In-App Purchase Revenue Grows More Quickly than Advertising

The pandemic has caused reduced advertiser spending overall, leading to lower growth of in-app ad spending despite significantly higher numbers of ad placements. While in-app purchases (IAPs) never stopped growing amid the pandemic, publisher revenues have recently been shifting from in-app advertising to purchases. Sensor Tower estimated that global app […]

The pandemic has caused reduced advertiser spending overall, leading to lower growth of in-app ad spending despite significantly higher numbers of ad placements. While in-app purchases (IAPs) never stopped growing amid the pandemic, publisher revenues have recently been shifting from in-app advertising to purchases.

Sensor Tower estimated that global app revenues from purchases rose by 23.4% year-over-year in H1 2020. Of the $50.1 billion generated by in-app purchases, $36.6 billion came from within games, a 21.2% YoY increase.

In recent years, hybrid monetization models—a combination of in-app purchases and advertising—have become more common in mobile games (and elsewhere). That trend appears to have stopped for the moment, at least among games. AppsFlyer, a mobile analytics and attribution platform, reported that the share of games using a hybrid model dropped 8% between Q2 2019 and Q2 2020, with all game categories showing a dip except for “hardcore” games (battle or fantasy games geared toward intense gamers). For casual and midcore games that retained their hybrid model, the share of revenues coming from advertising fell 30% YoY within the same games. In absolute terms, ad revenues did well in these hybrid games, rising by 47%, but IAP revenues jumped by 130%.

The trend toward increased revenues from purchases began in Q3 2019 but accelerated in H1 2020, when there was an 11% drop in advertising revenues and a 15% increase in IAP revenues among the same group of hybrid apps, according to AppsFlyer. “Users were far more engaged with games during lockdown, and along with the effects of our ‘new normal,’ users have become less tolerant of ads,” said Shani Rosenfelder, head of content and mobile insights at AppsFlyer.

Subscription Models on the Rise

The rapid growth of IAPs in games runs parallel to the fast rise in subscription revenues outside of gaming apps. According to App Annie, among the top 250 nongaming apps as measured by revenues, in-app subscriptions contributed to 97% of consumer spending in iOS apps and 91% of spending in Google Play apps in 2019. And 94% of the top 250 iOS apps by revenues and 79% of the top Google Play apps monetized using a subscription model.

According to AppsFlyer’s Rosenfelder, the share of apps using subscriptions has grown by 40% in 2020 thus far. Now, 5% of all apps worldwide use subscriptions—but only 2% of gaming apps do so. At least a quarter of photography, music, and health and fitness apps use a subscription model, per AppsFlyer.

Next Post

Should U.S. Broaden Mandate on Auditor Rotation?

Whither auditor rotation? A perennially contentious issue, it has led regulators in both the U.S. and Europe to require public companies to change auditors periodically – in the E.U. by requiring firms to invite bids from other audit firms after ten years and in the U.S. by mandating rotation after […]