Are paid apps so last year? A look back at app trends that dominated mobile in 2010.

Before 2010 becomes a dream of the past and the memories fade to indistinct nostalgia, it ‘s time to take a step back and review the year in apps.  By taking a look at the trends that prevailed last year, we can better understand today’s mobile marketing climate.  Fortunately, app store analytics group Distimo released a timely report on the year in review (or the apps that dominated it, anyway).  By examining this data and, moreover, what it means in the context of mobile marketing, we can glean a better understanding of the state of the industry, and what shifts marketers should expect to see in the coming year.

The Distimo report covers a lot of points relevant to the growth, expansion and diversification of app stores over the last year, but we’re going to focus on just a few that are particularly critical to the future of mobile marketing.  One such trend, a focal point of the report, is the growth of free apps across all platforms over the last year.  Correspondingly, the data indicates that there was a significant decline in the number of paid apps released from June to December.  Additionally, the average price of paid apps in each major app store dropped in 2010. And, perhaps most tellingly—mobile users downloaded almost 10 times more free apps than paid apps in December.

On the surface, this might seem like bad news for marketers and
developers, since it’s intuitive to assume that apps generate revenue through paid downloads.  But to truly understand how the app revenue model is evolving, it’s necessary to examine the figures more closely.  Although revenue may be declining from paid app downloads, Distimo reports that the revenue share from in-app purchasing has doubled on both of the iOS platforms, the iPhone and the iPad.  This type of spending originated in games like FarmVille, which required users to purchase ‘game credits’ in order to advance.  ‘Credits’ like these, which have no real, tangible value, have generated a surprising volume of profit for game developers like Zynga.  But applying this model to apps other than games may prove to be a bit trickier.

One great way to take advantage of the in-app purchase model is through subscriptions.  Though this development model is best suited for apps through which content is regularly distributed, like magazine or periodical apps (the iNewpaper model), we expect to see more brands and developers trial in-app purchases this year—who knows, maybe we’ll even be one of them!

Another significant trend the study highlighted was a shift in the growth of certain categories within each app market last year.  Apple’s App store, which is currently the largest and most expansive, seems to have matured and diversified a great deal over the last year.  While gaming apps such as the Angry Birds series still topped the charts, categories including Business, Medical and Finance added the most new apps, with an average growth rate of 162%.

Android’s App Marketplace, which is still relatively young, saw explosive growth over the last year, but the categories that led this upswing—Comics, Sports and Card/Casino—are all entertainment-centric, suggesting that the platform still has some room to grow.  It seems that Android Smartphones have become today’s ‘no work, all play’ devices, but that’s probably just a phase for the platform, which is still evolving in some critical ways.  Over the next year, we expect to see the App Marketplace diversify, much as the App Store has, adding more and more business, productivity and reference apps. This presents a huge opportunity for marketers and developers who can take advantage of growing categories before they become overcrowded.

Lastly, we were very intrigued by the data that Distimo collected on paid apps that topped the charts in Windows Marketplace for Windows Phone 7, which were all games.  This trend was a surprise, given that Microsoft is (excluding the Xbox) known more for its enterprise software than as a gaming platform.  Keep in mind, however, that their latest mobile device, Windows Phone 7, was not released until late in the year, so this data may be merely a snapshot of a quickly evolving marketplace.  We predict that the Windows Marketplace will be another one to watch in 2010, as the platform matures.

With all of these app markets growing and evolving in 2011, it will be an interesting and exciting year for mobile marketers.  There have never been so many opportunities to take advantage of it all, and with app beginning to mature into powerful enterprise business and productivity tools, it’s definitely the right time for brands to expand into the mobile space.