Tech: iOS app users are spending more (AAPL)

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Apple is getting better at monetizing US App Store customers, as average premium and in-app purchases per device grew to $40 in 2016 from $35 in 2015, according to a report by Sensor Tower.

The news is positive for the iOS app developer community. App monetization across both iOS and Android has been historically difficult for developers. The new data suggests that iOS app users in the US are becoming more comfortable making app and in-app purchases.

Here are the three key takeaways from Sensor Tower’s report:

• Games continued to dominate US App Store revenues. The monetization of mobile games per iPhone remained highest among other app categories and increased to $27 in 2016 from $24 in 2015. More than 80% of App Store revenue was generated from games in 2016.
• Entertainment apps showed incredible YoY growth in revenue. The entertainment app category stood out with 130% YoY growth in revenue per iPhone to $2.30 in 2016 from $1.00 in 2015. The high growth is attributed to high-grossing apps such as Netflix, HBO Now, and Hulu.
• Average app spending increased, despite a declining average number of apps downloaded per device. Though the average number of app downloads per phone decreased to 33 in 2016 from 35 in 2015, average app revenue per iPhone still increased from 2015 to 2016.

The increasing average spend on apps signals Apple’s foresight into the shift to mobile and streaming services. Consumers are clearly watching more content on mobile, which are typically subscription-based apps. In 2016, apps accounted for nearly 60% of total time spent consuming digital media, according to a comScore report. To take advantage of this, Apple announced new revenue splits in June 2016 that aimed to reward app developers that used a subscription-based monetization model, by increasing the share of revenue they receive from 70% to 85%. The new incentive could be behind the growth in subscription app revenue.

App developers long considered the "pay once and play" model — in which users pay up front an app and aren't prompted to make in-app purchases — the best way to generate revenue. But as more "free-to-download" apps entered the market, users increasingly opted for these experiences. These apps offer microtransactions for in-app goods and services, and in-app ads.

As the app ecosystem expands further, it will become increasingly challenging for developers to compete in a crowded market. Overall, global gross app revenue will double to reach $102 billion by 2020, according to recent projections by App Annie. As a result, app monetization strategies need to shift at least as quickly as consumer trends and preferences in order for developers to capture a piece of this growing market.

Laurie Beaver, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on app monetization that explores the top app monetization strategies under user- and advertising-paid approaches, and the growing combination of both. We will also look at emerging trends that could help developers navigate the fiercely competitive app ecosystem, and address the potential barriers that developers will have to overcome to reap the benefits of the multi-billion dollar market.

Here are some of the key takeaways:

• The app ecosystem is expanding quickly, and it's becoming increasingly challenging for app developers to compete in a crowded market.
• To capture a piece of the growing market, app developers must adapt their strategies at least as quickly as consumer trends and preferences change.
• Developers can choose a user-paid or an advertising-paid approach to monetizing their apps. Different monetization strategies work best with different apps.
• There are a number of widespread challenges that developers must contend with both before and after they enter the app market.

In full, the report:

• Provides key factors driving the expected growth of global app revenue
• Evaluates the top app monetization strategies
• Looks at emerging trends to help developers navigate the app ecosystem
• Explains the challenges that developers face to compete in the app market
• And much more

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