In-App Revenue Growth Forecast: Up 600% in 2011

In-app purchases, in-app billing, and virtual goods are emerging as new, and potentially more profitable, means of generating revenue for mobile application developers and publishers. A report from October, for instance, found that within social networking applications and games, in-app purchases have actually taken over as the leading source of revenue.

That trend will continue in 2011, says mobile billing and analytics firm Bango. According to its recently released forecast, in-app purchases will grow over 600% next year.

In 2011, the use of in-app charging will grow more than 600% to account for nearly 30% of all mobile app payments, states Bango on its company blog. The company says it arrived at these numbers based on end-of-year trends from leading developers in games, music and broadcasting segments.

As with the prior report (October’s report was from analytics firm Flurry, not Bango), it seems that in-app purchases are growing within a segment of application categories. Perhaps that list is slowly expanding beyond games, but it’s still not accounting for all the application types just yet.

Where Do In-App Purchases Make Sense?

Bango says it’s working with music and print publishers to move beyond subscription-based paywalls to implement new ways to charge. Instead of regular (monthly, weekly, etc.) fees, developers are exploring other options like charging per play (music), per video or even per-page (publishing).

In some cases, in-app purchases make a lot of sense – virtual goods within games, for example, as we’ve already seen. Case in point: Farmville’s Director of Mobile, Jen Herman, told the crowd at this year’s Open Mobile Summit that 90% of Farmville’s revenue is generated from in-app purchases.

But Bango also highlighted another good example: one its clients, a greeting card app, offers the app download for free, but sending photo postcards from within the app is only available for a fee.

In addition, says Bango, “developers and publishers who monetize regular use of the app – streamed video and audio, games, news and alerts – will most readily capitalize on in-app payment features.”

This year, Bango only saw less than 5% of payments billed though its mobile payments system as being of the “in-app” variety, but this was more due to technical limitations on the part of app stores, it says. As stores ramp up their offerings on this front, we’ve been watching firms like Boku, Zong, and others develop in-app billing services of their own. Many of these programs are still in beta (update: Zong has just emerged from beta today!), but it’s likely that next year, as these services are opened up to a wider audience of developers, we’ll quickly see the impact of in-app purchases on monetization efforts. Until then, developers have plenty of other methods to consider, including advertising and paid applications, and even “mobile wallet” solutions like Sprint’s, which lets users pay for both physical and virtual goods via their phones.

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