Despite high downloads, mobile apps struggle to make money in India

InMobi surveyed 1,000 smartphone gamers and was surprised to find that 74 per cent preferred to watch an ad for progressing within the game rather than make app payments

Consider this contradiction. Indian consumers are lapping up mobile apps like never before — helping the country rank high in the global pecking order both for new downloads and the hours spent on them. Yet, consumer spends on mobile apps — a key element for making this business viable — are still very small. That is why India does not even figure among the top 20 in App Annie’s global list based on consumer spends for 2021. And though mobile advertising has been growing, despite all the hoopla, the country’s mobile share was less than half a per cent of the total global mobile ad pie last year.        

App Annie is the leading app market analytics provider and its latest global mobile app report provides interesting insights into what is happening on the ground. New app downloads in India grew 10 per cent from 24.26 billion in 2020 to 26.69 billion in 2021, putting the country in the coveted number two spot, increasing much faster than China, which grew by just over 2 per cent though it continues to top the list. India accounted for over 11 per cent of all downloads across the world.

Indians are also engaging with their apps for longer periods — which many see as the first indicator of their conversion to a subscription model. The country was ranked second globally last year, with consumers collectively spending a staggering 690 billion hours, accounting for 18 per cent of the time spent on mobile apps worldwide.

But India’s absence from the top 20 in terms of consumer spends tells a different story — especially considering the fact that consumers across the globe spent $170 billion on mobile apps last year, according to App Annie. 

Of course, you would expect the top slots to go to advanced countries that have money to splurge — China, the US, Japan and South Korea. But even Thailand, Brazil, and Turkey (at number 20 with consumers spending $728 million in 2021 on apps) are in the top 20 list.

The challenge and the choice is simple: For subscription revenues to rise, consumers need to pay. Or companies have to depend heavily on advertising revenues or do a bit of both as OTT platforms have done — offer some free content and charge consumers for premium content. Vasuta Agarwal, managing director Asia Pacific, on global advertising online platform inMobi, points out that “unlike other countries, Indians are okay with ads even when they are seeing subscribed content such as the Indian Premier League. So for most publishers, advertising is the most preferred and logical     source. With the emergence of OTT (music, video) and gaming, however, there is a growing willingness to pay, leading to newer ways of monetisation.”

Globally, advertisers spent $368 billion on mobile advertising in 2021, more than double what consumers splurged on apps. In India, according to eMarketer, a global company that tracks the space, mobile advertising should hit around $1.69 billion in 2021, growing at 35 per cent over the previous year. But the growth rate of mobile advertising is projected to slow year-on-year globally as well as in India — it is expected to be $2.14 billion this year, a 27 per cent jump, and will just about double by 2025 to $3.4 billion over 2021.   

Clearly, most app players have to acquire customers through an advertising-led offering and eventually move them to a hybrid model that includes subscription. Disney Star India President K Madhavan, whose OTT platform Disney+ Hotstar, had done just that, says: “We have 50 million paid subscribers on OTT and we expect this to grow fourfold. We have scratched only the surface, though we have half the market share.”  

Despite all the projections, subscription video on demand (SVOD) revenue is expected to move slowly. According to Media Partners Asia, SVOD would go up from $0.8 billion in 2021 to 1.8 billion in 2026. And there are already murmurs such as those in Netflix (which is an all-pay model), where co-founder Reed Hastings described the lack of success in the Indian market as “frustrating” in a recent investor call. This, even as the company slashed subscription rates to woo more customers.    

Pushing subscriptions is undeniably challenging in India. Take gaming. According to App Annie, the number of gaming downloads in India has grown 85 per cent from 2018 to 2021, hitting 9.3 billion and accounting for a third of all downloads across segments. But in the same period, consumer spend on the apps in India inched up from $0.13 billion to $0.17 billion. Clearly, consumers were looking mostly at free games even if it meant watching ads.

An InMobi survey confirms this. The platform surveyed 1,000 smartphone gamers and was surprised to find that 74 per cent preferred to watch an ad for progressing within the game rather than make app payments.

The story is repeated even in dating apps, where consumer spend has been falling despite the buzz about their popularity among teenagers and youth. Consumer spend on dating apps, according to App Annie, has fallen 25 per cent from $32 million in 2020 to $24 million in 2021. But dating sites like Bumble, based on their research, expect 71 per cent of users to hit the reset button on their dating journey in 2022, App Annie points out. Perhaps that is what most mobile app platforms across categories are hoping for, too.