In-app advertising is outpacing browser advertising on both mobile and desktop in revenue growth, according to a joint study by App Annie and IDC.

In-app ad revenues grew 1.6x between 2012 and 2013, compared to 1.5x for mobile display ads, and 1.1x for desktop display. However, its growth is lagging behind the overall growth of app store revenue, up 2.3x, as in-app purchases become the primary method for monetisation.

Revenue from freemium apps – that is, those supported by in-app purchases – grew 211 per cent year-on-year in 2013, overtaking ad-supported apps, which grew just 56 per cent. However, IDC sees this trend reversing in the long term, increasing 3.8x between 2013 and 2017, which will see it outpacing app store revenue overall, and overtaking desktop display advertising.

Of the 10 key markets examined, eight will see the majority of app revenue coming from ads by 2017, compared to just two, India and the US, in 2013. The only markets where in-app purchases are expected to remain the main source of revenue are South Korea – the only market where the proportion of revenue from ads is forecast to drop – and Japan.

Freemium
One of the benefits of freemium apps, according to the report, is that they only require a small proportion of paying customers to be successful. Less than a third of apps see more than five per cent of their monthly active users make an in-app purchase.

While the freemium model is visible across a variety of app categories, it is completely dominant in mobile gaming, accounting for around 90 per cent of revenue.

Advertising breakdown
In February, 42 per cent of app publishers used paid advertising in their apps.

Banner ads are the most popular format, appearing in 88 per cent of ad-supported apps, followed by non-video interstitials (62 per cent) and native advertising (56 per cent).