App analytics firm Distimo reported that 49 percent of the revenue on iPhone apps came from in-app purchases in both free and paid apps. The news underscores the importance of in-app payments and the emergence of the freemium model as a revenue driver for app makers.


App analytics firm Distimo shows that 2010 was the year of mobile in-app purchases, reporting that 49 percent of the revenue on iPhone apps came from in-app purchases in both free and paid apps. The news underscores the importance of in-app payments and the emergence of the freemium model as a major revenue driver for mobile app makers.

In its year-end report, Distimo said in-app purchase revenue for free iPhone apps accounted for 34 percent of all revenue, while purchases in paid apps represented 15 percent. Overall, in-purchase revenue has grown to 49 percent from 36 percent in June.

Recently, Juniper Research predicted that overall in-app payment revenue for mobile games globally would eclipse download revenue by 2013. While that may still hold true across the mobile app ecosystem, mobile micropayments are on the verge of becoming the dominant money-maker for iPhone developers. This is something we’ve been writing about, ever since we reported that one-third of the of the top 100 highest grossing iPhone apps were freemium apps.

The importance of in-app purchases on the iPad is more muted, according to Distimo. It said in-app payments account for only 29 percent of revenue. But the fast growth of this model, especially for free apps, has big implications for developers looking to make money. Distimo said app users are almost 10 times more likely to download free apps than paid apps. It makes obvious sense that free is more appealing, but by turning to freemium, developers are able to tap that desire for free content while still getting a chance to up-sell users later on upgrades, virtual goods and extra content. Distimo doesn’t break down the revenue of competing platforms, but the model can work on Android and other operating systems.

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