Emarketer, the well-regarded source of much digital research data, has released data showing that in-app purchases (typically for virtual goods) in mobile apps are growing as a revenue source, and that advertising, due to Covid is shrinking. The mobile app economy has been dominated by in-app purchases since the advent of the smartphone, particularly due to the presence of extensive in-app purchases items in mobile gaming apps. In non-gaming apps there is rising revenue driven by content subscriptions.

Sensor Tower, a well-known data analytics firm in the mobile app arena, according to eMarketer, estimated that global app revenues from in-app purchases rose by 23.4% year-over-year in the first half of 2020 and $36.6 billion came from within games, an increase of more than 20% YOY.

It is has been observed in the recent past that increasingly hybrid monetization models are becoming popular. Such models are a combination of in-app purchases and advertising, which are especially prevalent in mobile gaming. Many game developers and game publishers are buying cost-per-install based advertising to acquire their users by advertising on mobile game apps similar to their own.

I believe that the advertising revenue model will continue to increase for mobile games, in part due to the big demand for mobile advertising inventory by those advertisers wanting to convey their messages to consumers across mobile platforms. But for the short-term it appears that the growth of advertising in mobile apps is slowing.

According to AppsFlyer, a mobile analytics company, the share of games using a hybrid model dropped 8% between Q2 2019 and Q2 2020. For casual and midcore games the revenue coming from advertising fell 30% YOY. As eMarketer said, “In absolute terms, ad revenues did well in these hybrid games, rising by 47%, but IAP revenues jumped by 130%.” According to AppsFlyer “Users were far more engaged with games during lockdown, and along with the effects of our ‘new normal,’ users have become less tolerant of ads,” said Shani Rosenfelder, Head of Content and Mobile Insights at AppsFlyer.

Speaking about subscription revenue, eMarketer quoted Ted Krantz, CEO of App Annie, another mobile analytics firm, asking a big question: “How many subscriptions will a particular consumer actually,” pay for.