The mobile application market is growing by leaps and bounds. The industry is huge and constantly evolving. As a result, more and more developers and software products that they create appear. The revenue of the global mobile app industry is growing rapidly.
Hybrid forms of monetization such as in-house advertising are gaining popularity. Research by Statista, IHS Markit, and Forbes confirms the assumption that in-app advertising will become the main driver of the mobile industry in the coming years.
This post is written in an attempt to answer the following questions:
- What is the average mobile app revenue?
- Is the average revenue increasing?
- What are the challenges facing the mobile industry?
- What are the most popular forms of monetization in today’s and tomorrow’s markets? Which ones are already outdated?
Does the mobile application market have room to grow?
According to App Annie, in 2015, the global mobile applications industry had a rather impressive $ 41.1 billion in revenue, and soon this figure will reach $ 50.9 billion. Statista predicts revenues in the range of $ 189 billion by 2020. The data from these studies differ, but they all point to the fact that in the foreseeable future the market is unlikely to be oversaturated with applications. App Annie and Forrester reported that only 46% of the world’s population will have smartphones by the end of 2016. That is, the mobile revolution, which is so much talked about, has not even begun yet.
Another Forrester study noted that companies for whom mobile devices are the main catalyst of their business are now significantly fewer than those for whom mobile devices serve only as an additional channel. Data for 2016 suggests that only 18% of companies fall into the first category and that by next year there will be 25%.
Consumers are evolving faster than manufacturers. If we talk about the varieties of popular applications, then the creation of mobile aggregator applications comes to the fore. Tools that collect content from multiple sources and put it into one user-friendly interface. This could be breaking news or niche articles. Aggregators are created for those who do not have the time or desire to visit many sites or install applications. Popular aggregates include Flipboard, News360, Feedly, and IFTTT. Such tools contain additional features, for example, provide information about a planned purchase. For example, on Facebook Messenger, a user can scroll through the news feed and then call Uber.
Rich and poor platforms
Two giants – Android and iOS – dominate the global mobile market. A Gartner study found that by the third quarter of 2016, 87.8% of smartphones sold were Android devices. This is 3.1% more than a year ago. IOS app development owns 11.5% of the market – 2.5% less than in 2015. These numbers seem low, however, they significantly weaken the position of other players in the market.
With 0.4% of the market, Windows ranks third in the list of popular platforms. Over the past year, their market share declined by 2.5%.
Apple and Google have the most popular app stores. Competitors do not even think about such success.
InMobi estimates that 55% of app developers make less than $ 1,000 per month. A third of developers can’t get 10,000 downloads. The income gap is higher among Android developers. In the iOS developer community, revenue is more or less evenly distributed.
Android and iOS dominate the global smartphone market.
Since 2016, 25% of iOS developers have earned $ 5,000 per month. Only 16% of Android developers have comparable earnings.
The statistics of the monthly revenue of the application of different operating systems is also interesting. Forbes estimates that the average iOS app brings in $ 4,000 per month, followed by Android at $ 1,125. Windows Phone app revenue – $ 625. In 2016, the situation changed radically. According to Statista, the app on Windows Phone started bringing in $ 11,400 per month, iOS – $ 8,100, Android – $ 4,900. Most companies give preference to Android app development – 75% of them.
Powerful processors, graphics, high-quality displays, and fast Internet connections turn smartphones into full-fledged gaming devices. The report App Annie says that mobile games, which in 2011 set less than 50% of users in 2015 have already brought 85% of the revenue of all market applications. This is $ 34.8 billion in absolute terms.
The share of games in the mobile application industry has grown significantly.
According to the 2015 Flurry Analytics Blog, the total time users spend on non-gaming apps has increased, namely:
- Customization apps (launchers, icons, wallpapers, lock screens, etc.) – by 332%
- Mobile versions of magazines and newspapers – by 135%
- Productivity Tools – 125%
- Shopping apps – up 81%
- Travel, sports, health, and fitness apps, as well as messengers and social apps – 53-54%.
- Games are excluded from the list, in this category, there was a decline in the total time of use, by 1%.
6 monetization models
If the user has not bought a paid application yet, only screenshots, descriptions, and videos will be available to him as a preview.
This approach is ineffective, statistics show that none of the paid applications is included in the list of software products that generate the most revenue. But in some cases, such a model brings results. For example, Minecraft Pocket Edition.
Freemium (free and premium). The basic functionality is free, but you will have to pay for the advanced one. Usually, there are few people who want to buy the paid version. In such a model, the main thing is to ensure the maximum number of downloads. She is often criticized, but there are also successful examples – Clash of Clans.
The subscription model is similar to freemium. The difference is that users pay to access all content, not just specific features. This model generates revenue through user engagement.
Lumosity is a good example. The app contains over 50 exercises for training memory and attention, developed by cognitive psychologists. Lumosity has a monthly subscription ($ 11.99) and a year ($ 59.99). The app has 93,000 users with an average rating of 5 stars.
A very common approach, especially for games and applications for product catalogs, is charged for each item sold. As of February 2016, only 1.9% of mobile gamers were making in-house purchases, according to Tech Times.
A good example is MeetMe, a social application from which users can buy products and services at a good price. In MeetMe, you can increase your page traffic for money.
Crowdfunding is a relatively new monetization model. The developers talk about the idea of some kind of service on a specialized site (Kickstarter or Indiegogo) and ask the public to invest in a future project. In some cases, it is possible to collect much more than the required amount. Tech startup Shadow is a prime example in this regard. Its authors received – $ 82,577 from 3,784 sponsors.
For a fee, the user becomes an advertising sponsor; part of the board goes to the developer. The model is very new, but it is already being used in some applications. App RunKeeper, which has 45 million users, rewards for jogging, and walking.
The most popular way to monetize apps. The reason is simple: users love free, and the more downloads, the higher the developer’s income. A report from IHS Markit says that by 2020, in-app ad revenue will reach $ 53.4 billion in annual revenue. Each sector has a handful of app developers who get the lion’s share of advertising. According to Klick Health, Facebook remains the undisputed leader, with 44.3% of all mobile advertising on social media. Other players that stand out include Alibaba, Google, Tencent, Twitter, Pandora, and Yahoo.
The companies that generate the most mobile app advertising revenue are often the largest ad sponsors. This trend is visible in the gaming industry.
Developers are mastering new forms of monetization and creating interesting solutions for a custom audience. At least two new models have proven to be very effective in the past few years.
This is not to say that any of the models are completely ineffective. It all depends on the specific situation. For example, a subscription is only applicable to a few niches, but at the same time, it is considered the most profitable model. Freemium, despite all the criticism, shows high results when used correctly. The Clash of Clans example demonstrates this well. Perhaps, paid apps are the least popular among users. But even this form proves its suitability in certain conditions.
Mixed models are becoming popular, such as in-app purchases plus ads. Based on the results of most studies, it can be concluded that the main driving force of the mobile industry is in-app advertising.
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