How Google is holding back in-app revenue growth

Jason Ankenyeditor's corner

Mobile applications are on pace to generate revenues of $46 billion in 2016, up from $8.5 billion a year ago, according to a new forecast issued by ABI Research.  Although ABI's projections encompass all app business models--i.e., in-app purchases, pay-per-download, subscriptions and ad revenues--the forecast anticipates in-app purchase revenues will surpass download revenues later this year. But for that to happen, developer segments beyond mobile game makers must embrace the freemium concept, and so far, very few are picking up the torch.

"As a revenue model, in-app purchase is very limited today," ABI senior analyst of mobile services Mark Beccue says in a statement. "The vast majority of current in-app revenue is being generated by a tiny percentage of people who are highly-committed mobile game players.  We don't believe the percentage of mobile game players making in-app purchases will grow significantly, so for in-app purchase revenues to grow, mobile developers other than game developers must adopt it."

But there's a major stumbling block to adoption, and it's called Google (NASDAQ:GOOG). Its Android Market did not introduce in-app billing capabilities until March 2011 and still only supports in-app purchases across 29 international locations. Moreover, the storefront doesn't support subscription billing at all. "Google is literally holding back the growth of mobile application monetization," Beccue adds. "We are keying many of our mobile app revenue forecasts around our guess of Google's plans."

And that's the problem: No one knows for sure when or even if Android Market will offer developers and consumers the same in-app purchase options available in Apple's (NASDAQ:AAPL) App Store. Independent technology analyst Ovum's second annual Developer Insights survey, issued last month, states that Android is poised to eclipse iOS as the mobile operation system most important to the developer community sometime within the next 12 months, but developers can't pin their future hopes on Android until they know more about what Android's future holds.--Jason

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