Smartphone App Riches Linked to In-App Purchases

The path to smartphone app riches seems pretty clear. If you don’t possess an in-app purchase strategy, there’s a good chance you’re going to make less money than those who have one.

According to the latest information and analysis provided Tuesday from IHS Screen Digest, the best way to make money in the smartphone apps market is to give the apps away for free-and and then generate revenue on subsequent sales of in-app purchases.

The new projections published today from IHS show that in-app purchases will rise to account for 64 percent of total market revenue in 2015, up from 39 percent in 2011.

Revenue from in-app purchases will increase to $5.6 billion in 2015, up from $970 million in 2011, according to the IHS Screen Digest Mobile Media Intelligence Service.

“Smartphone users overwhelmingly prefer free apps to paid apps, as we estimate 96 percent of all smartphone apps were downloaded for free in 2011,” noted Jack Kent, senior analyst, mobile media for IHS. “In 2012, it will become increasingly difficult for app stores and developers to justify charging an upfront fee for their products when faced with competition from a plethora of free content. Instead, the apps industry must fully embrace the freemium model and monetize content through in-app purchases.”

IHS Screen Digest calculates that 68 percent of the top-grossing U.S. applications featured some form of additional content or functionality available via an in-app purchase.

Do you have as much faith in the business model of in-app purchases as all the analysts and mobile experts do? Please weigh in with a thought or comment below.