Q1 2025 Digital Market Index: The Digital Economy Starts 2025 with Strong Growth Across Advertising and Mobile

Coming off a strong year in 2024, including an all-time high $150 billion spent on mobile apps, the digital economy continued to soar into early 2025 across mobile apps and digital advertising. AI continued to provide a nice boost to the non-gaming space, and even the mobile game market maintained positive (albeit modest) growth. Sensor Tower’s latest Digital Market Index report captures recent developments across mobile app performance, digital advertising, and retail media.

Mobile apps maintained strong growth into Q1 2025, with global in-app purchase (IAP) revenue across iOS and Google Play reaching $40 billion for the first time (+11% year-over-year). United States digital ad spend across mobile, desktop, and OTT also achieved double-digit YoY growth. US ad spend reached $31 billion in Q1 2025 (+12% YoY) with 3.9 trillion impressions.

Mobile IAP Revenue Hit $40 Billion in Q1 2025

Quarterly global IAP revenue across iOS and Google Play climbed 11% year-over-year (YoY) to reach $40 billion in Q1 2025, a new all-time high for a quarter. This was the sixth straight quarter that IAP revenue climbed by at least 10% YoY as mobile continued to take a larger share of consumers' wallets. Mobile IAP revenue has doubled since Q1 2019 when consumers spent $20 billion.

Non-game apps continued to drive the majority of this growth, boosted by emerging subgenres like generative AI and short drama. IAP revenue in non-games reached $19.4 billion (+24% YoY). At this rate, app revenue is on track to overtake game revenue before the end of this year. This is a truly remarkable shift over the past five years — in 2020, consumers spent 2.5X in mobile games than they did in apps.

Games still led non-games in terms of IAP revenue, though the gap is closing fast. Consumers spent $20.6 billion on IAPs in games (+1% YoY), a slight slowdown from the 2 to 5% YoY growth seen in recent quarters. Japan’s mobile game market showed signs of bouncing back after several years of decline with 9% growth YoY, helping to offset a drop off in markets like South Korea. Meanwhile, mobile game IAP revenue fell 3% YoY in the US. This followed up several quarters of strong growth in the market, so it is yet to be seen if this is just a one time setback or the start of a longer-term trend.

ChatGPT Approaches the Top Five Apps by IAP Revenue

TikTok held the top spot by IAP revenue in Q1 2025 as the top five apps were unchanged from the prior quarter. Meanwhile, the demand for generative AI is clearly still building as we enter 2025. ChatGPT has skyrocketed up the top charts by in-app purchase revenue, ranking just outside the top five at #6 in Q1 2025. Consumers spent more than $330 million on ChatGPT's in-app subscription, nearly 50% growth over Q4 2024. 

Short drama is another subgenre that has quickly gained traction over the past year. Four of the top 10 apps by quarter-over-quarter (QoQ) IAP revenue growth were short drama apps with DramaBox and ReelShort leading the way for the subgenre. Many of these apps are continuing their global expansion, adding new markets after launching in a few key countries like the United States. New apps are vying for the short drama market as well, with Dramawave ranking as the #4 app by QoQ download growth.

Turning to downloads, TikTok regained the lead globally after Instagram held the top spot for back-to-back quarters to close out 2024. The two apps have been neck-and-neck for the past three years, with each taking the top spot six of the past 12 quarters.

ChatGPT moved up two spots to rank at #3 by downloads in Q1 2025. Productivity app downloads climbed 23% YoY in Q1 2025, largely due to the continued rise of generative AI, including several new competitors making a splash like DeepSeek and Grok. Top apps (excluding games) by download growth over the past four quarters (compared to the prior four quarters) included ChatGPT (#1 by growth), Google Gemini (#4), DeepSeek (#6), and Doubao (#8).

The Digital Advertising Market Keeps Building Momentum into 2025

Digital ad spend in the United States across mobile, desktop, and OTT reached $31 billion in Q1 2025 with a record-high 3.9 trillion impressions. The digital ad market shows no signs of slowing down as both spend and impressions achieved more than 10% growth YoY. Video ads in particular provided growth in the US in Q1 2025 — many of the fastest growing ad channels in the US rely entirely or heavily on video ads, including OTT, YouTube, and Desktop Video. Overall, US ad spend on video formats (including story and reel posts) climbed 18% YoY, compared to a 6% decline in ad spend for other formats.

Ad spend growth was particularly high in European markets like France (+17% YoY), Italy (+16%), Spain (+16%), and the UK (+15%). The digital ad market also displayed strong growth in top APAC markets like South Korea and Japan.

Please note that the included ad channels vary by market. And keep an eye out for new ad channels becoming available in your markets of interest – several new ad channels have been recently released that are not yet in this report, including TikTok and YouTube in South Korea and LINE in Japan. These are available for Sensor Tower customers here or you can request a demo here.

Want More Insights on the Digital Economy? Read the Full Report

Read the Q1 2025 Digital Market Index report highlighting the market leaders in mobile and digital advertising, spanning 21 markets in a dynamic, interactive format covering:

• Top Markets - The United States remained the top market on mobile with a record $13.7B IAP revenue while Japan and Europe provided the fastest growth

• Top Categories - Consumer demand for AI helped boost categories like Productivity and Photo & Video which achieved 45% and 40% YoY growth, respectively

• Top Games - Top mobile games point to a market that is more challenging than ever for new titles to break through – though recent launches like Pokémon TCG Pocket show that it can be done

• Digital Advertising - Social channels accounted for more than 75% of US digital ad spend in Q1 while OTT provided higher growth

• Retail Media - US retail media ad impressions climbed 31% YoY to surpass 56 billion across top retailers like Walmart and Chewy