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Revenues from in-app purchases swelled 32% to almost $30bn for Q3 2020 – and Apple snaffled most of it

Despite Android dwarfing the iPhone ecosystem

Consumer spending within mobile apps surged in the third quarter of 2020, according to a new report from app analytics house Sensor Tower.

App revenues hit $29.3bn in the period, up 32 per cent year-on-year. Roughly two-thirds of all in-app economic activity came from Apple's App Store, with the remaining third belonging to the Google Play Store.

Although iOS occupies a relatively small chunk of the mobile space, its user base tends to be more willing to splash cash on subscriptions and premium services. This trend is demonstrated by a 2019 report, also from Sensor tower, which showed that iOS apps earn 64 per cent more on average than software sold via Google Play.

Still, the latest figures suggest a modest reversal of that trend, with spending on Google Play apps growing at a faster pace than seen in the iOS world – 33.8 per cent versus 31 per cent respectively. While the difference is minor, one could attribute it to Apple's decision to broaden its horizons, incorporating new devices like the mid-tier iPhone SE 2020.

Sensor Tower pointed out that much of that in-app spending – $20.9bn, or nearly two-thirds – comes from mobile gaming, which was itself up 26.7 per cent year-on-year.

Again, gaming revenues are a mirror image of the wider app economy. The majority of spending takes place on iOS, which saw gaming revenues rise 24 per cent from $10bn in Q3 2019 to $12.4bn. Google Play revenues grew faster, however, surging by 30.8 per cent to $8.6bn.

Moreover, iOS customers are willing to spend more on each app. The number of mobile game downloads on the App Store actually declined by 4.2 per cent, dropping from 2.4 billion to 2.3 billion. Compare that to Google Play, where users downloaded 10.9 billion games in Q3 2020, up 36.8 per cent against 8.7 billion in Q3 2019.

The figures highlight a healthy market that benefited from the coronvirus lockdown as people looked for things to while away the time, and opted to entertain themselves on the devices.

However, the app economy faces a two-pronged assault from developers fed up with giving Apple and Google 30 per cent of their revenues, as well as from legislators keen to curb what they perceive as exploitative behaviour in mobile games.

Apple is embroiled in a bitter spat with Epic Games, developer of Fortnite, over its policy on revenue sharing. Apple does not permit developers to process payments using third-party services, like Stripe. Nor should developers circumvent the App Store's payment systems by, for example, telling users to purchase digital items via their website.

This fight has been brutal – Apple yanked Epic Games' products from the App Store then Epic took Apple to court. Apple slapped back here and here.

But while Epic is alone in its aggressive tactics, it's by no means the only developer frustrated by Apple. Both Netflix and Spotify have ceased to allow new users to subscribe via in-app purchases, allowing them to tuck away millions that would have otherwise gone to Cupertino, and plenty of other app makers have joined the fight.

Lawmakers on both sides of the Atlantic have taken aim at so-called "loot boxes", which many regard to be a form of gambling. Loot boxes are paid items in games that, when bought, will "drop" a randomly selected reward. These can be common items, or rare and highly sought-after objects. This uncertainty instils it with the same addictive attributes of a fruit machine.

There's a difference between a fruit machine and a mobile game – the latter is played by and often aimed at children.

In September, Caroline Dinenage, the UK's Minister of State for Digital and Culture, opened a call for evidence on loot boxes. If these are deemed to be as exploitative or harmful as feared, there's a good chance that crushing new rules could be imposed. This would inevitably hit app revenues.

Back to the stats, the non-gaming portion of app sales in Q3 $8.4bn, up by more than 50 per cent.

Non-game revenues came from an eclectic mix of sources. On the iOS App Store, the top-ranking app was TikTok. For the uninitiated, TikTok lets the yoot megafans buy virtual "gifts" for their favourite livestreamers, which can then be redeemed for cash. Trailing were the big-ticket TV subscription services, like YouTube and Disney+, as well as Tinder.

On Google Play, the top grossing app was the Chocolate Factory's homegrown cloud storage service, Google One. The rest were a collection of messaging and entertainment services, with the top-ten list including two manga subscription apps: Piccoma and LIne Manga. ®

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