According to Google, two business models for mobile apps are growing at a fast clip. Particularly fast growing is something called “in app purchases.”
In app purchases are when someone buys an additional feature or service while inside a mobile application. This could be extra features, premium content, virtual goods, or simply a paid upgrade to remove advertisements.
Google recently announced it has seen a 700 percent growth in revenue from in app purchases over the last year in its Google Play store.
And it’s not just at the Google Play Store. A report says the Apple store is seeing a similar trend.
Earlier this year analysis firm Distimo reported 76 percent of U.S. Apple Store revenue came from in app purchases. About 71 percent of those purchases were from so-called “freemium” apps, the report said. Freemium apps cost nothing for initial download but then allow users to buy additional upgrades or features.
The top earners of in-app purchases in the Apple Store so far have been games, Apple Insider reports. However, at least one business app, TurboTax Snap Tax, did break the top 10 in earnings.
Google Dishes About Play Store
Subscriptions are another growing business model for app developers at Google Play. Google says revenue from subscriptions has doubled each quarter since the subscription option was launched a year ago.
Ibrahim Elbouchikhi, Product Manager of Google Play Commerce, said average revenue per user in the Google Play Store had more than doubled in the past year. He explained each of the two business models behind that growth.
“In app,” he said, “is about getting the user to enjoy the application, to really get immersed into it, before getting to monetization. We’ve heard this a lot in all sorts of sayings. You know, ‘Focus on the user experience, and the money will follow.’ And that’s exactly what in-app represents.” The remarks were made when addressing the crowd at the recent Google I/O event in a session called “Making Money on Google Play.”
He points out that “in app purchase” business models are not for everyone. Subscription-based business models can be very successful, too. However, he notes, “Subscriptions have a pretty high hurdle. The user has to see continuous value. They have to commit to a recurring subscription…. Yet, we are seeing more and more users taking that step, and it’s because of the applications and the content ….” He points to the success story of Pandora, a top app and “one of the few non-games that’s completely based on subscriptions.”
Google representative Elbouchikhi and his team shared other important trends for businesses and entrepreneurs interested in developing apps for the Google Play store.
Tablets are better than phones for monetizing an app. The purchase rate on tablet apps is 1.7 times higher. “Optimizing your application for tablets is well worth while,” he notes. Google has launched resources for developers, including optimization tips for tablet apps, to help developers.
The team also said apps making use of the latest Android platform additions had a 2.2 times greater chance for monetization over apps built on an older version. He urges taking advantage of the latest features, too, such as the Google+ login and new APIs. They are more than “nice-to-haves,” he says, because you can double your revenue by adopting these latest features.
And of course, quality matters. An app with a 4-star rating almost triples the revenue over a 3-star rating. And revenue on a 4-star app is orders of magnitude better than a 1-star rating. “Replying to reviews, fixing bugs, good customer support … all of that has a tangible impact on your revenue.” See Google slide above.
He also pointed out that by getting the application into the Google Play store, you have access to a global distribution network in 134 countries.
This means opportunities to market apps through the Google Play Store are growing. Small businesses and entrepreneurs already involved in mobile app technology, or those looking to expand their businesses into mobile, take note.
I’ve never purchased an app from Google. (Or Apple)
There are so many choices…too many, in my opinion.
But, your data suggests that I’m in the minority.
The Franchise King®
Joel – I think a lot of apps are games. I got a Google Nexus tablet and went looking for Suduko games. There were a gazillion versions. All I wanted was one. I still don’t know if I have the best version, because I wanted to spend 5 minutes getting one, not 5 hours. Of course, it’s a perfect example of the in-app purchase business model. It’s constantly annoying me with ads and trying to get me to upgrade to the paid ad-free version. 🙂
It’s an interesting business model though. Ever thought of creating a Franchise King app? What kinds of things could it do? And what kinds of bells and whistles could you add, in-app purchases people could buy after download to get even more use out of it?
Hi Shawn! I actually have had a couple ideas for one. The thing is this:; I don’t want to create an app just to say I have one. In other words, I don’t want to create one (or in my case- have someone build it) unless it can bring value to users and be really unique. Thanks for the idea…and maybe even the push to consider it a little more. JL
Shawn and Joel – I love it! The Franchise King App! It could have a wonderful checklist of questions to ask franchisors, due diligence tasks, and so on.
Thanks for that idea, Anita.
You usually have some great ones!
Now, to find a developer……