Economics of free mobile applications: personal data as a monetization strategy

The large majority of smartphone apps are zero priced. To generate revenue, developers have to monetize their apps. However li ttle 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 purcha se. In particular, personal data are essential for Internet companies' strategies but their implication 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 PrivacyGrade. We provide information on the third party market behind mobile applications. We show that the App econ omy and the third party economy are co - evolving markets and should be considered together. Among the apps in our dataset, 9% collect personal data and use no other monetization strategy. We show also 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 personal data as monetization strategy.