In the golden times of Palm OS and Windows Mobile, mobile apps were expensive. Prices north of 20 USD were not unusual, and users downloaded away happily.

Now, things look different:

“In terms of the apps that consumers are buying, 90 percent of the paid-for downloads cost less than $3 each,” said Sandy Shen, research director at Gartner. “Similar to free apps, lower-priced apps will drive the majority of downloads. Apps between 99 cents and $2.99 will account for 87.5 percent of paid-for downloads in 2012, and 96 percent by 2016.”

In addition to the quotes, Gartner provided the following table:
gartner free download Free apps to make up 90% of downloads

In addition to that, they also provide some interesting insight into Android IAP efficiency and the Chinese software market:

Amazon has appealed to users with its strong brand, global presence and a good selection of high-quality content while Facebook’s recently launched App Center — supporting both mobile devices and desktops — will become a powerful competitor due to its strong brand and leading position in social networking and gaming,” said Ms. Shen. “In China, there is a boom market of independent Android stores, due to the lack of presence of Google Play and ‘weak’ stores from CSPs. We expect to see more new entrants to the market, aiming to deepen relationships with their customers and/or to capture some of this growth market.”

Using an in-app purchase business model is a more effective method of converting casual app users into paying customers and then retaining them with good user experience and continued product updates. This is a different approach from upfront payment where users pay and download, and can be disappointed by the experience and never come back. In-app purchasing opens the door to a recurring revenue stream for developers, but app performance and design will always be the most important factor when attracting new users and keeping them satisfied.

In-app purchases will drive 41 percent of the store revenue in 2016. While the market is moving toward free and low-priced apps, in-app purchases will drive downloads as well as app store revenue. Gartner expects the number of downloads featuring in-app purchase will increase from 5 percent of total downloads in 2011 to 30 percent in 2016, and its contribution to the store revenue will increase from 10 to 41 percent in the same period.

What do you think?

Related posts:

  1. Health and fitness apps to be a $400 million market by 2016
  2. The App market trends are changing, says Distimo
  3. 43% of UK smartphone owners won’t download further apps or games
  4. Ovi Store beats Apple App Store on average downloads per app
  5. Mobile app downloads to reach 98 billion by 2015

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