The proliferation of mobile devices globally has changed the way consumers shop, both offline and online. No longer are brick-and-mortar shops the first point of contact in a shopper’s purchase cycle. They’re increasingly using mobile sites and dedicated apps to make better, more informed purchases. So the question remains – how can publishers and app developers capitalize on this opportunity?
One thing is for certain; in-app purchases can be a developer’s proven route to monetization. According to Business Insider’s Analysis of App Store Data, 93 percent of the top 100 grossing iPhone apps use in-app commerce. Of those 100 grossing apps, two-thirds are free-to-download apps. High-level or power users of apps are typically the ones making the majority of in-app purchases. And the more frequently and consistently these power users interact with an app (upwards of 10 app sessions), the more likely they are to make an in-app purchase. Take for example the largest Internet retailer, Amazon. It recently added in-app purchases as part of its larger mobile advertising strategy. This new feature will use Amazon’s one-click purchasing, letting consumers buy an item without having to exit the application they’re using. Keen to deliver more content for its Kindle Fire tablet (and compete with Apple’s iPad), each movie and book download made within the app will help Amazon make substantial revenue gains.
Another example of the monetization potential of in-app purchases is the Magic Piano by Smule app. It was first developed specifically for iPads as a pay-to-download app that costs $2.99. Months later, the iOS developer released a version for the iPhone, which was free-to-download and offered a few songs at the start. To ensure the app delivered consistent streams of mobile revenue, the iOS developer released additional songs every Wednesday from popular artists like Lady Gaga, Jason Mraz and Britney Spears – available as an in-app purchase using a special type of currency called Smoola. These Smoolas are sold in packs of 160, starting at $1.99, and tracks cost anywhere between 25 and 75 Smoolas each. We’ve already seen these types of in-app purchases prove to be huge revenue drivers for game makers like Zynga. Clearly, there is a very compelling business case for why more app developers should leverage in-app purchases to earn revenue from consumers.
Did you know that one in six Smartphone users in Europe access online retail sites and apps on their mobile devices? To top it off, one in eight Smartphone users in the EU5 countries actually completed a retail transaction on their phones, according to comScore. Recently, British supermarket chain Sainsbury’s put its mobile commerce strategy into motion with the launch of a mobile-optimized site that lets shoppers choose from over 200,000 grocery items to purchase using their phones. The newly launched mobile site was designed with a very specific goal in mind – to make customers’ lives easier and deliver a rich, useful shopping experience no matter where customers are when they decide to do grocery shopping. Given Forrester Research’s European Mobile Commerce Forecast, citing that mobile spending across Europe will grow to a whopping €19.2 billion (or 6.8% of online sales) in 2017, the potential to generate revenue from mobile site purchases is one that publishers cannot afford to ignore.
Clearly, the remarkable growth of apps and mobile sites has generated a number of different revenue models for publishers and app developers. But should we be worried that the success of gaming apps like Words With Friends and Draw Something (thanks to in-app purchases) is fleeting? What types of innovation are needed for publishers to monetize traffic on their mobile sites?