Smartphone In-App Transactions on the Rise

In-app spending climbed last year despite a general unwillingness to pay for apps by most smartphone owners, finds Gartner.

Most smartphone users don't pay for apps, technology analyst firm Gartner discovered in its latest analysis of the mobile app market. Yet when they do, they're spending more than in years past.

Gartner quizzed 3,000 consumers in the U.S., the U.K. and China on their mobile app habits. More than half admitted to not spending any money on mobile apps. Despite this, the firm found that there's still plenty of opportunity for developers to monetize their creations. On average, spending on in-app transactions reached $11.59 and $7.67 for paid-for downloads last year.

"Where users are prepared to pay for apps, spending on in-app transactions is on the rise — up 26 percent from 2015 — while spending on paid-for downloads only increased 4 percent in 2016," noted Gartner research director Stéphanie Baghdassarian in a statement.

Users generally spend less on paid-for downloads, the type that charge users upfront as the price of entry. Among those who pay $15 or more on apps within three months are likelier to rack up those expenses in in-app purchases. These dynamics, explained Baghdassarian, are playing out "because the vast majority of paid-for mobile apps have a price tag of $1.99 or less, while the activation of in-app transactions usually means that the user has found value in an app and will be happy to spend more on it."

Older millennials (25- to 34-year-olds) spend the most on apps, an average of $19 on in-app purchases and $13.40 in paid downloads each quarter, followed by younger Gen Xers (35- to 44-year-olds). In the meantime, younger millennials (18- to 24-year-olds) are starting to exercise their growing purchasing power.

"The 18-to-24 age segment shows low average spending on paid-for downloads and high average spending on in-app transactions, at $3.80 against $12.10," Baghdassarian said. "This trend is likely to continue as these young millennials grow older."

Last year, the App Annie mobile app data report predicted that mobile app store revenue would reach $101 billion in 2020, nearly double the $51 billion forecast for 2016. On a per-device basis, app spending will reach $16.22 in 2020 from $15.42 in 2015.

"Mobile apps have already dwarfed previous computing revolutions and we can look forward to even more growth ahead for the app economy," concluded the report's authors.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.

Tags: smartphone, Apps Marketplace, Mobile Analytics

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