Smartphone owners will pay for apps, hate mobile ads

To pay or not to pay, that is the mobile user conundrum.

To pay or not to pay, that is the mobile user conundrum.

On one hand, smartphone owners open up their wallets surprisingly often to pay for content and apps, according to a Nielsen Company study released this week. On the other hand, they want to see mobile ad dollars to translate into cheaper wireless bills. Apparently, eyeballs and patience are being strained by tiny ads.

Nielsen's study shows the sudden rise of the smartphone market, which got its start when the Apple iPhone launched in January, 2007. Now, one in four Americans walks around with a powerful computer on their hip or in their purse.

The smartphone has also spawned a multi-billion dollar app industry that has been compared to the California Gold Rush. Worldwide revenue from paid apps, related advertising and virtual content will reach $17.5 billion in 2012, up from $4.1 billion this year, according to a study commissioned by GetJar Networks, a mobile app store.

But perhaps the smartphone's most fascinating contribution has been a change in people's behavior about computers, content and the Internet, says Jonathan Carson, CEO of the telecom practice at Nielsen, speaking to mobile app developers at the AppNation conference in San Francisco earlier this week.

The Nielsen study shows a majority of smartphone owners willing to pay for apps and content. This represents a fundamental shift from PC Internet behavior where people assume content is supposed to be free. Carson explains that free content under an advertising model was the natural business model to evolve in a computing environment where Google search became the killer app.

Smartphones, however, have flipped this trend. In the mobile computing app world, Carson says, search and discovery is more of a challenge. Finding good apps isn't as easy as typing a few words in Google. Thus, when someone does find a good app either through word of mouth or trial and error, there's more of a commitment to the app and willingness to pay for it.

For publishers struggling with the notion of free content on the Web, the mobile platform including the iPad presents an opportunity for wooing paid subscribers. "It's a do-over," says Gordon McLeod, president of the Wall Street Journal Digital Network and an AppNation conference panelist. (Wall Street Journal iPad subscription costs $17 per month.)

Another user trend unearthed by the Nielsen study: Consumers want mobile ad dollars to pay for part of their wireless bills. It's not as dramatic as it sounds, says Carson. In fact, he says that there is a good chance that wireless carriers afraid of becoming merely utilities will open the door to the idea of packaging service and content. Ad dollars could eventually find their way to mobile users in the form of service savings.

"Cable companies have been successful bundling content with service," he says.

Tom Kaneshige covers Apple and Networking for CIO.com. Follow Tom on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline. Email Tom at tkaneshige@cio.com.

Read more about consumer in CIO's Consumer Drilldown.

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Tom Kaneshige

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