Mobile advertising has long been sought to monetize mobile applications that are offered free to users, but a new study by analytics firm Flurry indicates a better option might be the addition of virtual goods.
According to the data, mobile virtual goods accounted for 80 percent of revenue from iOS apps in September, far outpacing advertising. In fact, January, 2010 was the last month that advertising revenue was greater than virtual goods. Since then, it’s been nothing but micro-transactions of toys, coins, weapons and levels, just to name a few. Flurry conducted the research using data from social networks and social gaming applications with a combined reach of 2.2 million daily active users.
Virtual good and social gaming in general have gotten wildly popular lately, with sales of virtual goods already representing the primary source of revenue for social gaming on Facebook. Michael Pachter, Wedbush Morgan Securities video game analyst, reports that social gaming has grown from approximately $600 million in 2008 to $1 billion in 2009. Further, he forecasts that social gaming will generate nearly $1.6 billion this year, and grow to more than $4 billion by 2013.
Users respond better to virtual good offers over advertising because its directly relevant to what they’re doing inside the app. Still, it’s surprising that it generates such a substantial amount of revenue over mobile advertising. I wonder when we’ll see a combination of the two?