Who's making money in mobile app development - and how

Jason Ankenyeditor's corner

The battle for mobile developer mindshare often seems like a slugfest between Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android, with rival platforms stuck on the sidelines. IT industry market research firm Evans Data's latest Application Distribution report supports that perception--at least to a certain extent. Based on an August 2011 survey of more than 400 commercial developers, Evans Data found that 47 percent of respondents have some experience distributing their mobile apps via Android Market, more than any other storefront including Apple's own App Store, used by 43 percent of respondents. Asked to identify the app marketplace they believe will be most dominant two years from now, developers also give Android Market the slight edge over the App Store.

But when the subject turns to where developers are generating significant revenue totals here and now, the answer isn't either Android Market or the App Store. Surprise: It's Research In Motion's (NASDAQ:RIMM) BlackBerry App World. "There's room for more than two [mobile platforms]," says Evans Data CEO Janel Garvin in a statement. "BlackBerry developers are not as plentiful but 13 percent make over $100,000 from App World apps, which is considerably more than Android or Apple developers, and will help that platform continue to be compelling to developers, especially in the enterprise."

Another recent report sheds light on exactly how mobile developers are making money--and it isn't premium app downloads. During the annual Verizon Developer Community Conference event earlier this month, Hendrik Koekkoek--a data analyst with app marketplace analytics firm Distimo--revealed during a presentation that in-app purchases are now responsible for a remarkable 72 percent of iPhone app revenues, up from only 28 percent a year ago. No less significant, 48 percent of all in-app buys come in apps that are available as free downloads. Perhaps most remarkable of all, only 4 percent of iOS applications offer in-app purchase options, meaning a small number of developers are enjoying the biggest financial rewards.

Although in-app purchases were not introduced across Android Market until March 2011, Distimo reports that 68 percent of the 25 highest-grossing Android applications now incorporate the in-app option. And even though Verizon Wireless' (NYSE:VZ) own Verizon Apps doesn't yet offer in-app purchases, it does give developers the flexibility to introduce subscription billing, a model that now generates 44 percent of revenues within its 200 top-grossing apps. (BlackBerry App World added subscription-based services earlier this month, roughly nine months after enabling in-app purchases. Distimo did not supply BlackBerry app sales metrics.) Distimo adds that traditional paid apps still make up the bulk of applications across most stores, but it's increasingly obvious that the smart money lies in non-traditional revenue models. -Jason