Conventional wisdom in the mobile development industry holds that the best way to make money is to offer apps for free while accepting in-app payment for add-ons and extras. After all, a number of reports from Distimo and others have indicated that the in-app model is the most lucrative.
However, Raúl Castañón-Martínez, an analyst from Yankee Group, says that his company's more comprehensive research points in a different direction. They found that in-app purchases generate only a third as much revenue as paid app purchases. Other key takeaways from the report include the following:
- "Two out of three smartphone owners in the U.S. never spend money on app stores."
- "Only 12.5 percent of users who download only free apps will spend money on in-app purchases."
- "Eighty-three percent of users that download paid apps will also spend money on in-app purchases."