for which people were willing to pay this year.

Those trends will continue to rise over the next four years, Gartner said, though they won’t hold on forever. App downloads spike when people pick up new gadgets, but as they accumulate a portfolio of go-to services, the volume of downloads slows.
Still, according to Gartner’s data, total downloads will reach upwards of 286.7 billion by 2017 — 94.5 percent of which will be free.

“Free apps currently account for about 60 percent and 80 percent of the total available apps in Apple’s App Store and Google Play, respectively,” research director Brian Blau said in a statement, adding that iOS and Android apps are forecast to account for 90 percent of global downloads in 2017.

The same principle applies: Rich ecosystems and large, active developer communities help push new apps into consumers’ hands. But within the next few years, average monthly downloads per iOS device are expected to decline from 4.9 in 2013 to 3.9 in 2017, while Android devices will drop 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.

That rule also pertains to in-app purchases, which will drive 17 percent of store revenue this year, and increase to 48 percent in 2017, but eventually slowdown in later years. Still, in-app purchases contribute to a significant amount of the iTunes App Store’s revenue worldwide; other platforms have not yet reached the same levels as the iPhone.

“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.

A “promising and sustainable monetization method,” in-app purchases encourage performance-based purchasing — users pay only when they are happy with the experience, and developers work even harder to earn revenue through good design and performance.