Can mobile developers really make money from in-app billing?

Bango is a mobile company that pursues two main activities: mobile billing and mobile analytics. It powers a lot of the systems which allow developers to earn revenue from sales relating to apps and mobile content. Which makes it very handy when Bango wants to publish analytics about mobile payments – which is what it has released today. The company claims that in-app billing has been a very small source of revenue for developers this year.

What’s the story?

Mobile applications are never free. At some point, someone has to pay the developer. One method for developers to get money is “in-app billing”  – which gets your users to make tiny payments from inside your app, to unlock content or additional features. Usually, applications that use in-app payments are offered for free on initial download, and have a lot of features that can be used without paying. It’s the “premium” functions you have to pay for.

Today, Bango has said that less than 5% of the money it has seen flowing through it’s systems from mobile applications have been from in-app channels.

What we think?

“In-app billing” is one of the answers to the question “how do we get people to pay for things?” Thanks to the proliferation of free content on-line, people tend to expect things for free on mobile as well. Asking people to pay for an application often just drives them away. Actually earning money from your applications can be as hard as hell, and no definite solution has been found yet. For free apps that see a huge number of downloads, advertising will do the trick. Take the example of Rovio‘s Angry Birds – the massively popular iPhone and Android game is free to download, and is currently pulling in approx. $1 million in advertising revenue every month. But that’s a rare example. For other apps, you need to have multiple revenue streams, in the hopes that one of them will work. In-app billing has always seemed like a winning solution – if you actually hook someone into a decent app/game/service/what-have-you, then you actually have a platform from which to convince to part with a few shekels on a semi-regular basis. It’s unfortunate, then, that Bango’s release today seems to show that users don’t really use the option much.

But Bango still has faith in in-app billing – it cites several problems that currently exist with in-app payments that are starting to ease, in particular that many app stores didn’t support the function. Indeed, Bango is predicting something of an explosion in revenue from this channel: it says that use of in-app will grow 600% in 2011 to account for almost one third of all mobile app payments. I hope that it’s right. An over-reliance on mobile advertising revenue just doesn’t seem like a healthy app economy to me.  I’m not claiming that a system based on micro-payments from loyal customers is any more robust – both of them are completely reliant on the number of people who are regularly using your application. But having both systems in place could offer a developer a slightly less ephemeral revenue source.