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Mobile app revenue growing, but support needed from Google, developers

February 21, 2012

Total mobile app revenues from pay-per-download, in-app purchase, subscriptions and in-app advertising will soar over the next five years, growing from $8.5 billion in 2011 to $46 billion in 2016, according to a new report from ABI Research.

The report also reveals that mobile application revenues from in-app purchases will pass pay-per-download revenues this year. However, app developers and Google need to do more to support in-app purchases if it is to expand successfully beyond gaming-related purchases.

“While there has been a lot of discussion of in-app purchasing, it is a very narrow group of success,” said Mark Beccue, senior analyst for mobile services at ABI Research, New York.

“The dollar amounts are huge, but they are coming from a small number of subscribers,” he said.

“These are super users who are playing games and spending money and skewing the numbers. We do not think that most people will go this way.”

Moving beyond games
The report focuses on the various revenue models for monetizing apps, which include pay per download, in-app purchasing, in-app advertising and subscriptions.

Despite the limited scope of appeal for in-app purchasing at the moment, ABI believes the model is going to expand over the next few years thanks to an explosion in in-app purchasing outside of gaming.

In particular, ABI Research expects to see more app developers get creative and realize they can monetize their app directly with in-app purchasing as opposed to paid downloads.

The report also points to the bigger role that Google needs to play in supporting app revenue. While iOS enables pay-per-download, in-app purchasing, in-app advertising and subscriptions, Google currently only enables pay-per-download and in-app advertising.

Google behind the ball
Google did not introduce in-app purchase to Android Market until July 2011 and only recently added 17 mostly-European countries in December 2011. Additionally, pay-per-download is not an option in all markets for Android and subscription billing is not offered at all. “

“It is amazing how big app revenues are today in spite of the fact that Google has not done a lot to enable the ecosystem,” Mr. Beccue said. “I think that Android is severely under revenued.

“Google is behind the eight ball in enabling their developers to monetize their apps,” he said. “If Google were more aggressive in enabling monetization, we would see revenues jump quite a bit.”

One of the interesting findings in the report is how many tablet users are downloading apps.

“The initial thought was that because these are larger products, they lend themselves to the Web,” Mr. Beccue said. “However, a lot of people are consuming apps for both iPad and Android tablets.

“I think we are going to see momentum behind media tablet apps and what they can do,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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