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20pc of app revenue comes from 3pc of users: study

Are consumers paying for apps?

Speaking to a bigger issue from marketers to monetize content, 20 percent of revenue from mobile applications comes from three percent of users, according to a new study from ABI Research.

ABI Research’s “Wave 3 U.S. Survey Results – Mobile Applications” report looked at both in-app and mobile Web advertising and found some interesting trends on how consumers pay for content. Additionally, the study outlines a few takeaway points for publishers trying to monetize content.

“If viewing this from a mobile marketer’s perspective, then the appeal of free apps is of course the flipside of the fact that relatively few people spend meaningful sums on apps,” said Aapo Markkanen, London-based senior analyst for consumer mobility at ABI Research.

“Mobile consumers love apps but they are generally price-sensitive, which means natural demand for ad-funded content,” he said.

Stingy users
According to the ABI Research study, approximately two-thirds of app users have paid for an app, which includes everything from an in-app purchase or a paid download.

These paying users had a mean monthly spend of $14, showing that consumers are willing to pay for a somewhat substantial amount of content.

However, when looking at the median spend for the group, the monthly amount drops to $7.50. Although there are some consumers who are willing to pay for a large chunk of content, the majority of consumers are picky about what content they are willing to buy.

In particular, freemium models that let consumers download an app for free and pay to upgrade later is increasingly being used by publishers to monetize content. However, some mobile experts question how long the freemium model can sustain itself.

Additionally, utility apps for business purposes have been successful at monetizing content.

Mobile net
With the uptick in HTML5 development, more companies are looking to develop rich mobile Web sites to reach a broader group of consumers that have any type of mobile device.

Therefore, more marketers should be looking at the mobile Web as a source of revenue, per the report.

For example, The Financial Times recently announced that they would be eliminating its iPad and iPhone apps to further propel its HTML5-based strategy (see story).

Even though the switch from apps to mobile Web sites might make sense for a publisher, other industries such as gaming thrive on the engagement that is only available from an app.

Many publishers are rushing to see how they can make money off of mobile efforts, but it still might be too early for marketers to be thinking in revenue-only terms.

“One prediction that I’d make is that the share of consumers spending money on apps should gradually increase over time,” Mr. Markkanen said.

“First, more apps will become a part of their users’ daily lives, which should reflect well on conversion rates – loyal, closely engaged users are understandably likelier to pay up if compared to newer and more casual ones,” he said.

“Second, once payment methods in app storefronts – especially Google Play – evolve and become user-friendlier, spending money on apps will become more commonplace.”

Final Take
Lauren Johnson is editorial assistant on Mobile Commerce Daily, New York