In 2020, global consumer expenditure on mobile apps reached 143 billion U.S. dollars. The increase in app spending is a direct result of the 2020’s increase in usage: during the global coronavirus pandemic, people relied on their mobile devices to pass the time while sheltering at home, bringing usage levels to surge in every part of the globe. In particular, apps operating with subscription models are becoming more present in the mobile services landscape. Between 2019 and 2020, subscription apps have reported an increaseof 30 and 40 percent in consumer spending on iOS and Android, respectively. This is not only a sign that consumers are more open to paying for apps in the first place, but also that users have started seeing mobile apps as long-term commodities, especially when it comes to entertainment apps and mobile streaming.
User acquisition and retentionAccording to a 2021 survey of app developers, increasing the budget for advertising was the first move to increase user acquisition rates. However, more than half of the respondents reported planning to focus more on Android, while almost five in 10 were looking at video formats to entice more users into installing an app. Android, which regularly surpasses iOS over app downloads, reported slighter lower app retention rates in 2020 than its main competitor: after 12 weeks from install, apps on iOS had a five percent retention rate, while Android apps reported a 3.6 percent retention rate after the same amount of time. As it was to be expected from the increase in app install volumes, overall retention rates have experienced a decrease in 2020.
Monetization best practices: ads still rule the marketWhile subscriptions are increasingly becoming an option for app publishers, in-app ads are still the preferred monetization practice worldwide as well as in the U.S. market specifically. As of August 2021, 38 percent of global app publishers decided to include ads in their products, while in-app billing only interested four percent of the app developers worldwide.
In-app advertising helps with keeping the product at a low price or free, but repetitive or ill-positioned ads have the power to ruin users’ experience with the app altogether. Interstitial ads, which are pop-up ads that take up the entire page when transitioning between in-app content, still present the highest conversion rate for Android apps, while native ads are particularly popular with iOS users, with a conversion rate of 16 percent between January and October 2020.
App stores and commission rates: the end of an era?As of July 2020, app publishers on the Apple App Store and the Google Play Store were subject to a 30 percent commission fee on all in-app payments. Since then, several major markets have been drafting propositions and passing new laws to prevent what has been seen as a monopolistic attitude from the two tech giants regarding their app stores’ payment policies. First the European Union with the Digital Market Act, then the United States Senate with the Open Apps Market Act, governmental bodies have been trying to reduce larger tech companies’ control over the app market and to increase competition in the digital environment.
In August 2021, the amendment of the Telecommunication Business Act in South Korea was the first legal instance in which developers were allowed to start using third-party in-app payment methods. However, the September 10th ruling of the Epic Games v. Apple case in California is set to become a pivotal shifting moment in the digital world. The ruling of the case, which partially sided with Epic Games, states that links to third-party payment forms are to be allowed in apps hosted on the Apple App Store. While Epic Games has been ordered to pay the 30 percent commission to Apple on its previous earnings, and Fortnite still remains banned from the Apple App Store, the ruling is set to originate major policy changes for app stores.