You built your app, now monetize it with in-app purchases

Mobile app growth is no secret as apps are being downloaded more than ever; a recent TechCrunch article reports that a typical iOS device has downloaded an average of 60 apps per device, up from 10 in 2008. What the article doesn’t say is how many of these apps are free vs. paid or whether or not the app publishers are making money off apps. Yet as businesses look to monetize mobile apps, in-app purchases are becoming increasingly important to their strategy.

Our recent 2010 Mobile App Developers Survey found that an increasing number of app publishers are looking to generate revenue from their app. While in 2010 a full 33% of the developers we surveyed indicated that they weren’t making money off their app, only 13% indicated that their apps wouldn’t provide revenue in 2011. Although a large number of app developers still intend to make money from downloads and advertising revenue, in-app purchases showed the largest jump in importance to developers. The percentage of developers who plan to use in-app purchase as a revenue source will grow from 8% in 2010 to 31% in 2011.

This trend was further backed up this week in an eMarketer article, “In-App Purchases Become Major Mobile Revenue Stream.” This article highlighted the growing importance of in-app purchase to mobile revenue:

    “Within the realm of apps that are directly monetized, whether by paying for the app itself, paying for items within the app, or both, in-app purchases are becoming much more important to developers. They more than doubled their share of iPad app revenues, from 12% to 29%, between June and December 2010. Over the same period in-app purchases on iPhone applications increased from 36% to 49% of revenues—now taking half the market from traditionally paid-for apps.”

If you are evaluating your mobile revenue strategy, whether you have a paid app or are exploring a freemium model, be sure to include in-app purchases in your discussion of how to build a profitable app.