In 2019, global consumer expenditure on mobile apps reached 120 billion U.S. dollars, mainly attributable to spending on the two leading app stores, the Google Play and Apple App Store. In order to attain and eventually profit from mobile app users, publishers and marketers spent an average of 1.75 U.S. dollars in acquisition costs per user app install in 2019. While installs and registrations were the least expensive engagement activities that year, the price tag for the acquisition of app users who made in-app purchases exceeded 77 U.S. dollars for both iOS and Android apps. That said, user retention rates for mobile applications reached 32 percent worldwide in 2019, a slight drop from the previous year.
But how do digital content stores generate revenue from their apps, and what are the most lucrative app monetization methods among digital marketers? According to a 2019 survey, the most used mobile app business models include subscription, freemium, and advertising models. While subscriptions are considered the most profitable monetization model, monetization via in-app purchases (IAP) and in-app advertisements (IAA) is also becoming increasingly prevalent among app developers nowadays. As for the most effective in-app advertising formats, developers often opt for playable, interactive, and rewarded video ads. All of these monetization strategies are particularly popular as they allow for long-term revenue stream, even from apps that are free to download. Even if users are not charged a one-off fee upon initial download, their engagement, clicks, or spending on ad-free app versions contributes to the app industry’s standing as a multi-billion-dollar empire.
The most popular system-native stores are the Apple App Store and Google Play. While Google led the ranking of available apps at over 2.57 million in 2019, the iOS App Store recorded higher consumer spending and gross app revenue that year. With regard to different app categories, gaming stands out as the most profitable avenue for app publishers across leading digital marketplaces. In 2019, gaming apps accounted for 95 percent of global app revenue for the top one percent of app publishers, as well as the largest source of overall app revenue for the Apple App Store and Google Play. On a global scale, the mobile games market generated revenue of over 64.4 billion U.S. dollars in 2019, making it an immensely attractive platform for monetization. As some of the most hyped gaming apps of the last few years, Fate/Grand Order, Candy Crush Saga, and Pokémon GO generated double-digit revenue figures in 2019 via iOS and Android devices, with the Nintendo’s fan-favorite mostly generating profits through in-app purchases.
As both mobile app downloads and app revenue are forecast to increase in the following years, brands and marketers will continue to benefit from the vast monetization potential of mobile apps. Nevertheless, they will also have to overcome particular challenges in their strive for profit, such as ensuring a positive app experience to their users, regardless of possibly intrusive advertising content.