The seemingly never-ending growth of the mobile app economy is soaring to new heights.
The latest quarterly report by mobile analytics company App Annie said that Q2 of 2019 was a record-breaker for global app installs and consumer spend. Installs over the two main app stores recorded a year-over-year increase of 7%, totaling $30.3 billion worldwide. Gross consumer spend in Q2 2019 grew as well, increasing 20% from the previous year, with the Apple App Store and Google Play Store generating $22.6 billion in revenue.
As app growth continues at record levels, let’s examine what’s driving that growth.
Downloads and Spend Tell Different Stories for Android and iOS
Though Google Play holds a 185% lead over the App Store for total installs in the second quarter of 2019 (up 15 percentage points from last year), Apple actually brought in 80% more revenue. When you break it down further, you glean some interesting insights into what is actually driving that revenue.
First to consider is the breakdown of total downloads by games versus apps. While apps were the primary source of downloads for each platform, they made up a larger portion of the iOS total (70%) than Android’s (60%). What’s interesting is that apps generated 35% of the App Store’s total revenue compared to only 15% of Android’s total. What does this mean?
Subscription-Based Apps Fuel Revenue Growth in App Stores
In 2018, mobile games generated 74% of both app stores’ combined revenue. This is not a huge surprise given the prevalence of in-app purchases within games. However, with a sizable portion of the App Store’s revenue coming from non-gaming apps, there has to be something else spurring consumer expenditure. So what is it?
According to App Annie, subscription-based apps are the main drivers of app spend – specifically, those in the photo/video and entertainment/music categories. What’s more is users have been spending considerably more time in apps from these categories over the past two years.
As consumers spend more time in apps across the board (50% increase overall) and download more and more of them, companies need a way to differentiate their apps and keep users engaged with them. For many, implementing a subscription model is the way to do so.
Why Subscriptions Are the Way of the Future
The subscription model is by no means a new one, but it has taken on new life in the digital realm. Over the past seven years, revenue for hundreds of subscription companies grew by 321% on average, according to Zuora’s Subscription Economy Index. So what is driving this subscription emergence in mobile apps?
Whether you offer music, video, news, or something completely different, you are not simply selling the content itself, but access to the content. As a result, customers expect premium quality content or access to exclusive features and functionality.
Personalization is increasingly valued by consumers, and many are happy to pay for it on a subscription basis. Whether it’s a curated newsfeed or personal style advice, consumers value a personal touch as well as the time it saves them in the long run.
Is the Subscription Model Right for You?
The subscription model is clearly trending in the right direction, and is bolstered by a 32% year-over-year increase in engagement rate for subscriptions (i.e. percentage of users who go on to subscribe after installing an app). In addition to the monetary benefits that companies are seeing, they have also found subscriptions to enhance brand loyalty and product stickiness.
While it does not fit every organization’s business model, it can be incredibly beneficial in the right situation with the right customer. What will your next move be?