Distimo, MEF report says free apps with in-app purchases generate 'majority of revenue'

In-app purchases made in free apps are the primary way that developers make money in both of the world's major app stores, according to a report from Distimo and the MEF. The two organizations partnered on a new study of the revenue generated from smartphone apps on a global basis. Some findings:

  • At the end of September 2013, the "the revenue portion of the Apple (NASDAQ:AAPL) App Store was at 65 percent," according to the report's analysis of app store revenues across 34 countries. Although the report didn't provide details for that number, it pointed out that the figure is far above the 35 percent for Google (NASDAQ:GOOG) Play.
  • In the United States, the report found that free apps with in-app purchases formed the business model for 86 percent of the top 200 apps in iOS. For Google's Android, that figure was 94 percent. The two other types of business models--paid applications and paid applications with in-app purchases--accounted for only a sliver of developers' business models. In iOS for example, 7 percent of business models relied on paid applications and another 7 percent relied on paid applications with in-app purchases.
  • On Android in the United States, only 2 percent of the applications studied relied on the paid download business model, while 4 percent relied on the paid download and in-app purchase business model.
  • App revenue grew by a factor of 10 in South Korea and a factor of four in Japan, while the total revenue from apps in Germany doubled.
  • South Africa generated less than 1 percent of the revenue generated in the United States.

The Distimo/MEF report shows an overview of the mobile app ecosystem with regards to global app store trends.

"Paid apps and premium apps with in-app purchases still generate some revenue in the United States, however it is the business model of free apps with in-app purchases that generates the majority of revenue in this market," the report says. "Being the largest market, the United States exemplifies the broad trend in terms of revenue for the different business models, and most western markets follow this general trend."

This research is further proof (if proof were needed) that the model for paid apps may be nearing its end. The report also illustrates just how important mobile gaming is within the app ecosystem, overwhelmingly leading as a category in most of the major countries. It also offers some interesting granular data on specific locales like South Africa, where Apple only recently began offering games in its local app store. Some of this information could be helpful to developers seeking to find specific opportunities to grow and differentiate themselves based on geographies that are under-served.

For more:
- to download the complete Distimo/MEF report, click here

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