App Annie 2013 Index Flags Up Freemium’s Onward March & Why Many Devs Still Go iOS First

Mobile app analytics firm App Annie has put out a retrospective report on app trends in 2013 and there are few interesting tidbits worth flagging for developers. Notably the continued dominance of the freemium business model — especially for games.

App Annie’s data shows that games apps with freemium business models took 93% of games app revenue in 2013, up from 86% in 2012.

At the same time freemium expanded in the non-games app category, to account for a majority of the revenue generated. The data shows apps excluding games that use in-app purchase took 57% of indexed revenue last year vs 46% in 2012.

This tallies with an app-related forecast put out earlier this year by analyst Gartner, also tracking the rise of freemium. It’s expecting 94.5% of app downloads to be free by 2017, as developers shift away from paid downloads to IAP and other methods to monetize their apps.

Outside games, App Annie said the freemium business model is becoming prevalent in categories such as messaging, music, news and dating.

In the messaging space, a good example of a company making freemium work for it is Line — which has built a multi-million dollar business off of selling in-app purchases (such as IAP for games and paid stickers) to its community of free messaging users.

App Annie ranks Line as the top app using IAP in the messaging category by combined iOS and Google Play store revenue, with Skype in second place. Line’s camera app also makes a showing in the top socially-focused video & camera apps by download.

App Annie

In the music streaming category Pandora Radio takes first, followed by Rdio; in games it’s Puzzle and Dragons followed by Candy Crush Saga; and in dating it’s Zoosk followed by Badoo.

On the messaging front, App Annie’s data shines a little more light on where in the world particular messaging apps are most popular — at least in terms of combined revenue.

We’ve previously noted how much geographical variation there can to be in the messaging category — even though WhatsApp continues to dominate multiple markets. App Annie’s data for 2013 shows WhatsApp generating the most revenue in multiple markets, especially in Europe, although Skype also takes quite a big share in the region.

Meanwhile Line, which started out in Japan, is shown to have built up considerable strength in Asia, fending off the challenge from KakaoTalk and China’s WeChat (for now).

App Annie messaging

The report notes: “Social messaging apps created solid revenue streams in 2013, with many adding gaming to their platforms and using freemium models and emoticon stickers to incentivize in-app purchases.”

It goes on to point out the continued evolution of messaging apps into platforms in their own right. “These platforms are still expanding, with some incorporating music, books, and e-commerce functionalities,” it adds.

Related: earlier this month KakoTalk said it was looking at adding a news content service to its messaging platform, which reports some 130M registered users in its home market of South Korea.

The majority of the big messaging players are pursuing freemium business models as a strategy to build large enough user-bases so they can monetize via IAP or other routes. Veteran player WhatsApp continues to be the exception that proves the rule (perhaps because it’s been around long enough and has a dedicated enough user-base to support a yearly subscription model and ad-free stance).

Moving on, App Annie’s report also notes a big rise in music app revenues for 2013, saying they shot up by more than 75% between 2012 and 2013 — led by usage of Pandora in the U.S.

Most of the top 10 apps by revenue in the music category included music streaming or music creation, according to the data.

Also notable: the relative proportion of revenues being generated on iOS vs Google Play:

App Annie

The report shows iOS maintaining its app monetization edge over Google Play in 2013, despite Play overtaking Apple’s platform for app downloads.

iOS generated more than 2x the yearly app revenue of Google Play, according to the data. This underlines why so many developers continue to build apps for iOS as a first priority, with Android coming after — despite Android’s dominance of global smartphone marketshare. Forget reach; it’s about the revenue, stupid.

App Annie

Despite iOS staying ahead of Play for app revenue generation in 2013, App Annie does note that the gap shrank because of the role played by Japan — which overtook the U.S. to become the number one country for app revenue last year.

The report says Japan’s 3.3x growth was largely driven by games, with Google Play as the primary driver — helping Google’s Play to shrink the monetization gap with Apple’s iOS.

After Japan and the U.S., the next biggest country for app revenue generation was South Korea, followed by the U.K. However App Annie also notes a rise in BRIC countries, with “noticeable” gains in downloads from these countries.

In 2014, App Annie is expecting a strong performance from Hong Kong, Taiwan, Thailand, Mexico, and Indonesia. And Android’s strength vs iOS in those regions is likely to help continue to shrink the monetization gap between Apple’s iOS App Store and Google Play.

App Annie