App Monetization: Report as of 2016 and what to expect in 5 years

App Monetization as of 2016

Almost all industries are publishing apps. Cab-hailing services, restaurants, real estate, banks, airlines, game studios etc all have their apps. A publisher must understand the exceptional capacity of app economy’s growth and capitalise from strength to strength. Anticipating future market opportunities along with shaping up the portfolio and business scenario will help achieve proper app monetization.

This article is a complete report regarding app monetization as of 2016. In order to get the best out of your app we recommend you to go through all the stats and reports which we are publishing in this report. This report comes with data from CFOs, executives, investors and strategists with reports on the upcoming scenario of app publishing.

Basics of App Revenue

These days usage is the new trend and a major driver of revenue generation. Apps have become the ultimate life savers for all sorts of things be it banking, travel or music.

Worldwide, the time spent on app usage increased by 115% from early 2014 to mid of 2016. Communication apps like Facebook, Whatsapp top the chart amongst others. Media and video apps are about to Pip gaming apps as their usage has increased by 215%. Apps like Uber and Amazon have shown a massive growth of over 350% as the world has become highly dependent on them.

Apps download, usage and revenue are inter-connected. People download apps when they discover them but the usage varies on their convenience and liking. Once a user starts getting his utility from an app he starts using it time and again. The time spent on an app generates revenue. App revenue can be in various forms like in-app purchase, in-app advertising, m-commerce etc.

Emerging markets like India or China are still going through a rapid app download phase. Major players like US or Japan have started using apps on daily basis thus increasing the revenue. App monetization is dependent on mature market more than emerging market.

Different ways of App Monetization

The major app monetization methods include app store revenue generation and in-app advertising. There are various business models which publishers choose. Publishers can target one particular group with a certain model or can mix up various models to target all sorts of users.

Gaming apps are major driver of app revenue having almost 65% of the market share. Subscriptions have become a huge source of revenue for most of the apps. Subscriptions mean nearly 15% of total app revenue.  Both Google and Apple have made few changes from June 2016 where publishers will get better revenues for subscriptions. The market is even more open now as gaming apps also offer subscription model.

Not all apps are following in-app advertising or revenue generation as an app monetization model. There are m-commerce players as well which process transactions outside their apps. Uber, eBay, Amazon are the prime examples of such model. Here one purchases a service from the app but pays outside of it.

Comprehensive App Revenue Drivers

The combined app store revenue, in-app purchase, in-app advertising is expected to exceed $189 billion by 2020. Advertising’s share of revenue is projected to grow from 58% to 62% by 2020. Such huge growth is going to be strengthened by newer smart phone users as well as more number of internet adopters. The expected growth rate does not only depend on top apps, rather it includes the entire app ecosystem as one.

Number of mobiles and tablets will increase from 2.7 billion in 2016 to 6.3 billion in 2020. Such increase in developing markets will be the primary driver of such huge growth. Revenue growth is expected to come via games as well as apps. Gaming apps might lose out a little share as people are becoming more dependent on apps which provide day to day utility.

iOS and Android are going to stay the key OSs. Third party Android will see a major growth but primary Android will lead the game.China has a highly fragmented app store market which accounts for majority of third-party Android’s revenue and growth.

In-app advertising and Freemium Models

The freemium model and in-app advertising has always been the most reliable app monetization method. Both the models are convenient to the users because they do not charge fees or premium right upfront. The next 5 years will see a huge rise in the way developers investing in in-app advertising.

Freemium model appeals to a wider array of users. A user with serious needs only invests in subscription fees etc. Most of the users use an app for its convenience and utility. In-app advertising covers up for casual users. Even after a steady growth rate, the paid and paidmium models will remain a small stakeholder in the overall app monetization process.

There are various freemium techniques which publishers choose from. Virtual items, in-app upgrades are very common for gaming apps. Even publishers like “LINE” choose to sell stickers for messaging apps. Periodic subscription has seen major rise in freemium technique of app monetization.

Market Trends around the world

The Asia Pacific region will be the major leader in the upcoming 5 years. China has the world’s largest smartphone base, even India is rising rapidly when it comes to smartphone and internet users.

The American and European region is expected to double its revenue by 2020. US and China are forecast to sail way ahead when it comes to in-app ads and app store net revenue. Japan’s revenue growth will be characterised by its in app store revenue and its more simple levels of in-app advertising revenue.

Conclusion

The competition is fierce, the app market has become a little stagnant with the rise in number of apps. As a publisher you should try some of the following tips to help you grow in the business:

  • In order to succeed, you must evaluate the best in class apps. A publisher needs to understand the commerce strategy and subscription model the bests are working with.
  • Top Games are one the best teachers. Top games show the best practices of generating revenue. One can also get one with excellent user increment with top games’ in-app advertising strategies.
  • In order to get above your rivals, do invest in brand advertisements and B2C messaging.

These strategies will definitely help you with revenue generation and app monetization.

 

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