Economics of Free Mobile Applications: Personal Data as a Monetization Strategy
46 Pages Posted: 10 Mar 2018 Last revised: 26 Oct 2018
Date Written: October 24, 2018
The large majority of digital goods, such as smartphone apps, are zero priced. To generate revenue, developers have to monetize their apps. However little is known about their strategies. We provide empirical evidence on the monetization strategies related to free apps by studying how the collection of personal data is combined with more traditional revenue sources such as advertising and in-app purchase. In particular, personal data are essential for Internet companies but their involvement in the smartphone applications market remains relatively unexplored. We have unique data to measure how apps are monetized, based on information related to free applications available on the Google Play Store platform combined with data on applications’ privacy-related behaviors provided by Privacy Grade. We provide information on the third parties market behind mobile applications. We show that the economics of mobile applications and the third party economy should be considered together. Among the apps in our dataset, 9% collect personal data and use no other strategy. We also show that the increased number of downloads is associated to more data collection, hence apps with more than 1 billion downloads have a 24.2% probability of using users' personal data as a monetization strategy.
Keywords: Economics of Mobile Applications, economics of privacy
JEL Classification: D82, D83, M31, M37
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