The “Real” Challenges in Android App Monetization

Google’s Android Market has close to 400K+ apps with more than 10 billion downloads to date and growing at 1 billion downloads a month. Even though the number of app downloads is exploding on Android Market, monetization has been challenging.  According to a recent Distimo report, iPhone apps generated 4 times the revenue of Android apps and iPad app generated 2 times the revenue of Android apps in November last year. 

App Revenue (Rajat Garg)

Source: The Distimo Report 2011

One big difference in payment mechanism between Apple App Store and Google Android Market is that Apple requires users to have a credit card on file in order to download any apps (even free) in most markets. Apple enforces users to configure their credit card before they start downloading apps from App Store. However, on Android Market users don’t have to configure their credit card to download free apps. They are prompted to enter credit card details only when they buy a paid app. Therefore, buying a paid app is much simpler one-click user experience on Apple as credit card details are already available at the time of purchase.

Another reason for poor monetization on Android Market is low credit card penetration in emerging markets, where Android is dominant player. According to latest Avendus report, India has abysmal 0.2 payment cards per person as compared to 4.5 in US. There are 18 million active credit cards in circulation and an estimated 8 million unique credit card holders.

India Credi Card (Rajat Garg)

Source: The Avendus Report – India Goes Digital (November 2011)

Since the credit card penetration is so low, Google should look at alternate ways to facilitate payment for Android apps. Carrier billing is one solution and Google has tied up with several mobile operators to help make payment for apps directly though mobile prepaid or postpaid accounts.  However, Google’s carrier billing penetration is quite low as it supports carrier billing in Germany, Italy, Japan, Korea, Spain, UK and US only. Google need to tie up more aggressively with carriers to increase the reach.

There are various companies (such as Boku, Zong, InMobi etc) that have started providing carrier billing options to app developers as 3rd party provider. These companies have much better reach than Google’s carrier billing solution, but apparently Google doesn’t allow developers to integrate 3rd party payment providers while distributing apps through Android Market. This is quite frustrating and it significantly curtails monetization opportunities for developers.

Time is running out for Google and it needs to solve these ecosystem problems soon. The solution may lie in supporting additional payment channels (such as PayPal or Alipay in China), tying-up with carriers aggressively or acquiring a carrier billing company that already has good reach. Whatever is the solution, Google must act fast.

What’s your take?

[Guest article contributed by Rajat Garg. Reproduced from his blog]

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