8 Lessons on Mobile App Monetization
In February 2014, Distimo – recently bought by AppAnnie – published a study on monetization of the main mobile apps in the world.
This study details the gaps, according to regions, between CPI (Cost per Install), the average cost for app developers for one download and ARPD (average revenue per download) or also called LTV (lifetime value), average income out of one download.
1 – The First Market is Japan:
Japan is the first market for mobile applications with an average revenue of 5,32 dollars per download for developers.
2 – The Five Main Markets for ARPD/LTV:
The first one is Japan (5.32 dollars), then comes after Australia (3.60 dollars), South Korea (3.40 dollars), Canada (2.38 dollars) and Germany (2.30 dollars).
Russia and China take the ninth and tenth position in the ranking with respectively 1.30 and 0.92 dollars.
3 – The Five Countries that has the Highest Revenue Potential per Application:
When we compare LTV and CPI, five markets seem to emerge from the others: Japan, Australia, South Korea, the United Kingdoms and the United States.
4 – Confirmation for the Freemium Model with In-App Purchases:
This model represents 81% of the generated revenue on iOS in the US in 2014 (compared to 46% in 2012). The study is also highlighting that the in-app model is the most effective in Asia with China, Japan and Korea coming out on top of the ranking (this is based on the ratio of revenue across all apps — paid and free — not the sheer volume).
5 – Lifetime Value can Face Strong Variations according to the Market:
Indeed to take a simple example, for the app Jewel Mania, the revenue per download is 6.65 dollars in Australia but only 1.44 dollars in France.
6 – Lifetime Value is Higher on iPads but the Majority of Revenues are Coming from iPhones:
For i.e., the lifetime value can be 7.19 on iPad in Japan but the revenues on iPad represent only 9% of the App Store’s revenues. In South Korea and China the ratio is a bit better but still shows an obvious iPhone dominance on the market. In South Korea, 19% of revenues come from iPads and 81% come from iPhones and in China 27% from iPads and 73% from iPhones.
Nonetheless, it is interesting to see that in a matured market such as the US, the iPad revenue share on the app store is still less than half (49%).
7 – Even Though Paid-For Apps are in Minority, They Have a Higher Lifetime Value than free apps to play:
Indeed in Japan, the paid-for app life time value can be of 18 dollars and more than 10 dollars in Korea.
However the study shows that lifetime value is higher for freemium apps on in-app purchases (IAP) than for paid-for apps with IAP. In short, the user tends to spend more when the app is free.
8 – The Freemium Model is Ultra-Dominant in China and in Japan Where it Represents 94% of the Generated Revenues for Apps.
To conclude, although the freemium app model seems to be one of the most effective in many countries, the report does not predict a stark future for paid-for apps. Indeed freemium pricing the largest gross monetization model on sheer numbers, paid apps generate in fact a higher average spend if downloaded:
“Although it is known that the highest revenue share is generated from the freemium model, both business models of paid apps bring in higher revenues per download”.
Why is that? Well, users that will pay to download the app will surely be more engaged users as they are ready to pay to use it. The successful example of an app such as Tweetbot, which costs 4.99 dollars on the App Store, can definitely say that developers can still hope, although as the Distimo report shows the success of those paid-for apps is mainly based on the market and the app genre.
Share your thoughts on this subject! Do you think CPI is a good way to monetize an app? If no, why? Are you using freemium model too?
You can download the entire Distimo report here.