In 2011, 96% of smartphone apps were downloaded for free
Today’s smartphone users are increasingly unenthusiastic about paying for mobile applications. Consumers are closing their wallets at app stores, preferring free app downloads instead. IHS Screen Digest estimated that 96% of all smartphone apps were downloaded for free in 2011.
While some free apps are monetized only through advertising (and some, as brand marketing efforts themselves, may not be monetized at all), there is a shift toward the “freemium” model as mobile marketers are challenged to embrace new sources of revenue, including the in-app business model.
IHS suggests in-app purchases will become the new standard for mobile app revenues. The freemium model, proven successful by gaming companies that charge users for accessing new tiers of content, involves consumers downloading an app for free, then being drawn to make purchases within the app. IHS projects that in-app purchases will account for 64% of total smartphone app revenue in 2015, up from 39% in 2011.
IHS figures indicate that free apps represented nearly half of the top-earning iPhone applications and 31% of the top-earning Android Market applications in Q3 2011. They also showed that 68% of the top apps featured additional content or functionality for purchase within the app.
Analysis of the Android Market App Store from September 2010 to December 2011 further demonstrates the reliance on the free app model. According to AndroLib, in September 2010 roughly 65% of all Android Market apps were downloaded for free; in December 2011 nearly 69% of mobile apps were downloaded for free.
According to mobile analytics company Localytics, creating app stickiness is important to generating repeat app visits and subsequent in-app purchases. Returning to the gaming example, a smartphone user who engages with a mobile game for several consecutive days is more likely to make an in-app purchase than an infrequent app user. A Localytics study showed that loyal app users generated 25% more in-app purchases than average customers.
Moreover, Localytics data showed that 44% of smartphone users who made an in-app purchase did not do so until they had interacted with the app at least 10 times. It also found that users who made in-app purchases did so, on average, 12 days after first launching the app.
In 2011, Localytics found that 26% of apps were used only once after download. This further indicates that user experience and engagement are crucial for generating repeat app usage and subsequent in-app purchases. Mobile marketers should observe the mobile gaming market for best practices around the in-app business model.
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