Mobile apps users spend more, but ad model is tough
Published: 25 February, 2009
READ MORE: Applications
Smartphone users are spending more on applications, but using them for very short lengths of time, according to new research. In the US - but with a pattern seen in most developed markets, especially Europe - more than 17% of applications downloaded to smartphones in 2008 cost between $100 and $499.
According to ABI Research, this indicates that, despite the economic squeeze, a significant proportion of advanced handset users are spending more on apps than on the devices themselves, despite the availability of many cheap or free programs. The iPhone App Store is driving down average prices, with many downloads available for $1 or $2, but excluding the Apple platform, the average across other smartphones is $7 to $25.
Concentrating on the iPhone, another research report, from mobile advertising firm Pinch Media, found that most users who download an App Store product use it for only a few minutes, while only 20% return to the software the day after downloading. Long term users are only 1% of App Store custom, a far more extreme trend than in other mobile systems, though similar developments may well be seen in newcomers like Android Market, as users become more magpie-like.
Premium iPhone apps do retain users longer than free ones, but still see a steep drop-off, and the greatest stickiness is seen in games. With a paid-for app returning at least 70 cents a user, and free apps being run about 12 times during their lifetime, ad-supported downloads need to attract more than 70 cents in ad revenues in about 80n sessions. This translates to $8.75 per thousand runs, higher than the overall industry average of 50 cents to $2 per thousand runs. In other words, it will be tough to make money from ad-supported free software when the App Store is so crowded and users' attention span so short. Pinch reckons only 5% of apps in the Store are sufficiently sticky to justify advertising, and thinks other emerging stores are likely to see a similar pattern.
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