In-app purchases dwarf ad revenues, as iOS App Store exceeds $71 billion
Only 5 percent of app users make in-app purchases, yet they drive much more publisher revenue than app-based advertising.
US mobile ad revenue in 2015 was approximately 35 percent total digital revenue, or $20.8 billion. However, revenue from in-app ads is dwarfed by in-app purchase revenue and paid apps, according to the AppsFlyer State of In-App Spending report.
The AppsFlyer study looked at “over 100 million users across over 1,000 apps that have in-app purchase activity.” The chart below shows the breakdown of mobile app revenue by category: ads vs. in-app purchases vs. paid apps. These models aren’t mutually exclusive; however, non-advertising monetization dominates on a global basis.
AppsFlyer calculated that “the average global paying user spends $9.60 a month per app, which is 20 times more than the average user.” Yet only about five percent of app users make purchases.
Apple users spend 2.5X more than Android users on in-app purchases, and the number of in-app purchasers on iOS is also 50 percent greater than the number of Android users making in-app purchases. Average in-app purchase value for iOS is about 2X vs. Android.
Geographically, Asia leads all other regions, with over $10 in monthly spending per user. North America was second with $8.68.
As indicated, on a global basis, only 5.2 percent of users are making in-app purchases. In Asia, the number is 5.9 percent; in North America, it’s 5.8 percent. In other regions, it’s less. There’s obviously huge revenue opportunity in more deeply penetrating existing markets.
Separately, Sensor Tower calculated that Apple has generated more than $71 billion in app-related revenue to date. Apple previously announced that it had paid more than $50 billion to developers, which represents the net after Apple’s 30-percent cut.
The AppsFlyer data above don’t reflect mobile-web advertising. Nonetheless, it’s interesting how, as usage migrates to mobile and most time is spent in apps, the advertising model is losing to subscriptions and in-app consumer spending.