Mobile Apps Market Analysis & Monetization Methods

Developed specifically for devices like tablets and smartphones, web & mobile applications deliver impressive experiences for business and personal users. In 2016, 1 billion global consumers have the power of a PC via their mobile device; this shift will drive continued demand for apps that provide education and entertainment, extend business processes, enhance communication, and improve productivity.[1]

Before you enjoy that cup of coffee each morning, chances are you’ve already turned to a mobile app to start your day. Whether it’s finding your way to a meeting, logging your fitness routine, or even adding the cost of that latte to your weekly budget, one thing is clear: Apps are now an integral part of our daily micro-moments, with people spending an average of 30 hours per month in them, according to Nielsen1. Apps play a key role in those I-want-to-know, I-want-to-go, I-want-to-do, I-want-to-buy moments. They’re also a powerful way for brands to build deeper relationships with their customers. A mobile app marketing strategy can complement a brand’s offline experience (in-store special offers, for example), drive e-commerce, or simply help connect a brand with its loyal customers. Together with mobile websites, they’ve become important to both consumers and marketers.[2]

Market Analysis: Mobile Apps in General

A mobile app is a computer program designed to run on mobile devices such as smartphones and tablet computers. Most such devices are sold with several apps bundled as pre-installed software, such as a web browser, email client, calendar, mapping program, and an app for buying music or other media or more apps. Some pre-installed apps can be removed by an ordinary uninstall process, thus leaving more storage space for desired ones. Where the software does not allow this, some devices can be rooted to eliminate the undesired apps.   Native mobile apps often stand in contrast to software applications that run on desktop computers, and with web applications which run in mobile web browsers rather than directly on the mobile device.[3]

Apps that are not preinstalled are usually available through distribution platforms called app stores such as the Apple App Store, Google Play, Windows Phone Store, and BlackBerry App World. Some apps are free, while others must be bought. Usually, they are downloaded from the platform to a target device, but sometimes they can be downloaded to laptops or desktop computers. For apps with a price, generally a percentage, 20-30%, goes to the distribution provider (such as iTunes), and the rest goes to the producer of the app. The same app can therefore cost a different price depending on the mobile platform.

Average Numbers of Apps Used Per Day Per Person

mobile-app-users-per-day

Numbers of Global Users of Mobile Apps

number-of-global-app-users

[4]

Pricing & Web Application Monetization

The average selling price for applications — across all platforms — continues to decline. Some of that decrease has to do with increased competition. But another big part of the decrease in app retail prices is the availability of alternative revenue streams for developers. Rather than charge a flat, up-front fee for an application, app creators are beginning to spread revenue generation across the entire app experience, particularly in-app purchases and in-app advertising.[5]

Freemium or Lite

Freemium is the concept of giving away free version of a product or service while charging for a more advanced version with increased functionality (hence the portmanteau of “free” and “premium”). The idea is that users will love the free version so much, they’ll be more than willing to pony up for an even better, paid version.  But that’s not always how it works out. The popular Instapaper app famously dropped its free version earlier this year. When Marco Arment removed the free version of Instapaper from the app store, he found that sales of the paid version actually increased. The free app has other drawbacks, too. It might create an “image problem” whereby users don’t even realize that the app they’re using is limited compared to the full version.

It’s easier to build a strong case for freemium when it comes to gaming. Users start out at a very basic level and then evolve and grow their game skills from there. It makes sense that they’d start with the early free version, and then graduate on to the paid version once they’re ready to. The use case for gamers is more linear, and the paid version is just another step in the game’s path.  According to a study by app marketing consultant Distimo, the average selling price of games in major app stores declined 28% over the last year, while the revenue generated by the most successful freemium (or “lite”) games increased tenfold during this period in the Apple App Store for iPhone.[6]

In-App Purchases

During this same period, Distimo found that in-app purchases within games have exploded. Last year, 8% of top-grossing games relied on in-app purchases. But this year, the number has skyrocketed to a whopping 52% of top-grossing apps using in-app purchases as a significant part of their revenue model. That helped propel top-grossing games to a 79% increase in total revenue.

Advertising

In-app advertising is a great way to generate ongoing revenue for your application. You’ll only get paid once for an app download, but you can continue getting paid through in-app advertising. There is a huge range of advertising opportunities; everything from small banners to intrusive pop-overs. The key is to find a balance and manage user expectations for how annoying and invasive the ads will be. Users generally realize & expect that free versions of paid apps will have more intense ads.

Corporate Partnerships

In a recent brainstorming session, the IEG Consulting team took a look at how mobile applications – a key part of the ever-changing digital landscape – can be monetized for sponsorship revenue.

As any mobile user knows, app development and usage has surged since Apple’s App Store first launched in 2008. As of last December, the App Store boasted more than 1 million apps available for download. Even more telling, today’s U.S. mobile consumer spends an average of 2 hours and 19 minutes a day using mobile apps – accounting for 86 percent of time spent on a mobile device.

All of this activity yields a big opportunity for rights holders and brands interested in expanding their digital footprints. Research by IDC and App Annie shows that mobile in-app ads are growing by 60 percent a year and are expected to surpass PC online display revenue by 2017.[7]

In 2013, Evernote launched its first partnership with 3M to integrate digital Post-it® Notes into the application. A user can snap a photo of a real-life Post-it Note and upload it to their digital archive in mere seconds, making them easy to find and accessible from anywhere. A similar partnership exists between Evernote and notebook-maker Moleskine. Evernote recently announced another partnership with LinkedIn, in which users can scan a new business card and view their connection’s profile on the popular networking site.

If you thought that your Facebook Messenger chats would be free from monetization, think again. It looks like Facebook has begun to roll out an interesting new way to make money off of its wildly popular mobile chat application. While the new strategy doesn’t appear to be anywhere near as annoying as some of the advertising and sponsorship schemes we’ve seen in rival chat apps, feelings will undoubtedly be mixed if and when this new feature begins rolling out to users en masse.

As noted by Business Insider, some Facebook Messenger users have reported seeing a new section start to pop up in the app. When a user taps in the search bar to “search for people and groups,” a special new section labeled “Suggested Businesses” appears.

According to the report, there are 20 companies listed in a new scrollable carousel. With this section, Facebook displays companies that users can chat with, though not all of the listed companies have set up their chat services yet since this feature is still so new. For the time being, the list populates before a search is even performed and the listed companies have nothing to do with the actual search. It seems fairly likely that companies will be able to pay to be featured in this section.[8]

 

[1] https://www.forrester.com/Mobile-Apps

[2] https://www.thinkwithgoogle.com/articles/mobile-app-marketing-insights.html

[3] https://en.wikipedia.org/wiki/Mobile_app

[4] Id.

[5] http://mashable.com/2011/08/17/price-mobile-app/#REo2T7ioBsqz

[6] Id.

[7] http://www.sponsorship.com/About-IEG/Sponsorship-Blogs/Kristen-Pelachyk/July-2014/Mobile-Apps—The-New-Frontier-in-Brand-Partnershi.aspx

[8] Id

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