App revenue per device will grow by 2.5 times by 2018, with freemium apps and in-app advertising driving most of the growth, a new report from App Annie and IDC is projecting.
In-app ads will grow by a factor of 3 by 2018, and sales in Apple and Google’s app stores will double for the 10 countries covered by the report, titled “Mobile App Advertising and Monetization Trends 2013-2018: Freemium and In-App Ads Expand Their Lead.”
The report also said that mobile app revenues are beginning to displace other forms of monetization, including mobile browser and PC-based advertising.
“We’re really starting to see publishers hit their stride, with mobile in-app revenue growing 1.7 times last year,” said App Annie CEO Bertrand Schmitt in a prepared statement. “The continued innovation in mobile apps, monetization models and mobile advertising have driven significant growth in freemium and in-app advertising revenues. The space has matured significantly and publishers have the required ‘know-how’ to monetize off the significant app usage they’re generating.”
A key growth trend is freemium apps, which users can download free but include in-app purchases. Freemium app revenues grew by more than 70 percent from 2013 to 2014, while paid apps fell by 19 percent, and paid apps with in-app purchases fell by 24 percent.
Mobile in-app advertising revenue also rose by 70 percent, thanks to a 40 percent climb in the number of devices and a 20 percent increase in ad revenue per device. By 2018, in-app advertising revenue will be greater than spending on online search advertising in the 10 countries measured by the survey.
And the mix between app-store revenue and in-app advertising varies widely across those 10 markets, too. App-store revenue was only 30 percent of the mix in India, with the rest coming from advertising, followed (in increasing order) by the U.K. (32 percent), the U.S. (37 percent), Canada (53 percent), Brazil (55 percent), France (61 percent), South Korea (66 percent), Germany (68 percent), Russia (77 percent) and Japan (81 percent).
The U.S. is by far the largest market for mobile app revenue, followed by Japan, the U.K., South Korea, Canada, Germany, France, Russia, Brazil and India.
The one thing that could slow the growth of mobile app revenue would be a decline in app usage — but that looks highly unlikely. A separate report in January by Flurry Analytics showed app usage rising by an average of 76 percent from 2013 to 2014, with the “lifestyle and shopping” app category climbing by 174 percent.