by Nima Wedlake on September 26, 2016
Thomvest, in close partnership with our portfolio company Apsalar, recently fielded a quantitative survey to find out more about what marketers are thinking and doing as we finish out 2016 and head into the next year. The survey, conducted in July and August, asked mobile app marketers from around the world about their teams, challenges and opinions on the key issues facing our fast-growing industry. You can download the report in its entirety here, but we wanted to highlight some results around app revenue models and marketing spend.
According to the most recent data from comScore, mobile apps now comprise 58% of connected time in the US.
The figures in many other parts of the world are even higher. Given this, it’s natural that apps are increasingly viewed as a major revenue source for companies. They’ve always been important to mobile –only businesses, but now retailers, travel companies, financial services business and firms in many other verticals are placing greater emphasis on apps as a business channel.
Multiple Revenue Sources Becoming the Norm
One of the first decisions that app makers need to consider is “how will we make money?” By charging for the app? Advertising? In-app purchases? Virtual goods? According to our respondents, advertising has become the most frequently leveraged revenue channel.
Advertising is critical to the so-called “freemium” business model for many gaming apps, where non-payers are monetized through ads. But it is also increasingly common in other categories. Next most popular are real world and virtual goods transactions. Real-world goods sales are the keystone for retail apps, while virtual goods sales are most commonly leveraged in the gaming side of the business. Subscriptions are also becoming increasingly popular, with about ¼ of our respondents reporting that they are part of their revenue models. Subjectively this figure seems rather high to us, which may be driven by our respondent sample. Nevertheless, it seems apparent that subscriptions have “arrived” as an avenue for revenue in our world.
Advertising More Popular Monetization Model in the Developing World
Ours was a truly international respondent sample, and an analysis of developed versus developing world apps showed some interesting patterns. Most vividly as regards in-app advertising. Perhaps not surprisingly, advertising was leveraged more often as a revenue source in developing markets like India, China and Latin America.
Nevertheless, on the gaming side, in-app purchases of virtual goods like game gold represent the most popular type of game monetization.
So that’s some summary information on how apps MAKE money. On the investment side, there is naturally a big range of monthly marketing support levels for apps. About half our marketers said that their average monthly marketing investment per app is $25,000 or less. About a quarter reported spending between 25,000 and 100,000, and another quarter say they average more than $100,000 in monthly spending per app.
To download the complete report in PDF Form, click here.