In-app Purchases Outstrip Ad Revenue on Apple’s iOS

Flurry Advertising Revenue Shift iOS

Flurry Advertising Revenue Shift iOS

Flurry, the mobile app analytics company, has released figures that show that Advertisement Revenue is now the poor cousin of in-app purchases (virtual goods) on the iOS platform. Their survey was apparently conducted using data collected from a cross section of leading social networking and social gaming apps for iPhone, iPad and the iPod Touch.

Breaking down the information that Flurry have provided in graph form it is clear that up until the end of 2009 mobile ad revenue was the main cash cow for these social apps. From January 2010 onwards, revenue from Virtual Goods purchases have grown extremely rapidly, equalling ad revenue in one month, quadrupling it the next, and growing to almost 9 times that of ad revenue from there on in.

The phrase “Better the Devil you know” keeps popping into my head for some reason.

It’s certainly a very striking change in where cash flow is coming from for this particular sub section of apps. I think the staggering nature of the figures should be tempered to some degree by an awareness of the kind of apps this is happening in, and the comparative transaction value of individual ad clicks against that of your typical downloadable or unlock-able content. A player would probably have to click on 10 or more apps to equal a $1 dollar virtual purchase, for example.

Nonetheless, income from virtual goods is a proven model, which already works very well on social networking sites like Facebook and home console services too. So downloadable content was always going to outstrip ad revenue once it established itself as a medium in the App Store.

Flurry conclude that advertising is also falling further behind virtual sales as advertisers are slow to adopt mobile advertising as a strategy. And they expect advertising to have something of a resurgence over time. But even with Apple’s own premium iAd service it is unlikely that ad revenue will reach the levels that downloadable content has.

One thing is for sure: Mobile games that require a drip feed from your credit card are here to stay. So, expect more and more lightweight games to choose from as software companies try to pump out apps as quickly as possible that will hook players into downloading content. Those that don’t keep players hooked will get dropped by the way side pretty quick.

Is this a healthy trend for a gaming market that already pumps out bargain bucket apps with an average lifetime of 2 launches and 8 minutes play time? Have your say in the comments.

[Flurry]

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