In 2012, mobile application revenues from in-app purchases will pass pay-per-download revenues, but unless app developers get creative and Google gets in gear, the in-app purchase party could be short-lived.
“As a revenue model, in-app purchase is very limited today,” says Mark Beccue, senior analyst, mobile services. “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.”
In-app purchase revenue growth has been hampered by Google. The company did not introduce in-app purchase to Android Market until July 2011 and only recently added 17 mostly-European countries in December 2011. That is not the only area where Google has lagged in mobile application enablement. Pay-per-download is not an option in all markets for Android and subscription billing is not offered at all. “Google is literally holding back the growth of mobile application monetization,” adds Beccue. “We are keying many of our mobile app revenue forecasts around our guess of Google’s plans.”
Despite these challenges, in-app purchases will successfully spread outside of games. 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.
ABI Research’s report, “Mobile Application Business Models,” (http://www.abiresearch.com/research/1009106) provides an in-depth look at mobile app revenue models, including forecasts for different models by world regions and mobile device.