Why Most Apps Are Free And Likely To Remain So

The Flurry Blog’s Mary Ellen Gordon, PhD, says many consumer surveys point to an obvious conclusion: most people hate seeing ads on smartphones and tablets. But the truth isMay observes, that contrary to the desire for an ad-free experience, when faced with the choice between free apps with ads, or paying even $.99 for apps without ads, consumers overwhelmingly choose the free apps and tolerate the ads.

Dr. Gordon has explored that revealed preference for free content over content free of ads by examining four years worth of pricing information for the nearly 350,000 apps that use Flurry Analytics, and notes that if you truly can’t stand to see ads in apps, you can usually pay $.99 or $1.99 to eliminate the ads, and possibly get some additional functionality too, but in real world practice – most people don’t, however much they may declare themselves to be anti-ad. She points out that between 2010 and 2012 the percentage of apps on Apple’s App Store using Flurry Analytics that were free varied between 80% and 84%, but by 2013, 90% of apps in use were free. Ergo: people want free content more than they want to avoid ads or to have the absolute highest quality content possible, and Android users tend to be less affluent and less willing to pay for things than iOS users.

Dr. Gordon reports that as of April 2013, the average price paid for Android apps was significantly less than for iPhone and iPad apps, suggesting that Android users want app content to be free even more than iOS device users do, and implying that Android users are more tolerant of in-app advertising to subsidize the cost of developing apps. Another finding is that iPad users tend to be bigger spenders than owners of other devices, including iPhone, with the average price of iPad apps in use as of April 2013 being more than 2.5 times that of iPhone apps and more than 8 times that of Android apps, which she says is likely to be at least partly attributable to average iPad owners having higher incomes than owners of other devices.

She concludes that while consumers may not like in-app advertising, their behavior makes it clear that they’re willing to accept it in exchange for free content, just as we have in broadcast radio, TV and online for decades. Consequently she contends that the conversation about whether apps should have ads is largely over, and while developers of some specialized apps may be able to monetize through paid downloads, and game apps sometimes generate significant revenue through in-app purchases, with consumers are unwilling to pay for most apps, and most app developers needing to make money somehow, it seems clear that ads in apps are a sure thing for the foreseeable future, and that its time to shift the conversation away from whether there should be ads in apps at all, and instead determine how to make ads in apps as interesting and relevant as possible for consumers, and as efficient and effective as possible for advertisers and developers.

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