In-app purchase revenue will hit US$5.6 billion in 2015 compared to US$970 million in 2011, according to IHS Screen Digest Mobile Media Intelligence Service. In-app purchases will account for 64 percent of mobile app revenue in three years’ time, up from 39 percent in 2011.
The freemium model, in which users are charged for additional content or functionality in their app, is the fastest-growing segment of the global smartphone apps market and will soon dominate. IHS mobile media senior analyst Jack Kent said smartphone users much prefer free apps to paid apps with IHS estimating that 96 percent of all smartphone apps downloaded in 2011 were free.
"In 2012, it will become increasingly difficult for app stores and developers to justify charging an upfront fee for their products when faced with competition from a plethora of free content. Instead, the apps industry must fully embrace the freemium model and monetise content through in-app purchases," Kent said.
By the end of Q3 2011, free-to-download apps represented 45 percent of the top-grossing iPhone apps and 31 percent of Android apps in the US. IHS Screen Digest estimates that 68 percent of top-growing US apps during the period featured some form of additional content or functionality available through an in-app purchase.
The majority of in-app purchases in the US and UK at the end of the third quarter of 2011 involved the purchase of virtual currencies such as redeemable points in games or additional poker chips. IHS Screen Digest estimates that 63 percent of in-app purchases in the US iPhone App Stores at the end of the quarter were for virtual currency.