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Summary:

Gartner said that 89 percent of app downloads in 2012 are expected to be free and that number will only go up. But in-app purchase is rising as a monetization tool and will be present in 30 percent of apps by 2016.

in-app purchase
photo: Restaurant Story

Mobile app lovers like their free software but that doesn’t mean developers ought to worry. That’s the takeaway from a new Gartner study that found free apps will represent 89 percent of global downloads in 2012 and will grow to 93 percent of downloads by 2016.

The forecast, if accurate, suggests that while downloads are exploding — 45.6 billion expected this year and 309.6 billion predicted by 2016 — people will buy fewer and fewer apps. And the amount paying customers will spend is also expected to go down. Gartner said that paid apps priced $2.99 or less are expected to represent 87.5 percent of all paid download this year and will account for 96 percent of all paid downloads by 2016.

This might sound depressing for some developers but the upside is that in-app purchasing is growing as a key monetization tool. Gartner found that apps with in-app purchase in which users can buy extra items, levels or services inside the app is expected to soar in the coming years. Apps that feature this approach are expected to increase from 5 percent of all apps worldwide in 2011 to 30 percent of all apps in 2016. And the revenue in-app purchase provides will grow from 10 percent to 41 percent over the same period.

In-app purchase, freemium, Gartner

This move to in-app purchase isn’t new if you’ve been following along.  In a mobile games report it released in January, Juniper Research said worldwide revenues from mobile in-game purchases totaled $2.1 billion in 2011 and were expected to grow to $4.8 billion by 2016. We’ll be talking about app monetization strategy at GigaOM’s Mobilize conference Sept. 20-21. 

Many developers are finding it’s easier to attract users with a free price tag and then monetize a portion of their audience through upgrades and additional purchases. There will still be a room for paid downloads and the revenues that model provides will still be substantial. That’s good news for developers who put out a quality product but may not drive enough download numbers to make in-app purchase work well or don’t have an app that easily lends itself to in-app purchases.

But the forecast suggests that the freemium trend is only going to continue and if app developers aren’t already considering it, they should look at how their app might adapt to this new reality.

  1. There’s an interesting discussion of this with some figures at http://www.treysmithblog.com/the-fall-of-angry-birds/ including calculations that the top grossing apps are making between $2m – $3m a month from in-app purchases.

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