App monetization continued to improve on the U.S. App Store last year as seen in the ratio of revenue to downloads. According to Sensor Tower's Store Intelligence data, the U.S. App Store generated approximately $7.6 billion gross revenue compared to 5.4 billion app downloads in 2016, yielding a revenue-to-download ratio of $1.41 to every one download. This ratio increased by 38 percent from $1.02 to one download in 2015.
In this report, we'll examine how revenue-to-download ratio has grown since early 2016 on the U.S. App Store. We'll also explore 2016's leading categories in terms of revenue-to-download ratio, along with their year-over-year growth.
The revenue-to-download ratio is a leading indicator of the direction of monetization on the U.S. App Store. This ratio is based on the amount of total money spent on paid apps or in-app purchases during a specific period of time compared to the number of app downloads from the store throughout that same period. It is different from revenue per user or the revenue one download generates for a publisher over time.
Although this measure is not indicative of individual user spending in each downloaded app over time, it nevertheless serves as a proxy for the overall health and growth of the App Store.
The chart above presents an upward trajectory since 2016 for the monthly gross-revenue-to-download ratio. Specifically, in January 2017, the App Store generated an average of $1.53 for every download, a 31 percent increase year-over-year from $1.17. In February, the year-over-year growth was 27 percent, increasing to $1.69 from $1.33 in 2015.
We also analyzed how the App Store monetizes in general on a per-category basis. The chart below shows last year's top 10 categories by average gross-revenue-to-download ratio and their year-over-year change.
In 2016, the Games, Music, Entertainment, Social Networking, News, Lifestyle, Health & Fitness, Sports, Education, and Medical categories yielded the highest revenue-to-download ratio, all averaging more than 60 cents for every download.
Seven out of the top 10 categories grew their average revenue-to-download ratio year-over-year, led by Games, Music, and Entertainment, with $3.02, $2.01, and $1.14 for every download, respectively.
While Games continued to lead and improve in-app monetization, up by 35 percent from 2015's figure, it was Lifestyle and Entertainment apps that experienced the most drastic gains year-over-year. Specifically, average gross-revenue-to-download ratio for Lifestyle grew 242 percent, up from $0.19 in 2015 to $0.65 for every download in 2016. For Entertainment, that ratio grew 159 percent from $0.44 to $1.14 for every download.
Revenue growth of dating apps such as Tinder and Bumble contributed to a large portion of the Lifestyle category's growth. Bumble didn't begin monetizing until August 2016, and since then has generated over $8 million of gross revenue on the U.S. App Store.
For the Entertainment category, a significant portion of its growth can be attributed to Netflix's revenue growth in 2016. Netflx began monetizing through App Store subscriptions in Q4 2015, earning approximately $7.9 million in gross revenue during that period; in Q4 2016, that amount grew to more than $58 million.
The rest of the top 10 categories showed varying degrees of change over 2015. Three of them—News, Sports, and Medical—even decreased in terms of revenue-to-download ratio. However, thanks to the leading categories' increased success in monetization, the App Store continued growing its average revenue-to-download ratio overall.
In an earlier post, we showed that U.S. iPhone users spent an average of $40 on apps in 2016, up from $35 the year before. This increase in average spend per device mirrored what we found in this report—confirming that, overall, iOS publishers are improving their monetization on the U.S. App Store.
While evergreen categories such as Games and Music continue to generate the highest revenue-to-download ratios overall, the App Store is introducing new ways to help other categories of apps monetize. For example, last June, Apple expanded the availability of in-app subscriptions to all categories of apps. As developers experiment with new revenue models, we will continue to monitor how apps monetize on Apple's platform.
Note: The revenue estimates displayed above are gross amounts spent by consumers on the App Store before Apple's 30 percent cut of revenue has been deducted, and are not inclusive of taxes.