Privacy is the price most consumers pay for free apps, and that’s not always desirable. If given the choice, most consumers would want to opt out of data tracking in order to maintain privacy, and for now that price appears to be a $5 per app. With an average of 23 apps per users, the US app market could rake in around $16 billion – much more than today’s typical in-app advertising with brings in $.15 or less per download.
These numbers come from a recent study by economists at the University of Colorado, Scott J. Savage and Donald M. Waldman. In their study, they were able to evaluate the price of privacy based on the type of information users were willing to pay to keep private or untracked:
Results show that the representative consumer is willing to make a one-time payment for each app of $2.28 to conceal their browser history, $4.05 to conceal their list of contacts, $1.19 to conceal their location, $1.75 to conceal their phone’s identification number, and $3.58 to conceal the contents of their text messages. The consumer is also willing to pay $2.12 to eliminate advertising. Valuations for concealing contact lists and text messages for “more experienced” consumers are also larger than those for “less experienced” consumers. Given the typical app in the marketplace has advertising, requires the consumer to reveal their location and their phone’s identification number, the benefit from consuming this app must be at least $5.06.
Various apps already have different in-app purchases and pricing options so it seems that app developers should use this model of privacy purchases to create new revenue, rather than using annoying ads. More revenue means apps will also need to perform better and have better updates, so potentially a paid-for app model would mean everyone wins.