In-App Monetization on Mobiles Ahead of Advertising

by Mercator Advisory Group 0

The economic engine of the Internet has been advertising. Banner ads and Google are proof that advertising is what’s driven the explosion of media and rich content online. But that’s all been based on the PC-centric or, at least, large screen model of computing. The smartphone world, based on a relatively small screen, doesn’t have the same physical real estate to give to advertising. So, what’s a poor mobile content creator to do?

Monetize the app by selling upgrades within the app itself. Rather than charging ten bucks to a small group of users, these app creators are charging $1 or nothing to get users involved and then charging small fees for new features, new capabilities and power in games, etc. And it’s working as this link shows. This “get them in cheap and keep them forever” is a time-honored technique. We’re not the only industry that calls its customers users.

While the debate over web-ads


app ads may be going strong, some new data from Flurry analytics may make it moot. The in-app purchasing game has taken off to the point where revenues from in-app buys are dwarfing advertising income–at least for apps on Apple’s iOS platform.

Flurry, often a source of inside analytical data on smartphone apps, has a very challenging bit of data out at the moment: According to the graph above, there’s a massive swing in terms of smartphone app revenues. At the end of 2009 the greater majority of cash rolling in to developers from their carefully-crafted apps came from advertising.

But after a peak in ad revenues in December 2009, the pendulum swung to in-app purchasing, and revenues from ads slumped. By the end of this year, average monthly revenues per user will have doubled compared to 2009’s peak–and more than 80% of that will come from in-app purchasing.

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