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14 February 2014 01:00p.m.

The Freemium business model prevails in 2013

This is an interesting little set of numbers from the app analytics company Distimo. It appears that the paid apps market is on the verge of disappearing in comparison to the market for free apps that then have in-app purchases. My suspicion is that this is hugely skewed by the way that the mobile games market has taken to the in-app purchase revenue stream but I will admit that this report doesn’t provide the evidence that this is so.

There’s obviously a few caveats to this information: it’s from one company only, surveying the market, rather than a census of the whole thing. It’s also excluding advertising revenues from inside apps. But even given those caveats it’s still interesting information. And do also note that this isn’t the revenue flowing to the app developers: this is the rake off that the app stores themselves get, not what goes to the originators:

"Leaving aside ad revenues earned by app developers and focusing only on revenues to app stores, Distimo found that 98% of Google Play store revenues and 92% of Apple App Store revenues in November 2013 came from free-to-download apps that offered in-app items for purchase. That compared with 89% and 77%, respectively, just 11 months earlier."

Apple is gaining a much larger portion of the total revenues through the Apple App Store than Google is through Play. This is despite Android having a far larger market share than iOS. There are two factors we might think about here, the first being that Apple is very much at the top end of the market. We might expect those who pay more for their hardware to also spend more on the software to run on it. Richer people do tend to spend more overall.

The other is that Google Play isn’t the only place that you can get apps that run on Android. The portion of the US or European markets that are served by alternative sources isn’t all that big: but much greater inroads have been made in, for example, the Chinese market.

So this isn’t quite a direct comparison of Android to iOS revenues, rather of the App Store to Play. But an indication of the way that market is going still, especially the manner in which by far the vast majority of the revenue is coming from in-app purchases, not from the sticker price.